Codelco workers poised for strike in power struggle

Tue Jul 5, 2011 5:33pm EDT

Related Topics

* Codelco workers seen ratifying call for 24-hr strike

* To be first Codelco-wide strike since 1993

* Unions seek to regain power, pressure President Pinera

* Strike unlikely to hit annual output, but raises risk

By Alonso Soto

SANTIAGO, July 5 (Reuters) - Codelco workers are on course to strike for 24 hours on Monday to protest an overhaul of the state giant, in one of the toughest labor challenges yet for the world's top copper miner as it struggles to lift output.

Codelco [CODEL.UL] is scrambling to avert the July 11 strike that was called by union leaders critical of a restructuring that they say could could threaten the state's ownership over world-class deposits and prompt massive layoffs.

Workers at Codelco's top two operations, Chuquicamata and El Teniente, are expected later on Tuesday to vote to ratify the strike -- the first national walkout by its workers since 1993.

The company's worker unions are fighting to reclaim their influence over Codelco as the company's new CEO, Diego Hernandez, a former BHP Billiton (BLT.L) (BHP.AX) base metals chief, moves quickly to overhaul a company that has lost ground against slimmer private miners.

The strike is not seen denting Codelco's annual output target, but could herald more labor strife and pile fresh pressure on center-right President Sebastian Pinera after weeks of massive protests by students and environmentalists. [ID:nN1E7641RV]

"If the government and the (company) administration does not heed our call, then they better brace for more strikes," said Raimundo Espinoza, head of the 16,000-member strong Federation of Copper Workers.

"Since the return of democracy, we have not seen such an arrogant government. We will not allow it."

The last time Codelco workers staged a general strike in 1993 -- three years after the end of General Augusto Pinochet's dictatorship -- it was partially observed by workers and had little effect on output, according to reports from the time.

Espinoza said that strike only lasted half an hour and that this time around workers were determined to leave a mark.

If the one-day strike materializes it could cost the miner about 4,600 tonnes of copper or about $40 million in lost revenue, according to Reuters calculations.

The miner is still recovering from an ongoing wage protest by contractors that slashed output at El Teniente and threatened to spread to other divisions.

Labor strife is one of the many problems facing Codelco, which critics say is overstaffed and mired in bureaucracy that hampered output in five of the last six years.

"This is probably the biggest Codelco union workers' demonstration we have seen since the return to democracy," said Juan Carlos Guajardo, head of the influential copper think tank CESCO. "The world is forcing Codelco to change and that's a real challenge for both the administration and union workers."

NATIONALIZATION NOSTALGIA

The planned strike would come exactly 40 years after socialist President Salvador Allende nationalized the copper industry that led to the creation of Codelco -- the owner of the world's biggest copper reserves.

Codelco unions grew powerful, so much so that they became some of the few worker groups in Chile to strike during the 17-year dictatorship of Pinochet, who toppled Allende in a bloody military coup.

Union leaders continued to enjoy great influence in Codelco's board room during the 1990-2010 rule of a center-left coalition that saw them as key political allies.

Now workers have seen their clout challenged by self-made billionaire Pinera, who became Chile's president last year.

Workers fear Pinera, who is seen as a pragmatic centrist, is paving the way for the privatization of Codelco to secure the billions of dollars needed to exploit new mega deposits.

Pinera backtracked on campaign promises to sell part of Codelco -- a concern his government has again tried to allay in the face of the planned strike.

Codelco's CEO Hernandez has also dismissed plans to privatize the company, which every year has to negotiate with the government how to finance its investments.

Known as a tough negotiator, Hernandez has clashed with unions over some of his plans to revitalize Codelco with a series of "inevitable" transformations that in Chuquicamata alone would trim about 2,600 jobs.

"Nobody likes change," Hernandez said in a statement. "We like (job) security ... but we know that without change, Codelco will just get worse and its results will get worse." (Editing by Lisa Shumaker)

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