January 25, 2011 / 3:12 PM / 7 years ago

UPDATE 1-Chile says to invest military copper funds overseas

* Overseas investment could help offset capital inflows

* Military got $866 mln in Jan-Sept period from copper tax

SANTIAGO, Jan 25 (Reuters) - Chile Finance Minister Felipe Larrain said on Tuesday that military copper funds will be invested abroad in a move that could help offset capital inflows and ease appreciating pressure on the peso CLP=.

The Finance Ministry will handle the investment of the funds as the government seeks to boost transparency in the armed forces after allegations of misuse of the resources.

The total amount of military copper funds is kept under wraps because it is considered a matter of national security.

Codelco, the world's top copper miner, pays 10 percent of its sales to the military as part of an aged tax that some experts says hurts the state-run company's ability to do business in neighboring Peru and Bolivia. Neighbors are often critical of any military buildup in Chile, which won territories from both countries in a war during the 1800s.

Codelco [CODEL.UL] paid the military $866 million in the January to September period due to the tax.

Reporting by Bianca Frigiani; Editing by Chizu Nomiyama

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