Abstract

This paper discusses the mining development policies in Chile in the period 1974-96. This period includes the military government that took over the country from socialist President Allende in 1973, and the return to democracy with the election of President Aylwin in 1989 and of President Frei in 1993. The paper analyses the economic and mining policies of the military and democratic periods, and then the country's mining investment, production and exports under the prism of the main institutional development policies pursued. The analysis focuses on copper mining, where investment and growth have created a mining boom unprecedented worldwide in this century since the discovery of the flotation process in the early 1900s. Thus it is of special relevance to examine the set of circumstances that has made this boom possible. The main discussion during this period regards the legitimacy of foreign investment in mining vs the capacity and potential of the state-owned company Codelco to be a protagonist of mining development. While the more liberal sectors of the political spectrum have supported the privatization of Codelco, the more conservative sectors support the continued ownership of Codelco by the state. This discussion will be of no great consequence if the mining boom continues. Nevertheless aspects of the discussion in 1996 questioned the economic development model employed by the country since 1974. Crucial for the legitimacy of foreign investment is the assessment of the returns that the country is receiving from mining investment. Two studies released in 1996 conclude that the overall effects of foreign investment in mining are positive at the national and regional levels and that a Dutch disease scenario does not seem probable for the future. Moreover, it is evident that had the mining boom not occurred, the country's economic growth would have been lower during the period 1988-96. It also seems clear that the military government did not have identifiable viable options for a potentially successful mining policy at the time when the great policy decisions were taken. This has been validated by the policies adopted by the two democratic governments in more recent years. This does not signify that all is perfect. Indeed there are policy changes to be adopted, but they seem to be directed at adjusting the model so that the country improves its returns rather than upsetting the whole economic-institutional model.