Photographer: Fernando Lavoz/LatinContent via Getty Images

Chile's Secret Weapons Fund Under Attack After Gambling Scandal

  • At least $3.5 million was stolen from the fund to pay bets
  • Fund is financed by 10% of the sales of state copper company

Chile’s military manages an undisclosed fund for weapons -- few know how many billions of dollars it contains, or where it is invested or exactly what it is spent on. Now, a scandal involving bets at a local casino looks set to change all that.

Prosecutors and journalists are unraveling the story of how at least $3.5 million from the fund was filched by one of its administrators to finance a lifestyle of gambling, horse races and foreign travel. The journalist Mauricio Weibel, who uncovered the scandal and wrote a book on it, says the case may be the start of many.

“We still don’t know how big this is, but we know that corruption is widespread,” Weibel said. “Every day we see information of larger cases and our feeling is that this is only the beginning of a long investigation about corruption and fraud within the armed forces.”

The case follows a series of separate scandals in Chile over political campaign financing and bribery and further dents the image of a country famed for its honesty. It also threatens the last legacy of a military dictatorship that once controlled everything that happened in the South American nation and brooked no criticism of its reputation. As the press and legal system become emboldened, the government is pledging greater transparency and the military is a shadow of its former self.


The weapons fund is financed through a law shaped during the dictatorship of Augusto Pinochet that guaranteed the military 10 percent of the sales of the state-owned copper miner Codelco. With copper prices booming for much of the past decade, that was a lot of money, as much as $14.3 billion between 2000 and 2015. How the military spent that money was up to them, with little oversight from the government.

Even after updating the army, navy and air force in the past decade, the fund may still contain about $6.6 billion, or almost 3 percent of Chile’s gross domestic product, according to lawmaker Jaime Pilowsky, who heads the congressional commission that is investigating corruption in the army.

“It is an abomination that in times of democracy this law operates under such secrecy,” Pilowsky said in a written statement. “There can’t be more secret laws closed in vaults, difficult to access even for congressmen.”

Pilowsky is now campaigning to change the way the military is financed, ensuring greater control by the government.

In the Beginning

An ongoing investigation by military prosecutor Paola Jofre has revealed 2,500 supposedly irregular invoices given by administrators of the fund in less than a year.

Prosecutors have charged six military officials and another three civilians who were contracted to do work for the army and produced false invoices. At least two of the officials have admitted their guilt.

Now, the net may be cast wider. Prosecutors are investigating how the army’s former commander-in-chief, Juan Miguel Fuente-Alba, was able to spend almost $400,000 traveling around the world, even as he bought and sold properties across Chile, according to Weibel.

Time to Change

Getting to the bottom of the cases may not be easy. In a recently-published book “Betrayal of the Homeland,” Weibel unveiled numerous cases of corruption in military expenditure, but most of his sources refused to speak on the record, he said.

“Most of my sources were physically or verbally threatened and my house was broken into three times as I wrote the book,” he said in a telephone interview.

While the current Commander-in-Chief of the Armed Forces Humberto Oviedo has called on people to respect the presumption of innocence until proven guilty, the government is indicating that military spending can’t go on as before.

“This is the moment to make changes," Defense Minister Antonio Gomez said Friday. “To get out of this situation, we can’t take shortcuts or deny reality. The first step is to recognize the mistakes and the negligence that led to this situation.”

Before it's here, it's on the Bloomberg Terminal.