(Repeats for wider distribution)
By Gram Slattery and Fabian Cambero
SANTIAGO/ANTOFAGASTA Feb 15 Workers at the
world's largest copper mine in Chile are digging in for a long
strike, emboldened by new labor laws that are likely to result
in tough wage negotiations in the industry in 2017 in one of
Latin America's most free-market economies.
The 2,500-member union at BHP Billiton's
Escondida mine has been on strike since Thursday. Labor leaders
say they are far from reaching an agreement, and BHP has already
said it will not be able to fulfill copper delivery contracts.
The stoppage at Escondida, combined with export issues at
Freeport-McMoRan Inc's Grasberg copper mine in
Indonesia, the world's second-largest, have sent prices for the
metal to 20-month highs amid supply concerns.
Workers at mines representing around 12 percent of global
output are due to renegotiate contracts in Chile in 2017, with
any stoppage likely to affect volatile copper prices.
Escondida's labor relations have long been fractious, and
strikes paralyzed the mine in 2011 and 2006, when previous
collective labor contracts were renegotiated.
This time, negotiations stalled in part because of a freshly
minted labor code that aims to return power lost by unions
decades ago, people with knowledge of the talks told Reuters.
The law does not take effect until April, but its provisions
and language have influenced the union's negotiating position.
Last year, the center-left government of President Michelle
Bachelet passed the sweeping, complex reform to strengthen the
hand of organized labor, which government supporters say never
recovered from suppression under the 1973-1990 dictatorship of
Union sources say workers broke off wage talks with
Escondida in part because they believed the company was using
underhanded tactics to dilute the impact of that reform.
BHP declined to comment on ongoing negotiations.
But one legal source with knowledge of BHP's negotiating
strategy said the reform had effectively narrowed the pay and
benefit proposals the company could successfully take to the
The situation at Escondida bodes ill for other mining
companies ahead of wage talks expected elsewhere in Chile this
year. Anglo American Plc and Glencore Plc's
Collahuasi mine and Barrick Gold Corp and Antofogasta
Plc's Zaldivar mine are among those on that list.
Those two mines account for about a half-million tonnes per
year of copper output and more than 2 percent of global supply.
Labor leaders at both deposits said they had good
relationships with management. They added, however, they would
use the powers granted them in the reform in the coming
"It brings some rather powerful tools to the workers'
movement," said Raul Torres, president of Zaldivar's main union.
An Antofagasta spokeswoman said the company was already
working with unions to define what activities a company can
perform during a legal strike under the reform. Collahuasi did
not immediately respond to a request for comment.
Escondida, majority-controlled by BHP with minority
participations by Rio Tinto and Japanese
companies including Mitsubishi Corp, produced about 5
percent of the world's copper alone last year.
At Escondida, a principal point of contention between the
company and workers is a proposal by BHP to offer new workers
fewer benefits than those awarded to laborers already at the
mine, the union said. The union says this is a BHP ploy to
undermine a provision in the new labor code.
Under that provision, known as the minimum-floor rule, a
company will not be permitted during wage talks to offer workers
benefits weaker than those afforded in the previous contract.
If junior workers have fewer benefits than their colleagues,
that could lower the negotiating floor for the next round of
wage talks, years down the road, union leaders say.
"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
"(For us) that's the last straw, the last thrashes of a
Other aspects of the law, such as provisions that give
unions greater powers over nonunionized workers, were also
affecting negotiations, the legal source said, and workers were
adopting the language of the new rules.
"The words that were put into the labor reform have become
the words of the union," added the source, who spoke on
condition of anonymity due to the sensitivity of the talks.
Workers have also said that if the strike stretches into
April, when the reform goes into effect, they would need to
examine what additional demands to make, if any.
However, under Chilean law, the negotiation would largely
continue under the old regulations, so the concrete benefits of
holding out until the reform takes effect would be limited,
The labor reform passed Congress last April after a bruising
battle that opened up divisions within the governing coalition.
But a constitutional court struck down several sections of the
legislation, leaving lawyers uncertain about how much of the
reform can be implemented.
A government representative was not immediately available to
comment for this story, but proponents of the law say more
workers' protections are needed to battle Chile's biting
Industry analysts are watching negotiations at Escondida and
elsewhere for a sense of how the reform will play out throughout
"In some respects, this strike is a kind of transition
between the old system and the new," said Juan Carlos Guajardo,
president of Chilean copper consultancy Plusmining.
(Writing by Gram Slattery and Rosalba O'Brien; Editing by Simon
Webb and Matthew Lewis)