Editorial: Chileans tire of Piera

Chile’s mining sector was rocked by a 24-hour walkout in mid-July by unionized workers at state-owned Codelco, the world’s largest copper miner. It’s the first countrywide strike at Codelco in 18 years.

Workers are seeking to play a larger role in any reorganization of Codelco. Billionaire businessman and Chilean president Sebastian Pinera has said Codelco needs to be “modern, efficient and fully capable of realizing its potential,” but has denied there is any plan afoot to privatize the company, which plays a central role in the country as an export-earnings generator.

Codelco CEO Diego Hernandez took a harder tone, saying he’s unbowed in his drive to cut hundreds of jobs at the huge Chuquicamata copper mine and overhaul the workers’ healthcare system.

Pinera used the heated situation to shuffle his cabinet for the second time since taking power, promoting popular Mining and Energy Minister Laurence Golborne – who won Chileans’ hearts during the 33 miners’ rescue in Copiapo last October, and is widely viewed as a potential successor to Pinera – over to Public Works, which has grown in importance since the 2009 earthquake. Pinera also broke the Mining and Energy Ministry in two once again, appointing Public Works Minister Hernan de Solminihac as the new mining minister, and regional governor Fernando Echeverria as energy minister, as part of eight changes to cabinet. 

Golborne had added the energy portfolio in January after violent protests flared up in the southern region of Magallenes against a 17% rise in natural gas prices. He succeeded in brokering a deal that ended the protests, but it included the government abandoning a plan to introduce a new pricing policy that reflected market prices. 

Golborne was again in the hot seat with the rise of public protests by environmentalists, farmers and tourism operators against the government’s recent environmental approval of a controversial project named HidroAysen to build an array of hydroelectric power stations in southern Chile’s Aysen region. A court ruling has suspended the project, giving its promoters, which include Chilean utility companies Endesa and Colbun, time to regroup and ponder recent polling data showing that 62% of Chileans oppose the dams. 

The $3.2-billion megaproject involves the construction of five dams across Chile’s two major rivers, the Pascua and the Baker, and the building of the biggest high-voltage power line in the world, which would stretch an astounding 2,000 km to the capital Santiago and power-starved copper mines in the country’s north.

As the first relatively right-wing president elected to office in Chile in 20 years, Pinera started his term in March 2010 with high level of approval, especially in response to his government’s role in the miner rescue. But in the wake of large student protests calling for more affordable education, a customer credit scandal at retailer La Polar and the labour unrest at Codelco, Pinera’s popularity has since waned, with approval levels recently in the low 30s, sapping his ability to make any real changes in Chile’s mining policies, which haven’t changed much in 25 years.

• Perhaps a little deaf to the growing outcry in North America over “fracking”-derived natural gas, BHP Billiton has stepped up with a US$12.1-billion friendly cash offer to buy U.S. gas producer Petrohawk Energy for US$38.75 per share, or a 65% premium.

It’s BHP Billiton’s biggest-ever move into the booming shale-gas industry, bringing into the BHP fold Petrohawk’s 1 million acres of shale gas ground in Texas and Louisiana, with its estimated net production in 2011 of around 950 million cubic feet equivalent per day, or 158,000 barrels of oil equivalent per day.

Meanwhile, the residents of the Northwest Territories get caught in the squeeze, as BHP Billiton and others’ diamond mines, which are so critical to the territorial economy, enter their sunset years but cheap natural gas in the U.S. South – such as the Petrohawk assets – makes the development of Arctic natural gas megaprojects and their associated pipelines uneconomic.

• And, as we all know, gold spot prices cracked US$1,600 per oz. for the first time ever on July 18, on continuing worries over European sovereign debt and political battles in the U.S. over raising the already sky-high federal debt ceiling. Silver prices have also regained strength, trading once again above US$40 per oz., and platinum and palladium prices have been pulled higher in tandem with gold, breaking their recent correlation with the euro.