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World News

Analysis - Chilean miracle may help Pinera's royalty push

SANTIAGO (Reuters) - Chilean President Sebastian Pinera may enjoy more public support and sway in Congress after his government successfully located 33 miners alive 17 days after a tunnel they were in had collapsed.

The miraculous turn in a drama that most analysts thought would end in tragedy could strengthen Pinera’s hand as he prepares to send a bill to Congress this week to temporarily raise royalties for mines in the world’s top copper producer.

Pinera -- who became a protagonist in the story when he appeared on TV reading a note that the trapped miners had attached to a drill bit on Sunday to tell loved ones they were alive -- says higher royalties are needed to help rebuild the country, which was hit by a massive earthquake in February.

“The president took a big risk because he bet the miners would be found alive, when all other studies said that was unlikely. The bet paid off very well,” said Patricio Navia, a political scientist at New York University.

Pinera, who has a personal fortune of more than $2 billion (1.29 billion pounds), has struggled with sagging popularity since he took office five months ago. His approval rating is below 50 percent, the lowest level for any leader since the country returned to democratic rule in 1990.

“This pro-active role should be reflected in more support for him,” said Gustavo Cuevas, a political scientist at the Universidad Mayor.

Pinera has spent most of his time in office planning efforts to reconstruct infrastructure ruined by the February earthquake.

Now, he may have a chance to put his presidency on a new course.

“I think this will have an enormous impact on public opinion, the government has finally filled its posts and now is at cruising altitude,” said Marta Lagos, director of the MORI consultancy in Santiago. “With this, the president will have public opinion in his pocket.”

ROYALTY PLATFORM

With an improved public standing, Pinera may have a better chance of getting his royalty bill past the opposition in Congress, where he lacks a majority.

The bill proposes a temporary increase in royalties in exchange for a longer period of tax stability in the future for the sector, which includes state-run Codelco and global giant BHP Billiton. Other leading companies include Antofagasta Minerals, Anglo American and Freeport-McMoRan.

Currently, taxes for mining companies are not supposed to change until 2017, unless they voluntarily agree to pay more. After setting a higher royalty, Pinera’s bill would extend the period of tax stability to 2025.

Congress rejected an earlier version of the bill shortly after the quake. At that time, opposition lawmakers said changes to the tax regime merited a wider debate and excluded the measures from a broader bill to fund the quake response.

Analysts say the scenario is now more favourable for Pinera and there is an outpouring of goodwill for workers and less support for mining companies.

“The centre-left opposed the new royalty but now it will be difficult for them to oppose,” Cuevas said. “I think the rescue effort of the miners could favour the bill’s chances.”

Writing by Terry Wade; editing by Mohammad Zargham

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