Bob Haldeman interview (48)

By this time, 1970, we had, not including the construction,
which were mostly foreigners--in our operating organization six
expatriates, and all the rest were Chileans. The general
manager of operations, the general manager of the service
department, the manager of personnel, purchasing, and all down
the line were Chileans. A top-flight team, really doing a
wonderful job.


Do you want to say who did get the bid? It's a matter of
record.


Haldeman: McKee, Bechtel, and Utah [Mining and Construction Company) had
to split it up because of their specialties.


Swent: So they had a consortium.


Haldeman: Yes. One didn't have smelting experience, and the other one
didn't have mining experience; so we decided we would pick out
those things, and they would have to get together on it. It
turned out excellently. We were under time and slightly over
budget, but financing came very easy.





Index to Haldeman Interview

Bob Haldeman interview (47)

Nobody said anything, so I said to Mr. Simian, "Mr.
President, do you think we could have a break now?"


"That would be wonderful, if you don't mind, Bob."


I got up, high-signed all of my people, walked into the
other room, and closed the door. I left him with his
representatives. An hour and a half later he came out and said,
"Bob, these guys want to have the meeting tomorrow."


I said, "Ed, it would be a dead dog. By that time they'll
get to La Moneda (the presidential palace)."


He said, "I know it. They wanted me to come out and ask
you if you are absolutely sure that you are willing to stake
your reputation, blah, blah, blah, and aren't you making a
mistake?"


I said, "Ed, you can tell them, or do you want me to go in
and tell them?"


He said, "Well, no, I'll tell them." He went back in the
room, and later someone said to come back in, and the meeting
went on. You can imagine the faces in there. But they awarded
the bid.


Oh, boy, the flak flew the next day all over the place.
Mr. Simian went over to see the president, and he said, "Mr.
Frei, I want to tell you what happened. We went over the
numbers, and I go along and share the responsibility with Mr.
Haldeman. You don't always get the best job at the lowest
cost."


Mr. Frei said, "If you people are responsible for it, and
that's what you want, so be it." He stood up for it. Imagine!
No political pressure on me. You couldn't have asked for any
better relationship.


Swent: It wasn't a Chilean versus gringo split on the board, was it?


Haldeman: The four directors from the government were all Chilean.
Swent: Were the three others non-Chileans?


Haldeman: No. There was myself, Mr. Grant, and Carlos Tolosa, the Chilean
business manager. And the replacement was a Chilean, too.


Swent: So it wasn't a strict gringo-Chilean split?
Haldeman: No.


So we got off to a very good start. We started to build a
plant, and it went along just like clockwork. We had a really
fine team of people there, and the contractors complied up to
the last comma and dot. Everything went excellently.


Swent: Were you able to get your production up to what you had
predicted?


Haldeman: Well, now we come up to '69, and elections are in '70. We get
back into the same atmosphere of political things, and we are
about 70 or 80 percent along on our construction job. All the
pressure we were putting on was all we could do to get this
inaugurated before Frei left office. Of course, that's what he
wanted for his candidate, Mr. Radomiro Tomic, the Christian
Democrat and ex-ambassador who was running.






Index to Haldeman Interview

Bob Haldeman Interview (46)

Selecting Bids for the Mine Expansion 


Haldeman: We had to choose an engineering construction company, and we had 
three companies bidding. (I won't mention the names of the 
companies.) Each of them was associated with local Chilean 
companies . 

Swent: That was for this new half-Codegua plan? 
Haldeman: Yes. 

Now came the big political pressure through the Chilean 
associates of these companies to try and get the job. We got 
the bids in, and all my people evaluated it. I called Mr. 
Simian and said, "Before we have a board meeting, Ed, 1 want you 
to go over all these numbers with me." He's an engineer and 
understands all this. I had two of my staff there, and we went 
over and over it. The lowest bid was not the best. The highest 
bid was the best. 

Swent: Best in what sense? 

Haldeman: It had better people. Their way of determining their costs was 
absolutely crystal clear. The other one had all these hidden 
costs and threw charges on this and that; it was vague. You 
went through it, and you couldn't find out exactly who was going 
to be responsible for something and if there were overhead. 
They included things in general overhead, which shouldn't have 
been in overhead, at 60 percent. Right off the bat you know 
you're going to have to sit there and go to arbitration and 
chisel all the time. 

The highest bidder had a super team of professionals in the 
business of mining, smelting, concentrater, and electrical, 
which were the principal components. We were getting an awful 
lot of flak from the lower bidder. He had a lot of political 
clout with the president and the Congress, and he was in the 
Christian Democrat Party. He put a lot of pressure on the 
government members of the board. He said, "We know we have the 
lowest bid." I knew we were going to have fireworks. 

We went over the bids for a couple of days, and Ed finally 
became convinced that the [higher] bid we were going to take was 
the proper bid to have. I said, "After all, too, I have to be 
responsible for it, because I have the management contract. And 
Kennecott is responsible; it's not just me alone." 

Ed said, "All right, let's have the board meeting." 

At six o'clock that afternoon we had all the board in, and 
my project manager, Mr. B. B.. Smith, made the presentation. He 
was an excellent chap. We put all the numbers up on the board, 
and his number-two man, Mr. Samuelson, went through the details 
on it. I said, "So the management recommendation to this board 
is to pick Group A." Silence. 

Then, "What was that cost again?" 

The Chilean board for El Teniente Mine, 1967. Bob Haldeman is third from the left, front row seated in front of the table.  (click for larger image)

Index to Haldeman Interview

Bob Haldeman Interview (45)

How much difference did it make in your management? 

During the period from '64 to '67, I had to sit down with 
Mr. Saez. Raul was a very, very busy man, and we'd meet a 
couple or three times a week, or maybe jump a week, and meet for 
an hour or two. He said, "Bob, I'm going to talk to you, and 
you have to draft it and write it up. Then send it to me, and 
I'll call you when we can meet again to review the draft." 

I said, "I have done some work on it myself with my 
lawyers, so I'll give you a framework." 

He said, "That's fine and dandy. Let me take a look at it. 
But I want you to have one thing clear. When I was general 
manager of Endesa," which is a government-owned company, "I 
wanted to do several things in the company, things that a 
general manager should do, because it was in all my powers-of- 
attorney vested to me as I took over the job. I couldn't do 
them because I had political restraints on me. So I want you to 
draft this up so that you don't have any restraints; you will 
have all of the full powers of the general manager, because 
you'll be responsible in front of the board, and you can be 
fired if you don't do it properly. I don't want you to be able 
to duck out and say, 'I couldn't do it because I had restraints 
on me'. That's what I wish I could have had when I was manager 
of Endesa." 


So we drafted it up that way. We never took it out of the 
file in the short time from '67 to '71 that I managed the 
company. It never was referred to once. When you have a good 
agreement between the parties and you draft it up, you don't 
have to go back and look at the files on the thing. 

And it worked out absolutely fine, though many things 
happened to it. We had to present our budget the following 
year, in "68 and the rest of '67. I had a contributions and 
public relations budget, which all American companies had-- 
donating books to libraries, making pictures of the company, 
radio time, and all that stuff. The first thing that was 
criticized on the budget was when one of the members on the 
board said, "Bob, what are you doing with all this money? The 
government controls the TV station and the radio station; we get 
free time, so take it. Don't spend the money on that. The 
library? We have a budget for libraries; there's no need for us 
to give our money to them. We want the cash in here; we want it 
as dividends." 

So there were no contributions, no public relations, and no 
donations budget; we ran a mining company for profits! It's 
entirely different when you put it on the other shoe [put the 
shoe on the other foot]. [laughter] 

Simian and I became an executive committee. The board just 
decided that they wanted Ed and me to make the major decisions. 
They told us that we could let them know; they had trust in both 
of us. They knew perfectly well that Simian would not give 
anything that was not good for them, and I wouldn't give 
anything that was not good for us. So they decided that was a 
pretty nice way to have major decisions made. 

Ghost town of Sewell, abandoned barracks

Index to Haldeman Interview

Bob Haldeman Interview (44)

MANAGING A CHILEAN COMPANY

April 12, 1967. Legal Constitution of the Company

Haldeman: Mr. Simian, the minister of mines, who got the legislation

through from '64 to "67 to be able to make the joint ventures,

resigned as minister.

Chilean legislature

The president said, "Mr. Simian, you can't leave me. I

want you to be president of the company. You know Bob, and

he'll be vice president. I want the two of you to run the

company. "

That's the way the thing was structured. On April 12,

1967, the company was legally constituted. We had the first

board meeting, and all of the transfer of titles, shares, and

assets were made. [looking at photo] You have here Mr. Simian

at the head of the table. On his right is yours truly, on his

left is Mr. Grant, and these are all the board of directors and

the alternates.

Swent: Eleven people. Maybe we can get a copy of that picture.

Haldeman: I'll get a copy for you and send it to you.

In April, just before this was signedalmost

simultaneously--Kennecott was in OPIC offices and the Eximbank,

and their loan agreement was signed by U.S. government agency.

Swent: Where were those offices?

former Chilean government building

Haldeman: In Washington, D.C. The Chilean ambassador at that time,

Radomiro Tomic, was present and signed for the Chilean

government at the same time we were down here signing. At that

meeting, the head of Eximbank gave a little speech, the Chilean

ambassador gave a speech, OPIC gave a speech, and Mr. Milliken

gave a speech in which, among other things, he said, "The man

who is responsible for the whole idea of this joint venture is

not with us today, and that's Bob Haldeman. He's in Chile at

this moment, signing the papers and setting up the first meeting

of this company. It was his idea."

Swent: So he did give you the credit

Haldeman:

But never to my face. [laughs] I don't care,

perfectly fine by me. We got what we wanted.

Index to Haldeman Interview

Bob Haldeman Interview (43)

So we figured maybe twelve years. It was now '64, and

during the twelve years we figured the legislation would get by

in two years, '66, but it took three years. To build a plant

would take three or four years and would be done before Frei was

finished; we'd have the first six years and get our money out.

After that, if we made a profit, fine. We'd get $80 million in

cash for the assets--51 percent of the assets which is better

than nothing. Anaconda didn't get anything out of their assets.

OPIC [Overseas Private Investment Corporation] , who insures

United States investments abroad, gave guarantees of

expropriation exchange and all of that stuff. Kennecott had

been talking to Eximbank, and they put up $100 million. We put

up the $80 million that they paid us and reinvested it back into

the company. They had to print the money to do it, but we

didn't put up any fresh cash.

Then the Copper Corporation put up the other $20 million,

so that made the $200 million. Later on it inflated up to $240

million, and I had to go and get some loans from the Japanese.

Then we went over and got a loan from the French-Italian Bank in

Italy. They were selling against copper contracts futures

contracts. It finally cost $270 million, but it was completely

financed.

Index to Haldeman Interview

Bob Haldeman Interview (42)

Haldeman:
The next day we met at ten o'clock, and I took the notes 
down. It didn't quite fill two pages, double- spaced, and that 
was the agreement we struck for a $240 million business. We 
sold 51 percent of the company, and I was managing it for them. 

Swent: When exactly was this, Bob? 

Haldeman: It was between January and February of 1964. That memo was 
given to the president, and they immediately made a press 
release of the results of the agreements with the three 
companies. He said, "I have drafted legislation that I needed 
enacted to make these things become effective." 


Swent: These three companies were all announced simultaneously? 

Haldeman: Yes. The word leaked out a little bit, but then the president 
went over national radio. 

Swent: And you had heard what the results of the other two meetings 
were? 

Haldeman: The next day, when the president went over the radio, the phones 
started to jingle. Anaconda called up: "You s.o.b.'s. You 
dirty so-and-so's." 

Bob Koenig called up and said, "Congratulations. I think 
it was brilliant. I should have thought of it myself; I could 
have gotten some cash out of this investment." [laughter] 
Anaconda was furious. 

Swent: Had you been aware of what Anaconda and Koenig had done? 

Haldeman: Yes. Chile is a large country, relatively speaking, but it's a 
small one--Peyton Place; you know what that means. 

Swent: How had you heard? 

Haldeman: There are leaks of information all over the place. It's very 
hard to keep a secret in Chile. I knew in general what they 
were talking about. 

Swent: Was there a club where you met people and this sort of gossip 
was circulated? 

Haldeman: No. A fellow like Mr. Illanes and some of the Chilean 

supervisors that I raised up into key positions have an awful 
lot more information sources than a foreigner. They pick it up 
at cocktail parties. It leaks around. Then they can report to 
me. I needed those; I didn't have the ears. My intelligence 
service. Everybody had it. 

Swent: I was just wondering if there was a country club or a downtown 
club. 

Haldeman: No, nothing like that. Oh, there are, but usually they don't 
leak it to you there. They wouldn't have said anything to us. 
Of course, it took them by surprise; it took everybody by 
complete surprise. It was very bold and very good. 

At that time Michaelson and I were talking, and we came to 
the conclusion that this would probably last two 
administrations- -Frei and the following. Twelve years. 


Swent: They never gave you credit for having thought of this? 
Haldeman: Let's wait until a little later to talk about that.

Abandoned barracks at the ghost town of Sewell, Chile

Index to Haldeman Interview

Bob Haldeman Interview (41)

Swent: He wanted an advisory contract? 

Haldeman: An advisory contract with Kennecott sales [division] to help 

them for the first couple or three years until they could get an 
organization set up. 

Frank said, "Fine, Raul. Any other questions?" 


Raul said, "No." Mind you, we started at ten o'clock, and 
it was now eleven-twenty. 

And you've sold $80 million. [laughter] 


Haldeman: Raul said, "Frank, I'm sorry; I've got a meeting downtown at 
noon. Can we get together tomorrow at the same time here?" 
Sure, that would be fine. "Would you mind if we make Bob 
recording secretary? You and I will talk our agreements, and he 
will write them up. You type them out for me, we can both look 
at them, and I will take them over to the president in the 
afternoon." 

Frank said, "Fine. Bob, set up the meeting for tomorrow." 
I said, "Yes, sir." 

Lagarrigue said, "I have to go; I have to get to town." He 
decided he didn't know what to do, so he went out, got his car, 
and went right down to the La Woneda, the presidential palace. 
He walked in and said, "I have to talk to the president." 

The president was told that Lagarrigue was there and said, 
"Have him come in right away." 

Lagarrigue went in and said, "Mr. President, we've finished 
with Kennecott." 

The president said, "Oh, God, what happened?" 

Lagarrigue said, "They offered us and we bought 51 percent 
of the company." 

Frei looked at him and said, "This is my viga maestra, my 
master beam of my structure--the copper business." That famous 
phrase is in history books. 

Abandoned Kennecott barracks, ghost town of Sewell, Chile

Index to Haldeman Interview

Bob Haldeman Interview (40)

Saez said, "Frank, let me congratulate you. This is 
absolutely breathtaking. We never thought of this. It's 
brilliant. Two things come to my mind. Because of the bold 
move you have taken, I think you should have a tax rate lower 
than the others. And $100 million is just like a $100 suit; a 
$99 suit is much cheaper. I'll lower the tax rate so that we'll 
put the price of this down to $80 million, and you'll pick it up 
in the first two years of operation in your profits with the 
lower tax. Is that all right?" 

Frank said, "Fine." 

Raul said, "We're not set up to operate the property. 
Would you have a problem if we let Bob run it?" 

Frank said, "What do you want?" 

Raul said, "I'll tell you what. I have full confidence in 
Bob. Why don't you let Bob and me work out a management 
contract?" 

Frank said, "Anything you guys work out is fine by me. 
It's approved ahead of time." 

Lagarrigue was staying in the background, and Frank said, 
"Javier, do you have something to say?" 

Javier asked, "Who's going to sell the copper?" This was a 
great thing who sold the copper. That politically was the 
thing. 

Frank said, "The board of directors is going to call the 
shots, and you have the majority." 

Javier asked, "You'll be responsible for sales?" 

Frank said, "The board will; it's not 'we'; it's 'you.'
You are going to be a shareholder on this thing." 

Index to Haldeman Interview

Bob Haldeman Interview (39)

A Bold Proposal for Chileanization 


Haldeman: Frank said to Mr. Saez, "Raul, we've been thinking it over and 
we come with the following in mind. Twenty- five percent to us 
is just the same as 1 percent; in the same analogy, 49 percent 
is a minority and is just the same as 1 percent or 25 percent. 
We just don't think that solves any problems for you, much less 
for us, because that will always be a bone of contention. And 
50-50- -we don't want to have an arbitration court to manage the 
company. So we would think that the best thing for you, for the 
country, and for us is that you buy 51 percent of the company." 

Saez never flicked an eyebrow, and Javier Lagarrigue 
fumbled for his cigarettes and couldn't get one lit. Michaelson 
was smoking and gave him his Zippo lighter. Raul said, "Fine. 
How much do you put the value at on the property?" 

Milliken said, "We had American Appraisal assess this and 
it was assessed at $200 million; so 51 percent would cost $101 
million. Call it $100 million. We have the appraisal, and it 
does not include the value of the ore." Okay; fine. Yes. 

Frank said, "Furthermore on that, Bob has engineered a 
program. Bob, you explain it," and I explained what it 
involved this tunnel and so on--in very few words. I didn't 
have any maps or anything like that. I said it would increase 
production by 60 percent. 

Raul said, "That's wonderful. How about the corporate 
structure?" 

Frank said, "I don't think we should have a big, numerous 
board. We should have- -not an executive committee but, say, 
seven or nine on the board, of which you would have the 
majority." 

Raul said, "I think nine is too much; seven is better. 
When you get nine, you get a lot of political hacks who want to 
get in. Four will be enough for us, because we can fill them 
with people who are capable and know the business." 

Okay, so we would have three, and maybe we would have one 
alternate each. "Yes, that would be fine." 

Saez said, "Frank, who's going to manage the company?" 
"The board, and you have the majority." 

Presidential Palace, Santiago, Chile

Index to Haldeman Interview

Bob Haldeman Interview (38)

Our Mr. Milliken and Mr. Michaelson came down. I was 
called by Mr. Saez, who said, "Bob, we'd like to have a meeting 
with your men next week," so I set it up. He said, "I don't 
want to have it downtown; the reporters are all over the place." 

I said, "I'll take care of it. Don't worry." So we went 
way out to Las Condes and rented a house. We brought the cooks 
from our director's house in Sewell, two girls who had worked up 
there for forty years and could cook the most wonderful meals. 
Nobody knew. We had a telephone put in, and nobody knew the 
number. So we were to meet. 

My bosses came down, and I met them at the airport and got 
them to the hotel on the morning before the day of the meeting. 
We had lunch, and they hemmed and hawed. Then everybody took a 
little rest, and in the afternoon Frank called me in. He said, 
"I want to let you know what we're going to do tomorrow. We've 
come to the conclusion that 25 percent is just the same as 
having 1 percent, and 49 percent for them is the same as having 
1 percent; they'll always be a minority. At 50-50 you can't run 
a company. So we're going to sell them 51 percent. And this 
project of yours, going to a tunnel out there"--! called this 
the 280 Project; it was 280,000 tons of copper a year, and we 
were producing 180,000 tons. 

He said, "That idea, 280,000 tons per year, are you sure 
it's going to work?" 

I said, "Yes, it's going to work." 
Swent: This was the half-Codegua plan? 
Haldeman: Yes. He said, "We're going to propose that." 

They had done their homework and had never told me a single 
thing about what they were doing. I said, "That's fine, Mr. 
Milliken. Go right ahead." Here was this guy who told me that 
if he took it to the board they would fire him, and now he was 
telling me we were going to do it but in a spectacular way. 
Fine. 

We got to the meeting the next day at ten o'clock. We sat 
down and had a coke and a cup of coffee and so on. Raul Saez 
was master of ceremonies. He knew Milliken and Michaelson from 
before, as did Lagarrigue, so we were all on first names. Saez 
made a little pitch about what had happened before with Andina 
and Anaconda and what the president wanted, that he was not 
asking for something for nothing, blah, blah, blah. 

Javier went on about, "If you incorporate yourself, 
hopefully we could get some sales to be made by the companies in 
Chile, and they become Chilean companies. And we have your best 
interests at heart," and all this stuff and so on.

Center of cultural activities during the hey-day of copper mining at the ghost town of Sewell, Chile     (click for larger image)

Index to Haldeman Interview

Bob Haldeman Interview (37)

Anaconda Company; Chuquicamata Mine. Charles Brinckerhoff

Haldeman: Now they called on number two, Anaconda. Well, Anaconda just

couldn't pay dividends if they didn't have 100 percent of the

cash flow from Chuquicamata and El Salvador. 1

Swent: Who was here with Anaconda at that time?

Haldeman: Charles Brinckerhoff , who had been here for years as the head of

Anaconda, had just moved up to be president, not chairman of the

board of Anaconda in New York. Another fellow, Richard Sims, a

controller, came down. He had been put in to operate it until

they got somebody else the Chuqui mines and so on. Actually,

Brinckerhoff didn't really relinquish too much control over the

operations of the property.

The Chileans started to talk to them. Anaconda couldn't

afford to give 25 or any percent of those two mines, but they

had this ore body which was called Exotica, about ten kilometers

away from Chuqui. Chuqui was leached over the years, and part

of the solutions trickled, ran under the gravel blankets,

deposited out in the basin, and formed this secondary enrichment

body, Exotica. They had grades of 2, 3, or 4 percent copper,

but they were all exotic minerals all acid solubles, no

sulfides, nothing primary. They had stumbled across the darned

thing when they were digging a shaft in a drift to drain the

tailings deposits, and they found this ore.

They started to work on the metallurgy of the thing, and,

along came Mr. Frei. So they said, "Well, we have a new ore

body here; we'll open it up. It's high grade, and you'll have

25 percent in that. And we will pledge to increase the

production at Chuquicamata by X percent,

Anaconda Copper's Chuquicamata mine

El Salvador by

Y percent, and we will help build new port facilities at

Tocopilla. We'll open an exploration program down in the

southern part of Chile to satisfy a couple of senators down

there." All of these things were window dressing and icing on

the cake, and Chuqui and El Salvador were still 100 percent in

Anaconda's hands, and the tax rates on the companies who went

along were reduced to be 50 percent maximum tax.

After a lot of fuss, the government accepted that. So we

were called. Of course, Frei had pretty well been convinced by

this time that he didn't want to force this on us and become an

enemy of the United States for investments, and in the world of

copper, too. He probably figured he would try and get the best

he could, and the next round, when his party was elected six

years later, he could take another whack at the companies.

Index to Haldeman Interview 

Bob Haldeman Interview (36)

Now the government had a problem: how were they going to
tackle the copper companies in what manner and with whom? So
the president elected two people: Raul Saez, a brilliant
engineer who just passed away last year, who had worked his way
up. The highest job he had before he moved up was as the head
of Endesa, the power company. He was an excellent engineer,
capable, and a big thinker with a lot of international
experience.

Long-neglected rail yard at the deserted industrial

site of the Braden Copper Mine, ghost town of Sewell, Chile

If you remember, in 1955 they legislated and made this

auditing group, the Departamento de Cobre . It was a watchdog on

the copper companies. The man who was the vice president of

that group was Javier Lagarrigue, the second man elected by

Frei. He was a Christian Democrat and a nice fellow. I had

known him for years, and he knew the copper business pretty

well. I think he had been in that -department since 1955, and we

are now up to 1964.

Frei said to the two of them, "I want you to tackle the

companies and see what you can do."

Well, they sat down and figured out, "We've got to go first

where we can get the most out of the softest and the easiest."

They decided the order would be from the easiest to the hardest,

and the easiest was Bob Koenig. Bob had Cerro de Pasco in Peru;

he had Latin experience, and he couldn't care less. He knew

that you had to go along with the political current and tides.

We know the last is going to be Kennecott, because "they

are Peck's Bad Boy; they're the hard nuts, and we're quite sure

we're going to get nothing out of them. So we'll take number

two, Anaconda, because they have all their eggs in the Chilean

basket." They had no other income outside of Chile, an inside

board of directors, re-elected their own president and their own

directors every year, and gave themselves all a raise every

year. They were sitting in this little copper-tinsel world with

no other source of income.

They called in Mr. Koenig, and the conversations started.

After a couple or three weeks they struck a deal where they, the

Chileans, would buy in 25 percent of the company. It was based

on asset and liability the value of the company, everything

above board payments. Bob Koenig was very pleased with it and

satisfied.

Index to Haldeman Interview

Bob Haldeman Interview (35)

Cerro de Pasco Company; Andina Mine and Robert Koenig 


Haldeman: By this time there were three companies. Cerro de Pasco in 

Peru, in 1958 and 1959, decided they were going to open up the 
mine called Andina in Los Andes. It's about 80 kilometers north 
of here. The ore body was known for years, and they got the 
property claimed and bought it out. The mill is underground; 
it's way up, at about 3,500 meters but in an area that is very 
precipitous terrain, a lot of snow and snow slides and 
everything. Well, they decided they would go underground, and 
they built the mill underground. The mine is block caving like 
El Teniente; it all goes to the surface. It has been quite 
successful. 

Bob Roenig, the president of Cerro de Pasco, was just 
coming on stream with his property at that time. He was the 
only thing that Mr. Frei could show of a new investment. He 
said, "There were two companies, and now there are three- 

- Kennecott, Anaconda, and now the Cerro de Pasco Andina mine. 
I'm going to talk to all of you, and if I am elected- -which I 
know I will be--" as they all say. He said, "I hope you can 
understand me and help me out. I don't want something for 
nothing . " 

---

---

That was fine. I understood it very clearly. What he was
saying was that in the long haul, in each presidential term some
guy is going to want more and finally get control of the company
and buy it out. That was perfectly all right, because if
Allende got in, we would be taken over immediately. This might
be Gypsy Rose Lee's gimmick to keep you alive a little bit
longer.

I reported this to New York, and I also said that we had
some alternate schemes of expansion. The Codegua plan, that
enormous thing, would now have cost about $700 million. We took
a plan wherein we went in an intermediate level, at the smelter
level--5,000 feet and made a tunnel in there. From there down
we made a highway and got rid of the railroad. We abandoned the
camps of the smelter and Sewell and opened up from the smelter
down to the public; it was wide open. And of course we opened
up another thirty or forty years of ore.

The next step, whoever has it some years from now, will go
down to where we were at Codegua and do something, because it's
too costly to raise all that rock up and get it out to the
concentrator.

So it was a half a Codegua, if you want to put it that way,
which came out to about $240 million in cost. We had that plus
other things on the fire. But New York said, "No, we don't want
to go to the Codegua. To put in a billion dollars nowwe just
can't see the country that stable for that long a time to get
our money out." We were turned down once, so if they want it,
they can come back and ask for it.

We come to the elections, and Mr. Frei was elected by a
majority over 50 percent of the popular vote and he was put
into office.

Swent: He still didn't control Congress, though, did he?

Haldeman: No, he didn't control Congress. But in the way of things he had
enough splinter groups there that he was able to get major
legislation through without modifying it too much.

Index to Haldeman Interview

Bob Haldeman Interview (34)

Now we're drifting to '63 and '64. The political scene became
very intense. Mr. Frei was one of the candidates, and Allende
was another. There was another candidate, but he didn't have
any votesa Perot, you might say, as far as attracting votes.
Frei's Christian Democrat Party had built up quite a bit of
reputation at this time, and they were real good politicians out
in the boondocks . They went right to the little towns and
established offices, and they had a lot of hard workers,
how they consolidated their vote basis.

---

---

Eduardo Frei Montalva, President of Chile, 1964-70

---

Mr. Frei started to talk about Chileanization of copper, 
with a lot of political gobbledy-gook that I didn't quite 
understand. The copper companies were asking, "What is this 
fellow after?" He'd make some statements, but they were 
semi-vague and broad. They wanted to have a voice and a vote in 
their destiny in copper. Well, if you're worried, that means 
taking it away from you, whatever it is.

Just before elections, in July or August of '64, I arranged 
for a meeting through my Mr. Illanes. I said, "I want to talk 
to Mr. Frei and understand exactly what he means about this 
thing." So we went to see Mr. Claro, one of the directors up 
there [in a photo], the guy sitting down on the left, the bald 
fellow. He was married to one of [President] Gonzalez Videla's 
daughters. He was in the [political] party of Frei. 

Swent: What was his name? 

Haldeman: Jose Claro. Jose said, "I'll arrange to have Mr. Frei over at 
my house for a drink." 

Swent: The picture is interesting, because it's directors of-- 

Haldeman: That's the first board meeting of the company when we sold 
51 percent. I'll get to that later on. 


The industrial relic that was the Braden copper mine 
at the ghost town of Sewell, Chile, a World Heritage site


So I had a drink at his house and Mr. Frei was there. I 
asked him exactly what it was he wanted. He had had lunch 
before at my office, and I knew him very well. He was a 
senator, and one of the invited men, so I knew him by first 
name. That's how those things pay off. He said, "Bob, let me 
explain it to you. We have to have something to say in the 
industry," and he more or less repeated what Ibanez (my advisor) 
had told me, who was not a Christian Democrat; he was extreme 
Right. But it was the general feeling. 

Frei said, "I call it Chileanization, but what it is 
really there are two things that I would like and am going to 
ask the companies for. One is that you kick up production, one 
way or the other; I need more revenues. The second thing is 
that I want to buy some equity. I don't want to be given 
anything; I want to buy in the company, be on your board, and be 
able to give our opinions on what is happening to the industry. 
Because, after all, 70 or 80 percent of all of our foreign 
exchange comes from these companies . " 

Index to Haldeman Interview 

Bob Haldeman Interview (33)

In some of the areas, like the smelter, you had a bunch of 
bohunks who were running the converters and the reverberatory 
furnaces and the roaster building. The first time I put a 
Chilean in the converter section, the whole converter 
group- -Americans and Canadians (and these were not university 
graduates; they were practical men) got word to the 
superintendent: "You tell Haldeman, that new man in the 
management, that we're going to quit if they put the Chilean in 
the same job as we are." 

I told the superintendent to ask them when they wanted 
their plane tickets to go home; I'd have them delivered to them. 
Two of them picked it up, and I filled the jobs immediately. 
Everybody became quiet; they suddenly realized that I wasn't 
fooling around. They had a Chilean engineer, a college 
graduate, in there running the shift. He ran it much better 
than the bohunks--the practical men. 

That started the thing going in management. About this 
time we had a tremendous breakthrough, and the remaining 
expatriates realized that they had to compete with the Chileans. 
It made a very healthy atmosphere [for the Chileans] to get up 
the management ladder, because they had really worked their 
tails off. The Americans figured they were down for three 
years, and they could do almost what they wanted. No way.

---

---

So it was very helpful. Then it became the place to go for 
the Chilean engineer, and we then had requests of the best 
people around to get on the dollar payroll. We started to 
hand-pick the people out of the industry [laughs], and we picked 
up an excellent team. I'll get to that later on. 

Swent: This you could do on your own authority? The board in New York 
didn't know what was going on? 

Haldeman: I didn't consult them; I told them. 

There was myself and Mr. Grant, and then we had a manager 
of operations, manager of service departments, and manager of 
personnel. We had the equivalent job in purchasing and 
accounting. Accounting was always held with an American under 
Kennecott's American accounting system; they have the hands on 
the cash box. I don't have any problem with that; that's 
perfectly right. But the fellow they had down there went along 
with us and hired Chileans under him. 

About '63 or '64, we had an opening for a manager in the 
service departments. I didn't have anybody I could put in that 
I would be satisfied with who could compete with a Chilean 
fellow, Nelson Pereira. He had been educated at the University 
of Illinois in the United States and at one time was 110-, 220- , 
and 440-meter AAU track champion. A Chilean! 

So we made him the first Chilean gerente. Well, that was 
earth-shaking. [laughs] Then he turned around and married the 
daughter of my Mr. Casarotto, and they had four children. Their 
daughter is the girl who married a son of my friend who worked 
in the Bethlehem Steel mines. Small world, eh? 

Index to Haldeman Interview

Bob Haldeman Interview (32)

The Payroll System and the "Gold Roll"

Haldeman:

I have to tell you about the payroll. The payroll was divided
into three sections. The top jobs were called "gold roll", the
second jobs were "empleados [employees] on pesos," and the third
jobs were "obreros, or workers, on pesos". The Chileans could
get up to the "empleados on peso" roll, but the gold roll, of
the 400 maybe there were only four or five Chileans.

Why do they call it gold roll? Because when they first
started the operations in 1915, Braden Copper Company smelted
down to matte and sometimes to blister, and the only source of
people who really knew the smelting and some concentrating,
which were air cells, were in England. They wouldn't come out
for Chilean pesos, but they came out for penigues, or gold
coins. That's how you get a converter foreman or a smelter
foreman or a flotation foreman, usually Welsh or English or
Cockney--you pay them in gold coins. That became the "gold
roll".

Old RR bridge & barracks at ghost town of Sewell, Chile,
UNESCO World Heritage site


Later they stopped paying gold and paid them in United
States dollars. And, of course, for years we had a black
market, where the official rate was 30, and you could go out and
get 150. If this fellow earned 50, and that one earned 100, and
this is 150, actually he was earning  500 if you went on
the curb for the black market.

Swent: Did they ever pay in dollars in the States?
deposit your pay in the States for you?

Haldeman: Oh, yes, they deposited it in the States, and then you'd cash a
check or you could charge. For years, until 1955, I lived on
chits and never used any American currency.

As we replaced these jobs in the gold roll (they've cut out
the gold roll, because it's nationalized, and they couldn't do
that; that was an Ugly American habit), they earned dollars, and
we paid them the same salary at the job they replaced. Of
course, the Chileans who got up into that position just became
rich; they could buy a car and this and that. Work? Oh, my
gosh. Eight hours? That wasn't the shift; the wives would call
them up and tell them to come home. And you built loyalty with
a lot of pay and the fact that they were recognized as equals.

Index to Haldeman Interview

Bob Haldeman Interview (31)

Presenting a Plan for Chileanization to Frank Milliken, 
President of Kennecott 



Haldeman: So he arranged a meeting, and I went up to New York and sat down 
with Mr. Milliken-- just the two of us. "Frank, I want to tell 
you something, what I believe and what I think," and I started. 
It took an hour and a half or two hours and a couple of cups of 
coffee. 

He sat there with his lower chin out; he pouts all the 
time. When I finished, he looked at me and said, "Bob, you have 
a problem." What's that? "The trouble with you, Bob, is that 
you have been working in Chile too long. Do you realize that if 
I took this to the board of directors they would fire me?" 

"No, Mr. Milliken." 

"Well, thanks a lot. When are you going back? Why don't 
you come over for dinner tonight." 

Frank R Milliken, 1914-1991:  Milliken was chief executive officer at Kennecott Corp., which he headed for nearly two decades, when he became Copper Man of the Year. A mining engineering

graduate of Massachusetts Institute of Technology, Milliken began his career in 1935 as a

metallurgist for Peru Mining Co. in New Mexico.

---

---

Haldeman: So I came back to Santiago with my tail between my legs.
Swent: He didn't offer to sponsor it at all?

Haldeman: No. That was the end of the conversation. I came back, put it
in the file, and that was the end of it.

Meanwhile, we had better get back to the management side.
We left Mr. Grant in 1956, and now it was 1962, 1963.

Swent: Grant was still there?

Haldeman: Grant was still here as the second man. When we started this
thing out of a payroll of about 7,000 people, about 400 were
expatriates, mostly Americans. By this time we were down to
about 180 Americans, the other jobs being replaced with
Chileans.


Index to Haldeman Interview 

Bob Haldeman Interview (30)

The railroad bridge at the ghost town of Sewell, Chile

"When the prices go down, you people curtail production,
fire 30 or 40 percent of your people, and at the end of the year
hire them back again. How can we Chileans plan a budget for our
country when you make the decisions without advising us?" It's
true, and they had no other sources of income of exports.
Nitrate was a sad business; it was just barely alive. He said,
"You've got to incorporate yourself more in the Chilean scene of
business here. Why don't you think of becoming a Chilean
company. You don't have to lose your control of the company,
but offer shares in the local market. Get some shareholders,
get Chileans involved with you so that they can defend your
position. When your dividends go down or the government wants
to tax you, I don't protest. But if I had a block of shares in
the company, I'd certainly make a fuss. And have your board
here, a local board, where decisions are made, and you have
Chilean representatives on the board who have shares on the
board. They don't have to have control. They're going to get
the message over to the government that this is a business, and
you just can't treat it any other way. It has to hurt our
pockets a little bit before you get some help and defense."

Deserted barracks at the ghost town of Sewell, Chile

I thought it over, and he made an awful lot of sense. I
went back to my office with my two lawyers and sat down and told
them what I thought. They didn't disagree. They were aware of
it, but nobody wanted to really bring it out.

Swent: Were these Chilean lawyers?

Haldeman: Yes. But to think, at that time, of a Chilean lawyer to tell a
100-percent owned American company that they should incorporate
and sell shares on the market never-never land; they wouldn't
dream of that.

Swent: It doesn't sound strange now, does it?


Haldeman: Well, the world has changed.

I said to the lawyers, "Let's get to work. I want you to
educate me on all the legislation in regards to corporations,"
which I never had to bother about because we were a wholly-owned
subsidiary in the U.S. We worked three, four, five months I
guess it was. I put together a whole presentation, a whole
package of what I proposed to do--to have a Chilean board, et
cetera.

I made enough dress rehearsals that I was absolutely sure I
could present this myself, and I became very convinced of the
thing. We would get this nationalistic feeling off our backs.
And if you want to share the profits, share them. Sometimes
it's better to be a pig, not a hog. A pig just eats a little
bit, but the hog eats it all.

I talked to Michaelson, and I told him what I had in mind.
He said it sounded good, but what I had to do was convince
Mr. Milliken (President of Kennecott at that time --RS)
on the thing. He said, "Look, if you want to come
up, I'll arrange for a meeting. You come up and sell your plan
to him."

Index to Haldeman Interview 

Bob Haldeman Interview (29)

Alessandri just didn't feel he wanted to take our package 
to Congress, so in about 1962 we threw in the sponge and figured 
there was no need to talk any more about it. 


Chilean President Jorge Alessandri

Swent: You must have been terribly disappointed. 

Haldeman: Yes, very disappointed. When I had to leave the country, I had 
to leave so quickly that I didn't have time to go into the 
files. I don't know where that report was. I know somebody in 
the Copper Corporation has it in the government, but I can't get 
my hands on it. 

In 1962 the government was scrounging for money. They had 
problems with the copper price fluctuations- -every thing. Of 
course, no new investments. I became aware of the fact that now 
Mr. Allende is gaining more ground politically on the fact that 
they should take over copper. Well, we hadn't done anything for 
the government, but it wasn't because we didn't want to; we just 
couldn't. The political pressures were coming, and I could see 
the handwriting on the wall. I talked to Mr. Michaelson. I 
said, "Mike, time is limited. Like Gypsy Rose Lee, you have to 
find a gimmick to stay alive."

Haldeman: At this time Mr. Ibanez, who was a businessman, one of the chaps 
I invited to lunch from time to timethe coffee you had today 
is Nescafe; he started the Nescafe business in Chile. A 
landowner, a very charming person. He founded these Almac 
stores, a chain that you see everywhere. Today the poor fellow 
is a vegetable in bed on his farm. He must be eighty-plus. He 
called me over to his office one day and said, "Bob, I want to 
give you a little personal advice. Time is running out. As you 
know, you are a foreign company, and the political pressures are 
on. You people in copper are just too important to the nation's 
economy. When the price of copper goes down and there's too 
much inventory on the market, New York--both your companies- 
decide they're going to have to cut back production," which they 
did at one time when I was in the mine. I was the general 
superintendent in '52, and Mr. Stannard came down. Our prices 
were at rock-bottom; we were getting along with practically no 
profit at all. He said he couldn't see much future for the 
world business of copper, and they were on the borderline of 
deciding to shut down the mine, the whole property. That was at 
a tuxedo dinner at the Teniente Club. 
The El Teniente Club still stands at the ghost town of Sewell.  Almost all other

 traces of the American compound behind it were destroyed, apparently as a result

of the communist desire (they were in charge at the time) to wipe out any traces 

of the former American presence at Sewell.(click image for larger view)
 

Index to Haldeman Interview