Commodity Revenue Management

The document analyzes Chile's copper industry and the government's fiscal strategies to manage windfalls from the 'copper boom'. It details the transition from the Fondo de Compensación del Cobre (FCC) to the more robust Fondo de Estabilización Económica y Social (FEES), which aims to decouple public spending from price volatility. The report also examines the role of Codelco, the impact of Chinese demand, and the challenges of tax avoidance by foreign firms and the controversial funding of the armed forces via the Ley Reservada del Cobre.

• Chile is the world's largest copper producer, accounting for 37.5 per cent of global supply, with copper exports representing 57 per cent of all national exports by the end of 2006.
• The Chilean government implemented a countercyclical fiscal policy based on a structural balance target of a one per cent GDP surplus to shield the economy from external shocks.
• The Fondo de Estabilización Económica y Social (FEES) was created to replace the FCC, disassociating budget spending from copper price volatility by saving windfalls that exceed the structural surplus goal and investing them abroad to limit the appreciation of the Chilean peso.
• The Ley Reservada del Cobre mandates that 10 per cent of Codelco's export sales be transferred to the armed forces for the purchase and maintenance of weapons, a practice criticized for lacking transparency and diverting funds from social needs.
• Foreign mining companies have used the DL600 framework and transfer pricing to avoid taxes, with some firms remaining exempt from royalties until 2024.
• China is the primary driver of the copper boom, consuming 25 per cent of global production, which has led to a strategic 15-year supply agreement between Codelco and China's Minmetals.
• The mining sector faces long-term operational threats from declining mineral grades, which increase energy intensity and costs, as well as critical water shortages in northern Chile.
• The Fondo de Innovación para la Competitividad (FIC) was established to use mining royalties to fund research and development in six strategic areas to diversify the economy.

APA

Ruiz-Dana, A. (2007). Commodity Revenue Management. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_price_case_copper.pdf

Chicago

Ruiz-Dana, Alejandra. Commodity Revenue Management. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_price_case_copper.pdf.

Wikipedia

{{cite report |last1=Ruiz-Dana |first1=Alejandra |title=Commodity Revenue Management |publisher=International Institute for Sustainable Development |date=July 2007 |url=https://www.iisd.org/system/files/publications/trade_price_case_copper.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ruizdana2007commodity, author = {Ruiz-Dana, Alejandra}, title = {{Commodity Revenue Management}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = jul, url = {https://www.iisd.org/system/files/publications/trade_price_case_copper.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }