Bringing Chile’s copper unions into the modern age

Santiago, Chile — The union representing 2,052 workers at the Escondida copper mine in Chile’s Region II signed a new collective contract on Sept. 1, bringing an end to a 25-day strike and giving workers a pay raise 5% above inflation plus bonuses — the best deal in Chilean mining history. The strike was unusually long for Chile and cost the company, majority owned by diversified mining group BHP Billiton (BHP-N, BLT-L), an estimated US$300 million and 45,000 tonnes of lost production. Having retained the services of professional business advisers and negotiators, it seems Chile’s unions have finally entered the modern business age.

The Escondida settlement is a product of the improved preparedness of the union, which retained Law Investment Commerce Consult (LICC) and its team of lawyers, economists and finance experts. LICC general manager and head negotiator for the union, Cesar Mendoza, says he began preparing the negotiation plan three months before the union’s collective contract expired at the start of August, with a negotiation strategy based on an economic analysis of Escondida and its owners, BHP and Rio Tinto (RTP-N, RIO-L), to equalize the power differential between the parties.

“Everything we have done is to reduce the power gap between the union and the company and move towards the negotiating line,” he says. “The union has put itself at the same bargaining level as the company.”

Union secretary Pedro Marin says the union tried a new approach with this latest strike.

“The union needs to fix its line of negotiation and argue it well from a solid base and based upon a long-term economic analysis, so we contracted a commercial advisor,” he says. “This is an innovation; we have to modernize.”

Analyst Cesar Perez at Santiago’s Celfin Capital agrees: “It is about time the unions entered the modern world.”

LICC’s preparations also included securing several million dollars of financing to allow the union to give strike pay for up to three months. This financial measure removed some of the strike tensions that can feed both militancy and strike breaking and allowed the union to present a united front.

Solidarity was also increased by the perceived failure of Escondida to respond in kind to successive reductions to the union’s initial demand for a 13% pay increase, with the strikers viewing the suspension in negotiations as an attempt to break the union.

A night tear gas attack by police to disperse a camp of strikers blockading an entrance to the mine (3,500 metres above sea level) on Aug. 18 also boosted solidarity.

“We were not prepared for this. We were in no position to face the police,” says 240-tonne haul truck driver Patricio Perez. “It was totally dark and we did not know if they would attack us or not.”

“Escondida has not handled the strike very well, and it did not respond quickly enough,” says analyst Cesar Perez.

‘Union of unions’

The Escondida union, affiliated with the FMC federation, is unique in that it represents 98% of full-time workers at the mine and is its only union. Unionization at Chile’s other mines is fragmented, with several unions representing different industrial units. However, the duration of the strike and the perceived attempt by the company to break the union drew support from unions affiliated with the FMC, and more importantly, those of state copper company Codelco — affiliated with the FTC union. Representatives from union no. 8 Codelco Norte even visited the strike camp on Aug. 24 with a strike fund donation.

“This dispute is originating a union of mining unions,” says union president Luis Troncoso.

Talk of a merger between the FMC and FTC to create a “super” union representing about 22,000 copper workers has circulated around Santiago for some time with little formal progress, but the unity shown through the Escondida strike could reinvigorate the integration process.

FTC general secretary Juan Raul Zepeda has addressed the issue in the past, suggesting it would be just the first step of an international mine workers’ movement.

“In Chile, the big companies meet, they are very solid and have tremendous political force before the state. The unions do not have sufficient weight to face up to (mining association) Consejo Minero,” Zepeda said. “The first step is to unite the unions in Chile. The second step will be to associate with mega unions in Mexico, Peru or Australia — wherever there are operations of BHP Billiton, Phelps Dodge and so on . . . to make us international.”

Union leaders claim union power has increased through the Escondida strike by demonstrating what collective action can achieve, but not all observers agree.

“This does not signal a change in the strength of unionization in Chile, but it is a signal that (mining companies) have to share the profits of the high copper price,” says Leonardo Suarez, chief economist at Santiago stock brokerage Larrain Vial.

Max Vicua, founding partner of corporate governance consultants MV Amrop also played down talk of greater union strength, although he says the nature of negotiation is changing.

“Negotiations today are more technical,” he says. “In the past, they were more ideological.”

Diego Hernandez, president of base metals at BHP Billiton and the ultimate authority at Escondida, admitted that both union and company leaders had learned from the strike — particularly the need to resolve differences sooner — but criticized the union for taking so long to reach an agreement.

“Perhaps (the union) was advised by people with no experience in collective negotiations,” he says.

The Escondida strike will affect labour relations in Chile in the near term. The FTC can expect to draw on reciprocal support from Escondida’s union when it flexes its muscles in contract negotiations at the Andina and Codelco Norte divisions of Codelco later this year. Together, the two divisions produce over 1 million tonnes of copper per year.

Long-term labour relations are also likely to change. As well as following union presentations to the mining commission of Chile’s lower house during the second week of the strike, the government intends to fast-track a bill to amend the 2001 Labor Code. The bill will seek to amend elements of the code that favour companies, such as the provision that after 15 days of strike action, a company can hire replacement workers and strikers can voluntarily return to work.

“If the law allows workers to break from the strike and for a company to replace workers after 15 days, a strike has no effect. This weakens the union movement as a company can continue producing, which means the strike does no damage,” says union lawyer Nancy Stowhas.

— The author is a freelance jour-nalist based in Santiago, Chile.