Explosives to Electronics: Examining the Historical Dynamics of Chile’s Mining Industry to Modernity

Photo Credit: Municipalidad Antofagasta

By Mihir Shenoy
Contributing Writer

Chile’s newly-elected president wants to reform the way the nation’s resources are managed. President Gabriel Boric ran on a platform of standing up to private mining interests, supporting tax hikes, suing companies for exorbitant water use, and proposing a state-owned lithium company to compete with existing firms. Boric is seeking to reverse the detrimental effects that neoliberalism has had on Chile’s mining industry. This shift towards heightened government regulation would not just affect mining in Chile but also the world, as Chile’s resources are becoming increasingly important to sustainable global development. Currently, Chile supplies the world with 25% of its copper and 20% of its lithium, a component of the lithium-ion batteries used in electric vehicles. The administration’s desire to nationalize and redistribute profits from these essential resources stems from a legacy of Chile’s history of heavy foreign investment and financial speculation. 

Chile’s first major industrial mining operations extracted a relatively obscure material, nitrate, which is used in fertilizers and gunpowder. It is rather fitting then that the industry began a period of modernization following war. In the aftermath of the War of the Pacific (1879-83), Chile annexed Peruvian and Bolivian territory that bordered the Pacific Ocean. This region would become the country’s primary producer of nitrate and eventually copper and lithium. However, the territory spanned the driest desert in the world, Atacama. To this day, the water-intensive mining industry drives conflict, as evidenced by Boric’s recent lawsuits.

During the war, John Thomas North from Great Britain purchased collapsed Peruvian nitrate bonds. After Chile annexed the territory, North was granted control over the nitrate fields, allowing him to monopolize nitrate production, waterworks, and railroads that served the region. After North’s death in 1896, a public-private enterprise known as the Compañía de Salitres de Chile (Cosach) emerged that skewed heavily towards private leadership under the American Guggenheims. Synthetic nitrate competition then forced Cosach to dissolve in 1933, crumbling the nitrate powerhouse. 

North and the Guggenheims exemplify a form of foreign investment that continued throughout the twentieth and twenty-first centuries, where locals benefited from the burgeoning industry but were simultaneously tied by the actions of foreigners. Nitrate built up the port city of Iquique, a city in Atacama, and modernized the Chilean mining system to compete with the rest of the world. However, the Chilean nitrate economy depended unitarily on British and American corporate management. North lobbied Congress to prevent competing firms from undercutting price hikes, and the Guggenheims convinced American President Herbert Hoover to persuade Chilean President Carlos Ibáñez del Campo to create Cosach. The fear of foreign and plutocratic interests controlling Chilean resources thus has its roots in the monopolistic struggle over nitrate production during this period.

Though nitrate’s global demand has fallen, copper’s has not, and considering its value as an electrical conductor, is unlikely to decline in the near future. In the 1930s, industrial copper smelting rose in popularity partly due to the Guggenheims’ vast financing of mining operations, including the Chuquicamata mine, which was sold to the U.S. firm Anaconda Copper in 1923. Che Guevara visited this mine in 1951, noting the workers’ deteriorating health and low wages. Strikes had become a regular occurrence, and regulation efforts culminated in the 1971 decision to nationalize copper under President Salvador Allende. The state-owned industry, Codelco, survived privatization efforts under the dictatorship of Augusto Pinochet and has remained the largest copper producer in Chile. However, today private companies collectively produce more copper than the state. 

The nitrate-copper sequence demonstrates a struggle between the Chilean government and foreign entities that continues today. Nitrate’s original privatization was ultimately split by state interests into a public-private partnership. Copper started off private, turned public under Allende, and then reverted partially to quasi-private control. Given Boric’s current plans to nationalize the lithium industry, the debate over private and public control remains an important but unsettled issue at a time when the world is entering an era of clean energy technologies which demands and depends on reliable and profitable resources such as lithium.

The future of Chile’s mineral industry remains uncertain, but its path will likely be different from that of the United States, another lithium-producing country. The United States has effectively entrusted the private sector with its mining needs, with companies such as Standard Oil, U.S. Steel, and Anaconda Copper dominating domestic and international markets. Yet, Chile’s major suppliers have historically shifted between public and private ownership, making a stable long-term economic strategy precarious. Additionally, the United States has historically been a larger financer than borrower regarding industrial development—something that cannot be said about Chile—which has facilitated American control over financial management decisions. Anaconda Copper’s prioritization of its copper profits over its workers and the Guggenheims’ collusion with the Hoover administration represent two examples of the effects that neoliberal imperialist interests have had on Chilean society. Chile’s nationalization efforts can be seen as a defense mechanism against American forces which could result in a different economic trajectory, one that prioritizes national well-being and security.

The battle between nationalization and foreign investment could also produce other modes of development. For example, domestic Chilean capital could gain influence in the lithium market and drive out international competitors that have historically owned nitrate and copper mines. Sociedad Química y Minera de Chile (SQM), one of the world’s top five lithium producers, began as a private-public enterprise, then became entirely publicly owned before privatizing fully in 1983, with controversial Chilean billionaire Julio Ponce Lerou the principal investor. This approach may allow Chileans to reap greater rewards from their natural resources, but the corruption associated with financiers like the Guggenheims and John Thomas North is unlikely to disappear simply with the transition to domestic private ownership.

As new mining projects emerge in Chile, economic and geopolitical interests raise prudent opportunities. Electric vehicle proliferation has resulted in a rapid increase in demand for lithium and a new age for Chilean mining. Most recently, the Boric-led government has adopted a nationalization strategy through regulation and tax hikes. Yet, Chile’s historical vacillation between private and public hands could breed lasting instability, which may engender geopolitical challenges between Chile and its trading partners. However, the history of wavering mining policy in Chile should not preclude investment into the Chilean mining industry, but rather encourage investors and politicians to study this history carefully to determine what development strategies work best for both Chileans and the rest of the world moving forward. 

VIVA LA EDUCACIÓN: RESHAPING EDUCATION INEQUALITY IN CHILE

By AJ Thomason
Staff Writer

From its independence in 1818 until Augusto Pinochet’s rise to power in 1973, Chile stood as one of South America’s most economically stable countries while also remaining absent of the frequent springs of militaristic governments that plagued Latin America. Pinochet’s reign, assumed after a successful coup de’tat, lasted 17 years and left behind some 3,000 dead, a polarized citizenry and, among other things, a broken educational system.

In 1981, Pinochet began dismantling the free public education system and replaced it with a voucher program for primary and secondary education. This dissolved the centralization of Chile’s higher education, switching it with three tiers of schools run by municipal entities: government-funded public schools; private schools subsidized by the government; and private, fee-paying schools. The growing inequity of the quality of education between these systems, their accessibility and funding sources has manifested itself throughout the years and currently leaves Chile in the midst of its largest state of social unrest since its return to democracy in 1990.

The protests began on August 4, 2011 in the capital city, Santiago, after the decades old, ever-growing disparity came to light. Students took to the street en masse. Nearly 100,000 people organized to voice their collective message that inequality between the education systems available to the upper class and that available to the lower class is unfair.

The plight felt by these students is legitimate and backed by statistics. The Organization for Economic Cooperation and Development (OECD) has named Chile as the most socio-economically segregated country in regards to education opportunities. According to OECD, the average percentage of integration between students of different backgrounds is 74.8 percent worldwide. Chile rests at less than 50 percent.

Hugo Nicolás, a visiting Chilean student at the University of California San Diego, sums up the problem in the eyes of young Chilean academics. “The Chilean people” he said, “are in a process of significant change. Young people have awakened after 20 years. The problem is that in Chile education is a business, it is another product you can buy at the corner of your neighborhood. In Chile we want free education because the government can afford it.”

The protest and outcries have only grown since 2011; and the message has gotten engrained more deeply into the culture of consciousness that has swept Chile’s youth. April 11 saw the year’s first organized march—only this time a clearer message was presented. The cloudy Thursday morning was met with masses of students gathered in a dozen cities, with more than 150,000 people marching in Santiago alone. Rallies of this scale are organized by functional student run entities that have found that together the collective voice makes more impact than a myriad of individual cries of discontent.

Camila Vallejo is the vice president of the University of Chile Student Federation and also serves as a main spokesperson for the Confederation of Chilean Students. Camila provides an explanation for how marches of this scale are assembled. “What brings the students together, and the many organizations involved in this, is the fact that in Chile education has been turned into a consumer good, a commodity for consumption, which has created an enormously segmented socio-educational system,” she said.

Vallejo’s comments not only reify Nicolás’s claim, but also unify the message of the student body as a whole that the drag on justice created by the market driven nature of the educational system is no longer to be accepted. Vallejo adds that, even with 80 percent approval from the public, “our demands were simply not taken up and channeled through the institutional means, the political institutions that exist, and so there is a crisis really in political representation.”

The broken educational system in Chile is fortified and strengthened by the government lent media that, according to Noam Titelman, the current president of the Catholic University Student Federation, make it very difficult to reform. “They’re owned by the same people who want to maintain things,” he said.

Titelman highlights the classic struggle between the word on the streets that often rings most true, and the monopolized, faux-publicized word that reaches the ears of the global community.

Unique to this movement compared to others in recent history is the determination of those effected as a collective whole. After three years of tear gas, fire hoses, expulsions and blacklisting, students, educators and community members at large have maintained the cry for justice and change. With presidential elections just on the horizon, the dawn of that very change may be closer than ever for these soldiers of sense who believe that the government capable, be it for the people, is the government that should. November will mark a major movement either forward or backward for the Chilean students but, irrespective of the results, this generation of doers, who, in numbers found clout, will have had their message heard.

Image by Marie Barranco