The arrest of Augusto Pinochet at a London hospital on October 17, 1998 — after Spanish judge Baltasar Garzón filed charges against the Chilean dictator for crimes against humanity — produced a storm of media attention. The international press initially reported that Pinochet was in London to receive medical treatment for a herniated spinal disc and to visit a friend, former prime minister Margaret Thatcher. Only later did it come out that he was also there to receive a $4.3 million personal commission for Chile’s purchase of three British frigates, brazenly flaunting Chile’s law forbidding government officials from receiving special payments. Pinochet also met with Royal Ordnance, a subsidiary of BAE Systems, Europe’s largest weapons manufacturer, to discuss his favorite project with the company, the Cohete Rayo, a 22-mile-range missile that Chile had already invested at least $176 million in building. Pinochet was preparing to invest even more, with the first prototype to be produced using British technology in Chile by 2001.1
The extent of Pinochet’s arms trafficking was unknown to the public until 2004, when a U.S. Senate investigative subcommittee released a report describing how the Riggs Bank of Washington, D.C., had collaborated with Pinochet and his family in establishing special accounts and offshore shell corporations to hide their business activities. Funds from Pinochet’s military deals and commissions would be deposited in these private accounts and then used according to the whims of Pinochet and his associates, with no public accounting whatsoever. As the Senate investigation reported, Riggs had established these accounts “with no serious inquiry into questions regarding the source of his wealth,” helping him “set up offshore shell corporations and open accounts in the names of those corporations to disguise his control of the accounts.”2 Citibank and some lesser-known banks performed similar functions for Pinochet over the years.
Until Pinochet, Chile was not even a bit player in the international arms business. In the 1980s, the dictator’s mafia-like organization began functioning and continued even until after he was forced out of the presidency in 1990. A new constitution was imposed on the country in a rigged plebiscite that enabled Pinochet to remain in power at least until 1988, when a second plebiscite was to be held on extending his presidency. The regime acquired an aura of permanence, and the international arms boycotts on Chile began to lose their effectiveness, particularly with unscrupulous international arms dealers and contractors. In 1980 Pinochet began spinning his web of contracts that would turn Chile into a significant international armaments dealer.
He played the part of godfather, appointing members of his clique to head the Factories and Arsenals of the Army of Chile, or FAMAE, an autonomous state agency and the oldest munitions factory in Latin America, dating back to the early 19th century, that produced most of the arms and weaponry for export. If anyone showed signs of crossing the padrino, they were immediately removed from their posts.
Aside from the military officials (sometimes retired), civilians were also a part of the syndicate. Oscar Aitken, a specialist in financial law, served as its head lawyer, helping establish the secret offshore accounts. There was also the Czech-born Carlos Honzik, a friend of Pinochet’s who lived in Chile and served as a representative of the Swiss arms company Mowag. In 1980, Honzik began negotiating weapons agreements on behalf of Chile. His office close to the presidential palace was decorated with several pictures of Honzik embracing Pinochet. According to Luis Narváez, a reporter who is investigating Chile’s arms dealing and Pinochet’s offshore accounts for the Chilean newspaper La Nación, Honzik was crucial to the operation, more important than the lawyer Aitken. “He would often instruct Aitken on the best way to move funds in and out of the accounts, and virtually all military deals for heavy arms purchases and licensing agreements, including illegal commissions, were negotiated by Honzik,” Narváez says.
In 1981, just as the Reagan administration took office, Pinochet reopened a Riggs account he had shut down after the passage of the International Security Assistance and Arms Export Control Act of 1976, which blocked all U.S. military sales to Chile because of its human rights violations. The war between Great Britain and Argentina the following year over the Malvinas, in which Chile stood alone among Latin American nations in assisting the British, aided Pinochet’s international military ambitions. British governments from thenceforth were delighted to deal with Pinochet in cutting military deals and granting him special commissions. In 1985 this close relationship enabled Pinochet to begin discussions with British Ordnance on transferring the technology to manufacture the Cohete Rayo in Chile.3
But it was during the Iraq-Iran war that Chile took off as a major international arms dealer. In 1983, the country began producing cluster bombs, making its first sale for $21 million to Iraq for 3,000 bombs weighing 500 pounds each. Many more deliveries were made of these bombs as well as other weaponry.4 Cardoen Industries, owned by Carlos Cardoen, produced the cluster bombs for Iraq. Diversifying rapidly in arms production, he had five factories with 1,000 employees by the mid-1980s.5 He would collaborate with FAMAE and the Pinochet mafia on some arms projects, but Narváez says he was never part of the syndicate, and a certain amount of competition existed. There is, in fact, a widespread belief, according to Narváez, that an explosion at a Cardoen plant in the northern Chilean desert in 1986 that killed 29 workers was carried out by a special military unit under Pinochet’s direction.
In 1985 Pinochet followed the example of the Reagan administration and began negotiating arms deals with Iran, with the direct approval of CIA director William Casey.6 Cardoen and a secret government delegation journeyed to Tehran, where they concluded a contract in which Chile would sell Iran 300 units of a newly designed cluster bomb called the Avispa, which was manufactured under a complex arrangement with Cardoen and FAMAE in a plant called FERRIMAR, controlled by Chilean industrialist Guido Pesce. The first shipment of Avispas arrived in Iran in January 1986, and almost immediately the Iranian authorities reported that many of them malfunctioned. A corrected version of the Avispa was sent to Iran the following June, but in a test run it prematurely detonated in a fighter plane.7
The Iranian government demanded that Chile turn over one of its F-5 aircraft, produced by the U.S. Northrop Corporation, as compensation for the faulty cluster bombs. A Chilean military delegation headed by the general director of FAMAE, Carlos Carreño, was dispatched to Iran, where it upped the ante by initializing an agreement to sell 15 additional F-5s to Iran for $200 million. These fighter planes constituted the core of the Chilean Air Force, and the agreement caused an uproar among air force officers—including their commander in chief, General Fernando Matthei. In addition to not wanting to part with the planes, Matthei also feared retaliation from the U.S. Congress or the Pentagon, since by then news of the Iran-Contra scandal had broken, forcing the Reagan administration to end its Iranian arms deals.8
In 1987 Carreño was to return to Tehran to sign the deal for the 15 F-5s. But a day before he was scheduled to depart from Santiago, Carreño was kidnapped. Pinochet immediately blamed the Manuel Rodríguez Patriotic Front guerrilla group, and the following week, in apparent retaliation, five members of the Chilean Communist Party were “disappeared.” Ninety-one days later, Carreño was released in São Paulo, Brazil, and flown back to Chile in one of Pinochet’s personal jets, appearing in the newspapers the next morning in a photo with the smiling dictator.9 Carreño later testified that his captors, who he said never asked him any political questions, were mostly likely connected to the intelligence unit of the Chilean Air Force.10
In spite of the fiasco with Iran, the 1980s witnessed the consolidation of Chile as a leading arms dealer among third world nations. Modified U.S.-made helicopters, night vision goggles, and other light weapons were sold to Libya’s Muammar al-Gadhafi, the Saudi Arabian monarchy, and the South African apartheid government. Sales of the cluster bombs and other weaponry to Saddam Hussein in Iraq continued to expand.11 Chile also became involved in the sale of weapons in the CIA-backed Contra war against the Sandinista revolutionary government in Nicaragua in the mid-1980s before the Iran-Contra scandal broke. At the urging of Colonel Oliver North, Chile sold 58 ground-to-air “blowpipe” missiles and eight platforms for launching short-range rockets.122 The cluster bombs sold to Saddam Hussein were used extensively by Iraq in the Persian Gulf War in 1991.
It is believed that in retaliation, the United States canceled the previously approved contract for the shipment of a prototype of a Bell combat helicopter to Chile that was to be used to manufacture a lower-cost version of the helicopter in a Chilean plant.13
Pinochet finally turned the presidency over to Patricio Aylwin of the Christian Democratic Party in March 1990, after losing the 1988 plebiscite. But according to the constitution he imposed on the new government he was to remain commander in chief of the Chilean Army until 1998. For the next eight years he acted with complete independence of the elected civilian governments, continuing to expand his international arms empire along with his offshore bank accounts.
In 1991 at Pinochet’s direction the Chilean government signed a secret deal with Croatia for the sale of a long list of weapons, ranging from three different types of missiles and platform launchers to rockets, grenade mortars, and rifles. Falsified export documents were drawn up making it look like Sri Lanka was the country of origin for the shipment. They were presented to Aylwin’s minister of defense, and over his protests he was compelled to sign them.14 But like the earlier deal with Iran, this one also went awry. A cargo plane flew from Chile in November making a stopover in Miami, where the CIA may have detected the shipment. The arms arrived in Hungary from where they were to be sent by land to Croatia. But in Budapest, perhaps due to a CIA tip, customs officials uncovered the real origins and contents of the shipment and it was confiscated.7
That same year, Chile delivered 1,658 cluster bombs to Ethiopia. In 1997 the Sudanese government used Chilean-made cluster bombs in its civil war against rebels in the south. Human Rights Watch believes that the bombs might have come from Ethiopia.16 In 1993, during Aylwin’s civilian government, the government opened an inquiry on the shipment of arms to Croatia in 1991, which violated a UN embargo.
Colonel Gerardo Huber, who helped set up the deal, was preparing to testify. Although his goddaughter, Loreto Tapia, was married to one of Pinochet’s grandsons, Huber was “disappeared” before he could formally give his deposition. Days later his body was found just outside of Santiago.17 Pinochet blamed leftist terrorists. Not long after, in 1995, Chile immediately began shipping arms to Ecuador when a border war erupted with Peru, violating an international treaty that Chile had signed with Ecuador and Peru in 1942 agreeing not to sell arms to either country in case of a conflict.18 Meanwhile, the expansion of Cardoen Industries was particularly notable in the 1990s as it set up subsidiaries in Ecuador, Italy, Spain, and Greece. A Cardoen-owned plant in Guatemala began producing explosives, grenades, and mines.19
Thus, in October 1998 when Pinochet arrived in London, he stood at the pinnacle of an international arms empire, second only to Brazil at the time as Latin America’s most important exporter.20 But after his 1998 arrest, virtually no countries or arms dealers dared to deal anymore with the Pinochet family. In retrospect, the dictator put Chile on the map as an international arms trader, but his arms syndicate, its laundering of funds, and its fiascos drained hundreds of millions of dollars from the Chilean treasury.
The Riggs banking revelations in 2004 destroyed his business empire, as most of his offshore and family accounts were blocked or confiscated. Even Elías Padilla, the director of the Center for the Study of Memory and Human Rights at the Academic University of Christian Humanism, was surprised by the extent of Pinochet’s corruption. “Now,” he says, instead of chanting at demonstrations, “ ‘Pinochet, Assassin,’ we can chant, ‘Pinochet, Assassin and Thief.’ ”
When Pinochet died in December 2006, he had not received a final sentence for any of the charges against him nor spent a day in jail. But he died a hounded man with virtually all of his family’s fortune blocked or confiscated. President Michelle Bachelet refused to hold a state funeral for him, and while the military held a special ceremony attended by pinochetistas as well as protesters, it refused to bury him in the elaborate mausoleum he had prepared for himself at the military cemetery, fearing it would attract too many vandals.
However, Pinochet left behind two legacies that the four presidents of the Concertación coalition have followed from 1990 to today: the neoliberal economic policies launched in the mid-1970s, and the conversion of Chile into a major global arms dealer and Latin American military power. Aside from expanding military exports, Chile has gone on a military purchasing spree since 2000, spending $2.8 billion on heavy weapons, including 10 F-16 Lockheed fighter planes, 18 similar warplanes from the Netherlands, and frigates, submarines, and Leopard tanks from Germany. These hefty procurements have set off alarm bells in neighboring Argentina, Peru, and Bolivia, all of whom are trying to compete with Chile with more stringent revenues and budgets.21
In terms of defense budgets, Chile ranked third among Latin American nations in 2005, spending $3.8 billion on defense, behind Brazil with $13.2 billion and Colombia, which because of its war with the guerrillas and U.S. military support, had a budget of $6.3 billion, according to the International Institute for Strategic Studies (IISS). But on a per capita basis, Chile by far outspends both countries, since its population is 16 million, compared to Brazil’s 188 million and Colombia’s 44 million.22 Venezuela, with 26 million, had an official defense budget of just $1.4 billion, although as the IISS points out, this may not include defense deals made outside of the regular budget. Even so, Peruvian journalist César Levano is on the mark when he points out that “if the United States is really preoccupied with an arms race [in Latin America], it should look at Chile, and not Venezuela.”23
The arms procurement program continues to escalate under the government of Bachelet, who took office in 2006. According to a law written by Pinochet, the armed forces of Chile automatically receive 10% of the copper revenues from Codelco, the state-owned copper enterprise. And with the steep rise of international copper prices in recent years, the Chilean military budget has increased dramatically.24
The Chilean military has apologized to the country for the crimes of the Pinochet era and it has sworn its total subservience to civilian rule. But it is opposed to touching the copper endowment bestowed on it by Pinochet.
Roger Burbach is director of the Center for the Study of the Americas (CENSA), based in Berkeley, California. Among his most recent books is The Pinochet Affair: State Terrorism and Global Justice (Zed Books, 2003). Research assistance: Claudia Toledo.
1. “La empresa preferida de Pinochet,” Que Pasa (Santiago), September 15, 2005, http://quepasa.cl/medio/articulo/0,0,38039290_101111578_160031632,00.html.
2. “Money Laundering and Foreign Corruption: Enforcement and Effectives of the Patriot Act, Case Study of the Riggs Bank,” U.S. Senate Permanent Subcommittee on Investigations, Washington, D.C., July 14, 2004, p. 2. www.senate.gov/~govt-aff/_files/ACF5F8.pdf.
3. “La empresa preferida de Pinochet.”
4. Benedicto Castillo, Pinochet: El gran comisionista (Editorial Mare Nostrum, Santiago, 2007), p. 104.
5. Shirley Christian, “Chilean Arms Maker Helps Fill a World Demand,” The New York Times, July 22, 1987.
6. “How did the General Get So Rich?” Weekly Puzzler, December 28, 2006, www.submergingmarkets.com/weekly_puzzlers/2006/12/the_generals_bo.html.
7. Castillo, p. 104.
8. Ibid., pp. 105–6.
9. John Müller, “La Operación Foxtrot, el ambicioso plan de Pinochet para transferir 16 aviones F5 a Iran,” www.geocities.com/john_muller_es/Cronicas/Irancorfo/irancorfo4.html.
10. Castillo, pp. 105–8. The main line of the inquiry in which Carreño testified centered on the agreement with the Iranians for the sale of the F-5s.
11. “How did the General Get So Rich?”
12. Castillo, p. 124.
13. Cardoen Industries, www.geocities.com/CapitolHill/Congress/1770/cardoen.html.
14. Castillo, pp. 144–45.
15. Larry Rohter, “Colonel’s Death Gives Clues to Pinochet’s Arms Deals,” The New York Times, June 19, 2006.
16. Human Rights Watch, “Arms Transfers to Government of Sudan,” 1998, www.hrw.org/reports98/sudan/Sudarm988-05.htm.
17. Rohter, “Colonel’s Death.”
18. César Levano, “Las armas de mentiras,” Voz de Izquierda, October 19, 2007, http://vozdeizquierda.blogspot.com/2007/10/las-armas-de-la-mentira-cesar....
19. Chile, Cardoen Industries.
20. Military Spending and Armaments, 1999: SIPRI Yearbook (Oxford University Press, 2000), p. 372.
21. Alex Sánchez, “Chile’s Aggressive Military Arm Purchases Are Ruffling the Region, Alarming in Particular Bolivia, Peru and Argentina,” Council on Hemispheric Affairs, August 7, 2007.
22. International Institute for Strategic Studies, “Defense Spending in Latin America,” May 2006, www.iiss.org/whats-new/iiss-in-the-press/press-coverage-2006/may-2006/de....
23. Levano, “Las armas de mentiras.”
24. Sánchez, “Chile’s Aggressive Military Arms Purchases.”