Government seeks an end to miners strike in Chile

As a strike by 2500 miners at the Escondida copper mine in Chile begins its second week, the government has invited representatives of the workers’ union and the mine’s owner to Santiago, the country’s capital, for mediated negotiations.

Escondida, owned by BHP Billiton, an Australian mining conglomerate, is the world’s largest copper mine.

The strike began after BHP and the workers’ union Sindicato No. 1 Trabajadores de Minera Escondida (Workers Number One Union of the Escondida Mines) could not reach an agreement on wages and bonuses.

BHP also wants to create a two-tier benefits plan that would lower benefits, such as aid for education and health care, for newly hired workers. The union strongly opposes such a plan.

To union members, this strike is crucial.

“We will be on strike for as long as it takes, until death (if necessary),” said Karen Vargas, a striking miner to Agence France Presse at the union’s strike camp near the mine. “We have to win back all that we had.”

The workers’ union has accused BHP of gaming Chile’s new labor law in order to lower future benefits.

The new law, which goes into effect in April, aims to give unions a bit more leverage in collective bargaining negotiations.

One of the new law’s provisions establishes a minimum-floor rule which means that the benefits in place at the time that contract negotiations begin are the starting point for bargaining. Companies can’t begin negotiations by demanding benefit cuts.

The union accuses the company of trying undercut the minimum-floor rule by establishing two tiers of benefits, whose lower benefits will become the floor for future contract negotiations.

“It’s very probable that the company intends to lower benefits (for new workers) so that the next negotiation starts with what that established,” union spokesman Carlos Allendes said to Reuters. “(For us) that’s the last straw, the last thrashes of a drowning man.”

In addition to setting a minimum-floor for contract negotiations, Chile’s new labor law among other things:

  • allows sector wide bargaining, meaning that unions representing workers in the same business sector can negotiate a sector-wide contract, which prevents competing companies from undercutting labor costs to gain a competitive advantage;
  • allows temporary and contract workers to join a union
  • prohibits the use of replacement workers during a strike; and
  • requires companies to provide unions with relevant financial information when requested.

A provision in the law that workers must be union members to receive wages and benefits negotiated by the union was struck down by Chile’s Constitutional Court.

The government enacted labor law reforms in hopes that a more fair bargaining relationship between workers and owners will allow workers to share more of the wealth that they help create.

After Chile’s military dictator Augusto Pinochet seized power in a  bloody 1973 coup, he imposed free market policies that among other things severely restricted workers’ ability to bargain collectively.

Because of this and other advantages that Pinochet’s free market policies gave to businesses, most of the wealth generated in the country has been pocketed by the extremely wealthy.

As a result, Chile has the highest rate of inequality of all 30 plus nations that belong to the Organization of Economic Cooperation and Development (OECD).

OECD uses an index called the Gini coefficient to measure the distribution of a country’s wealth. On the Gini index, zero represents a completely equal distribution of wealth, and 1 represents the concentration of all wealth in one person.

According to a 2016 OECD report, Chile’s Gini coefficient is 0.47, the highest among all OECD nations (Mexico is second with a Gini of 0.46 and the US is third with a Gini of 0.39.)

The OECD’s average Gini is 0.30.

 

The sea of inequality that separates the very wealthy from those who create the wealth has created turmoil the country.

In the last year, pensioners have been in the streets demanding pension reform, students have been in the streets demanding education reform, and airline workers, airport workers, public employees, other miners, food processing workers and others have gone on strike.

The strike by Escondida workers is the latest manifestation of this turmoil.

The union is hoping that the strike can be resolved through government mediation, and the government would like to see the strike resolved because copper production is a vital part of the country’s economy.

But BHP appears to be stonewalling, at least that is what Joaquin Garcia-Huidobro, a columnist for El Mecurio, a daily newspaper, seems to think.

BHP “seems to have nothing to say to Chileans” about how it intends to end the strike, writes Garcia-Huidobro.

“The silence of this Anglo-Australian company. . .  is eloquent,” continues Garcia-Huidobro. “It is an example of a style that has caused great damage.”

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Workers in Chile demand an end to its privatized social security system

Hundreds of thousands of people on August 21 took to the streets of Santiago, Chile to demand an end to Chile’s privatized social security system and to replace it with a public pension plan.

Similar demonstrations took place in other parts of the country. Organizers of the protest estimate that 1.3 million people took part in countrywide demonstrations against the AFP, the country’s privatized social security system.

“We pledge that we will not rest until our retirement savings are no longer serving the economic elite, but are once and for all placed in the service of those who are its rightful owners–working men and working women.” said Luis Messina , coordinator of the group that organized the mass protest NO AFP.

AFP has not lived up to its promises.

In 1981, Chile’s dictator Augusto Pinochet scrapped the country’s social security system, and replace it with AFP, a collection of private individual retirement savings accounts, administered by banks and other financial institutions.

Workers were required to contribute 10 percent of their salaries to AFP. Employers who had been required to contribute to the former social security fund were no longer required to make contributions.

AFP administrators invested the money from the individual accounts in capital markets, and of course charged fees for services provided. Any losses resulting from the investments were borne by individual account holders not the administrators.

At the time that AFP was established, Pinochet relying on expert advice, estimated that private retirement savings accounts would provide retirees with between 70 percent and 75 percent of their final salary.

That has not turned out to be the case. The average replacement income for Chile’s retired males is 38 percent and for women it’s 33 percent.

The result has been that a substantial number of Chilean retirees are living in or near poverty.

The Wall Street Journal reports that “From 2007 to 2014, almost 80 percent of Chile’s pensions were less than the minimum wage and 44 percent were below the poverty line.”

“We just spend on food. We don’t buy clothes, we don’t buy shoes,” said Nora Guerrero, a 71-year-old retiree to the Journal.

Pinochet’s privatization of the country’s social security system was the brainchild of Chilean economist José Piñera, an acolyte of Milton Friedman, an American Nobel Prize winner in Economic Sciences who pioneered work in the economic theory called Monetarism and was the prominent professor at the Chicago School of Economics.

Piñera’s plan was hailed as a model for other countries to emulate by the World Bank and other international financial institutions.

But AFP’s problems became apparent as soon as people started retiring under it.

For his book Social Insecurity (Beacon Press, 2014), a critique of private retirement savings accounts, James Russell traveled to Chile to learn how AFP was working.

He reports that a study conducted by the National Center for Alternative Development (CENDA, its Spanish acronym) found that real growth rates for AFP accounts were much lower than had been originally forecast and that “retirees under AFP were receiving less than half of what those who retired under the old INP (the former public social security system) . . . received.”

But while retirees weren’t doing so well, the financial institutions that managed their private accounts were doing just fine. The CENDA report found that “the corporations managing the private accounts were pocketing one of every three pesos deposited and accumulated in them,” writes Russell.

Because of the problems created by AFP, the government in 2008 made some reforms, but did not completely abolish AFP. Doing so argued the government would undermine capital markets because the accumulated funds in AFP had become a huge source of investment.

In essence the individual savings plans, which failed to provide retirement security, had nevertheless, become a “source of capital accumulation for businesses,” writes Russell.

Today, AFP funds have grown to $176 billion and according to Bloomberg, they underpin Chile’s capital markets.

Chile’s retirement insecurity problem has forced the government of President Michelle Bachelet to propose further reforms to Chile’s retirement system, but NO AFP is calling for the abolition of AFP and a return to a public social security system.

The public also appears to be fed up with AFP.

The Wall Street Journal reports that “Chilean opinion pollster Cadem found that 84% of Chileans want an overhaul (of AFS), while a University of Santiago survey said 61% want to return to a public pension system.”

After the large turnout at the latest NO AFP demonstrations, the organization, which was founded by a group of trade unions, said it will continue to pressure the government.

Speaking at the Santiago demonstration, Carmen Espinoza spokeswoman for NO AFP told the audience that if the government “doesn’t listen to the workers, who are the owners of these funds, then the way forward is a national strike on November 4.”