Impending labor reforms have mining sector in Chile nervous
A new labor bill in Chile that is expected to be delivered to Congress in December has some mining firms nervous about the future.
The firms say they have been left in the dark about the bill and that investors confidence has been shaken as well.
Reuters reported that President Michelle Bachelet's socialist government says it wants to modernize collective contract negotiations and strengthen unions, though it has been vague on details. Senators close to the government have said it could seek to limit mining companies' ability to replace workers during strikes.
The labor reform is part of a battery of measures aimed at reducing Chile's gaping wealth gap, and Bachelet faces a tricky balancing act as mining accounts for half of Chile's exports.
Mining companies fret the reforms will jack up labor costs and increase the power of unions in a country where strikes are relatively uncommon.
"It's not the moment to implement a radical labor reform because we have had too many changes and each change creates uncertainty," said Diego Hernandez, president of Antofagasta Minerals.
State-run Codelco and private firms like BHP Billiton, Anglo American, Glencore, and Antofagasta are all juggling weak copper prices, due to slacker demand from China, and surging costs.
The government has said reforms will be implemented gradually and industry's concerns will be fairly evaluated. Still, executives and industry groups are concerned.
Investment in Chile's mining industry is declining, dragging down economic growth to a projected five-year low of 1.7 percent in 2014.
Chile's Mining Federation, which groups unions from privately-run mines like Escondida and Collahuasi, is seeking improved benefits for union members under the new labor law.
It wants to boost the bargaining power of striking workers by limiting the use of replacement workers, and seeks shorter collective contracts with guarantees that benefits and salaries are not scaled back with new contracts.
BHP Billiton owns a 57.5 percent stake in Escondida while Rio Tinto holds a 30 percent share.
Collective contracts currently run for between 34 to 48 months. The government wants to shorten them so they can be more frequently negotiated to protect workers from shifting economic conditions, in particular inflation.