Chile’s Milicogate Scandal


Chile has an unusual method for funding arms purchases: a 10% levy on export revenues from the state copper company, Corporación Nacional del Cobre (CODELCO). These funds go directly to the three branches of the armed forces to spend as they choose on arms purchases, without passing through the central Ministry of Defence, and without parliamentary scrutiny. A group of military officers, in what became known as the Milicogate scandal, concocted a series of fake military procurement deals to embezzle almost USD 11 million from the CODELCO revenues. The officers issued invoices associated with fake deals for goods and services that were never supplied, siphoning off the proceeds for their personal benefit, and potentially to pay off higher-ups in the military as well.

Key Facts

Buyer country: Chile

Seller companies: Frasim, Tecnometal, Power-Ti

Year of deals: 2010-2014

Equipment sold: None – corruption involved embezzlement using fake invoices.

Value of deals: n/a

Sum involved in corruption allegations: CLP 5.5 billion (Chilean pesos, or USD 11 million)

Dramatis Personae

Corporal Juan Carlos Cruz Valverde, Colonel (ret.) Clovis Alejandro Montero Barra, and Sergeant Liliana Francisca Villagrán Vásquez — officers serving in the Armed Forces Support Command (CAF); charged with tax fraud in February 2016.

Juan Miguel Fuente-Alba Poblete — retired general, former Commander-in-Chief of the Army; under investigation.

Antonio Cordero Kehr, Jorge Salas Kurte, and Miguel Muñoz Farías — retired generals, formerly serving in the CAF; charged with breach of military duties in September 2016, under investigation for issuing false invoices.

The Arms Deals
False-color satellite photograph of Chile's Escondida Mine. U.S. Government/NASA.
False-color satellite photograph of Chile’s Escondida Mine. U.S. Government/NASA.

The Ley Reservada del Cobre (Secret Copper Law) is widely criticized as a means of funding arms procurement. The law was first passed in 1958, and has been modified several times since. The military regime of General Pinochet (1973-89) increased the levy from 15% of the profits from copper sales to 10% of the revenues. The text of the law, and subsequent modifications, remained a secret until 2016, although information on the sums spent under the law have generally been available.

This off-budget system has led to a level of military spending unrelated to any assessment of actual defence needs, or to the policies of elected governments. With control over the funds held by the heads of the separate armed services, spending is unplanned and uncoordinated. With no parliamentary scrutiny, there is a severe lack of accountability for how money is spent. Unsurprisingly, this opens the door for corruption.

Corruption Allegations

The fake invoices at the heart of the Milicogate scandal were issued to three companies that were suppliers to the army: Frasim, Tecnometal, and Power-Ti. The identified sums embezzled in this manner amount to at least CLP 5.5 billion, about USD 11 million. The embezzlement was made possible by a lack of oversight and control of spending at the Comando de Apoyo a la Fuerza (CAF, Armed Forces Support Command)—which oversees military procurement. Thus, CAF civil servants, for example, were given orders not to review invoices but rather to pay them without question.

Investigations and Outcomes

Army officials first started to notice irregularities in invoicing and started an investigation in April 2014. Suspicions initially fell on two CAF officers: Corporal Juan Carlos Cruz Valverde and retired Colonel Clovis Alejandro Montero Barra, who were placed in military detention. News of the affair became public in August 2015 through the weekly newspaper The Clinic. This led to the creation of a parliamentary commission of inquiry in October 2015. The internal Army enquiry moved to the judicial system in November that year, with the appointment of examining magistrate Omar Astudillo Contreras. At a hearing in February 2016, Astudillo indicted Cruz and Montero, along with another CAF officer, Sergeant Liliana Francisca Villagrán Vásquez, for tax fraud. Further charges were leveled in May 2016 against two lieutenant colonels, a lieutenant, and two company directors. Investigations have continued, and have scrutinized the role of former Commander-in-Chief of the Army, retired General Juan Miguel Fuente-Alba Poblete. Prosecutor José Morales announced in May 2016 that Fuente-Alba was being placed under investigation regarding the source of his wealth, which allegedly far exceeded what could be expected based on his military salary. One allegation is that Colonel Clovis Montero, the main accused, laundered money through a series of purchases of luxury cars for Fuente-Alba via a particular car dealership. The dealership would sell cars to Fuente-Alba at cost price, the contract would be transferred, and then the general would refund the cars at full sale price. The difference would be kept by Fuente-Alba.

Three other retired generals, Antonio Cordero Kehr—formerly the chief bodyguard of General Pinochet and his wife—Jorge Salas Kurte, and Miguel Muñoz Farías, who all served with the CAF, were charged with a breach of military duties in September 2016, and are under investigation for potentially issuing false invoices.

The Milicogate affair has led to renewed criticism of the Ley Reservada el Cobre. Indeed, successive Chilean administrations have been making efforts to reform or abolish the law since 2010, although no such measure has yet successfully cleared Congress. A Parliamentary Commission of Inquiry into Milicogate, which reported back to the full body in September 2016, blamed the scandal on a lack of financial oversight and control in the armed forces, in particular in the CAF. General Fuente-Alba in particular was accused of a failure to exercise oversight. The commission also recommended repealing the Copper Law. One result of the affair was that the text of the previously ‘Secret’ Copper Law, and its various modifications were officially made public in December 2016.

In September 2019, the Copper Law was finally repealed after 61 years. The Chilean Congress approved a new compromise whereby the 10% levy on Codelco sales would be maintained for nine more years, and then phased out over four years. In addition, the statutory floor on the armed forces’ budget will be eliminated. The new law, however, does not increase oversight of military budgeting or procurement.

Banner Image Credit

Image Caption: A military parade in Santiago, Chile, in September 2009.
Image Source: Flickr/Creative Commons, Alex Proimos.

Sources (Click to Expand)

“Chile investiga facturas falsas del Ejército por valor de diez millones de dólares,” Infodefensa (website), Dec. 16, 2015,

“CHILE SECURITY: Another institution hit by scandal,” Latin America Strategic and Security Report (website), February 2016,

“Minuta Milicogate,” Transparency International Chile briefing, May 3, 2016,

“Contraloría inicia sumario en Ejército por anomalías en compras a empresa involucrada en Milicogate,” The Clinic (online), May 11, 2016,

“Caso Fuente-Alba: Fiscalía cita a declarar a excomandante en jefe del Ejército por investigación de millonario patrimonio,” The Clinic (online), May 6, 2016,

“Milicogate: Ejército cifra en más de $5 mil millones el fraude al Fondo Reservado del Cobre,” The Clinic (online), Aug. 26, 2016,

“Milicogate: Comisión investigadora critica la falta de fiscalización y control de las distintas autoridades,” The Clinic (online), Sep. 27, 2016,

“TEXTO ÍNTEGRO Y ACTUALIZADO DE LA LEY N° 13.196” (full text of the Ley Reservado del Cobre), Chile Chamber of Deputies,

“Ley Reservada del Cobre dejó hoy de ser secreta,” La Tercera (online), Dec. 22, 2016,