One of the companies which has stirred the most controversy is Exxon Minerals International Inc., which after more than 20 years of business in Chile has reportedly made no payments to government in income taxes.
Critics of Chile's policies regarding foreign investment say this is because of the lack of adequate controls in the country's foreign investment laws.
These laws allow subsidiaries of companies to take foreign loans from their headquarters, often based in tax-free havens such as the Bahamas or Bermuda, so that they can avoid, at least on paper, making a profit.
This is advantageous for the companies, as tax rates for interest payments made abroad are substantially lower than taxes paid on profits.
Chilean law provides for companies to be financed either by their equity or by debt. If a company is financed by loans, the interest payments that are sent abroad pay a 4 percent tax, whereas equity-generated profits transferred abroad pay a 35 percent tax.
Since 1978, Exxon has undertaken four different investment contracts with the Chilean government. The contracts work under the provisions of Law Decree 600, which regulates foreign investments in the country.
The first such contract dates from 1978 and the request to operate in Chile was made by Exxon Minerals Chile Inc., although the investment rights belonged to Exxon Overseas Investment Corporation based in Bermuda.
In 1989, Exxon Minerals International Inc. made investments in Chile and in January 1999 Exxon Holding Latin America Limited, with headquarters in the Bahamas, made a new investment. At the same time, Exxon Financial Services, also based in the Bahamas, invested in Chile through the Disputada de Las Condes mining company.
Disputada is being sold by Exxon and has garnered the interest of a series of mining companies, including the Chilean government's National Copper Corporation (Codelco), said by analysts to be the likely purchaser.
A March 2000 report by the Foreign Investments Commission -- the government agency in charge of authorizing investments in Chile - noted that between 1978 and 2000, Exxon reported capital investments of $1.2 billion, with associated credits for $1.4 billion. The company made loan repayments of $1 billion and interest payments of $584 million.
The Foreign Investment Commission's report was forwarded that year to the General Comptroller's office after government officials voiced their concerns about a company that in more than two decades never registered profits and, accordingly, never paid income taxes (although it did pay the 4 percent tax on interest paid).
The commission can only authorize investments but does not monitor tax payments. On the other hand, the Chilean Copper Commission (Cochilco) supervises the export volumes and prices and the Internal Revenue Service, known by its local acronym SII, monitors profits. The SII, as in most countries, is not permitted to give profit information to the general public.
Companies are equally discreet in this sense.
"We reserve the right not to enter in the public debate, although we have permanent contact with the authorities regarding these issues," said Guillermo Garcia, Disputada public affairs manager.
Garcia refused to clarify whether or not the company had ever paid income taxes in Chile.
Since the 1971 nationalization of copper, the Chilean government received more than $25 billion in taxes from its copper mines between 1971 and 1999.
In contrast, private mining companies have paid in taxes over the same period an estimated $1.4 billion.
This prompted Lavandero to denounce private mining companies in Chile.
"In the last 10 years, and in spite of the drop in its profits, Codelco has paid more in taxes than every business in our country, including banks, pension funds, electricity companies and the remaining mining companies, which produce 65 percent of the Chilean copper," he said.
According to Lavandero, who recently released a book on this issue, only three of the 47 private mining companies operating in Chile declare profits, "while the rest, by means of legal loopholes, manipulate their losses. That is, they don't pay taxes in Chile."
Mining companies that register the highest levels of indebtedness in Chile are Zaldivar (controlled by Placer Dome), Candelaria (where Phelps Dodge Corp. is its largest stockholder), Collahuasi (jointly owned by Falconbridge, Minorco and Nippon-Mitsui), El Indio (owned by Barrick) and Exxon Minerals' Disputada de Las Condes.
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