Chile reconsiders military spending provision

SANTIAGO — Momentum is mounting in Chile to abolish a military expenditures law after recent disclosures that military officers used it to generate illegal commissions.

The secret law — only a select group of government officials are allowed to actually read its details — dates to the late 1950s and mandates that 10 percent of all export revenues from the state-owned copper company Codelco are automatically transferred each year to the military, for the purpose of purchasing weapons and equipment.

Following the disclosure of illegal commissions on weapons purchases in the 1990s, the provision has provoked debate. 

Last week a group of lawmakers proposed a constitutional reform that would make defense expenditure subject to annual congressional approval and oversight — the same as the rest of the national budget. Last year, the money transferred to the military under the law totaled almost $1.2 billion, and over the past five years, about $5.3 billion.

Critics say this flow of money isn’t proportionate to Chile’s strategic defense needs and that it prevents Codelco from doing business in bordering countries that don't want their money funneled to the Chilean military.

The debate is also taking place as Chile is teetering on the brink of what is expected to be the worst economic slump in decades. At a time when unemployment is rapidly inching towards double-digit figures, many believe these funds should instead go towards cushioning the impact of a looming recession.

“No one controls military expenditures," said deputy Gabriel Ascensio, a longtime opponent of the law. "We as legislators don’t know how much is spent, how it is spent or on what it is spent."

In January, Chileans learned that former air force chief Ramon Vega — along with at least three other top officers — received up to $15 million in commissions for the $109 million sale of 25 Belgian Mirage warplanes to Chile in the mid-1990s.

A Belgian inquiry into irregularities in a deal with the Chilean air force brought the scandal to light. Now, Chile has opened its own investigation into the commissions. So far, Chilean authorities have indicted four officers on corruption charges and broadened the investigation to several other arms deals.

“It’s a secret law so no one really knows exactly what it says; I’ve never seen the text," said Codelco spokesman Pablo Orozco. "But thanks to Codelco, the armed forces have completely renovated their material: they bought tanks, warships, combat planes."

According to Orozco, a significant portion of the copper money is now financing Chile’s peacekeeping operations in Haiti.

Codelco chief Jose Pablo Arellano has called for an end to the law, in part because it prevents the company from doing business in Peru and Argentina. “They aren’t going to allow a company into their territory and help it do business there if its earnings are later used to buy defense material,” Orozco said.

The law has been in effect since 1958. During Augusto Pinochet's dictatorship, the law was revised to apply to Codelco's gross sales, not just its net profits.

Four democratically elected government administrations that followed all promised to abolish the law, but to no avail. A proposed constitutional reform from 2001 — similar to the one currently before lawmakers — has been dormant since its introduction. 

There has been one slight change in recent years.

As record-high copper prices swelled the national treasury and the military fund for most of this decade — sparking public discussion about how these profits should be spent — the government cautiously moved to take control over part of them. As defense minister in 2003, Michelle Bachelet (who is now Chile's president) succeeded in redirecting a portion of the 10 percent of copper export revenues away from the military, and towards the Ministry of Defense.

But some lawmakers want more of a change.

“Financing that is transparent, technically sound, politically and strategically justified and democratically legitimized is an imperative need and a long-time debt of our political and budgetary system,” said deputy Jorge Burgos, who was an author of the constitutional reform proposed last week.

More GlobalPost dispatches from Chile:

Man vs. Fish: The salmon industry's push into Chilean Patagonia

The recession wine: Is a bad economy good news for Chile's low-cost grapes?

Chilean Patagonia: Icebreakers