Blog post

September 1, 2006 [LINK]

Copper strike ends in Chile

The Chilean mine workers union voted by secret ballot to accept the compromise offer of a five percent raise. Interestingly, the miners approved the deal overwhelmingly even though the union ended up making bigger concessions than the company. Thus the copper strike came to an end after almost a month. "La Escondida" is one of the biggest copper mines in the world. It is owned by BHP Billiton, a consortium of British and Australian investors. See BBC. Given the current boom in world copper demand, it would be foolish for the two sides to hold out for much longer, forgoing millions of dollars in lost revenue.

Copper is an unusual metal, as the vast majority of the world's reserves are found in just four countries: Chile, Peru, Zambia, and Congo (ex-Zaire). In the 1970s, Peru's military government tried to organize an international copper cartel, modeled on the success of OPEC, but copper prices fell sharply in 1974 just as they were getting organized. The volatility in markets for such basic industrial commodities is the main reason the management of the Escondida mine in Chile was reluctant to give workers a bigger raise. If the economy starts to slow next year, as many people expect, prices will come tumbling back down.

Golf courses in Caracas doomed

The government of Hugo Chavez has announced that it will take over the land occupied by three golf courses in Caracas, for the purpose of building new housing developments for poor people. As many as 50,000 new homes may be built. From CNN.com,

Mayor Juan Barreto's office has ordered the "forced acquisition" of two golf courses and will soon issue another decree expropriating a third course in the ritzy hills of southern Caracas, city attorney Juan Manuel Vadell told The Associated Press.

It may sound frivolous to make this a principled issue of property rights, and it is hard to deny that many of those folks do need better housing. Nonetheless, a country in which property can be confiscated arbitrarily is a country in which wealth does not tend to regenerate itself. As in the former Soviet Union and in China before the reforms of the 1980s, the aggregate capital stock gradually goest to rust and wastes away, thereby diminishing job opportunities. Unless Venezuela changes course, it will end up as a miserable Third World country when its petroleum reserves become depleted in the next 20 years.

A similar issue arose in Peru during the late 1980s, when populist president Alan Garcia was threatening to take over the golf course in the posh district of Miraflores, two miles south of downtown Lima. Fortunately, cooler heads prevailed. Now that Mr. Garcia is trying so hard to appear moderate to avoid fears of another catastrophe such as his first term precipitated, it is unlikely he would be inclined to challenge the power of his country's wealthy elite. But you never know.