Canada Pension Plan

PRESS RELEASE: EDC preempts court decisions, finances second Biobio dam in Chile

August 28, 2000

Canada’s Export Development Corp. is financing Chile’s largest and most controversial hydro dam, even though the Chilean courts have yet to decide whether or not the dam on southern Chile’s Biobío river is legal.

“There are still three lawsuits against this dam before the courts,” says Juan Pablo Orrego Silva, an ecologist with the Chilean Action Group for the Biobío (GABB), which is opposed to hydro development along the river.

During a Quebec trade mission to Chile in May, ABB Alstom Power Canada of Tracy, Que., announced a C$27-million deal to supply Chile’s largest utility, Endesa, with generating equipment for the Ralco dam.

Probe International has since confirmed that the EDC is supporting the Quebec sale with US$17-million in financing. According to EDC spokesperson, Rod Giles, the proposed dam met all of EDC’s environmental criteria but the agency, exempt from Canada’s Access to Information law, has refused to disclose further details.

Work on the US$500-million Ralco dam resumed in March despite injunctions filed by Chile’s indigenous Pehuenche and environmental groups which have stopped construction three times since Endesa started building the dam in 1998.

And the fight continues. Pehuenche families and environmentalists are awaiting court decisions on three lawsuits against the dam: The first charges Chile’s National Environmental Commission (Conama) and Endesa of illegally approving the dam’s environmental impact assessment. The second lawsuit contests Endesa’s claims to water rights for Ralco on the Biobío. The third lawsuit accuses the Economy Ministry and Chile’s former president of violating the country’s 1993 Indigenous Peoples Law when they gave Ralco the go ahead. Under Chile’s indigenous law, developers are not allowed to start construction on projects unless all indigenous people whose land would be affected formally give their consent.

Of the 91 Pehuenche families whose land would be flooded by Ralco, 18 families have refused to sign away their properties, claiming that most people were pressured or tricked into agreeing to Endesa’s resettlement deal. They also argue that the lands offered as compensation are far less valuable than their traditional land, and are inadequate for sustaining Pehuenche livelihoods.

The Chilean National Energy Department has also argued against Ralco, saying that natural gas piped from Argentina to fuel high-efficiency power plants would be far more reliable and economical than Endesa’s drought-prone hydro dams.

Ralco critics maintain that former President Frei’s administration bowed to pressure from Endesa, which controls nearly half the country’s generating capacity and claims water rights to 60 per cent of the country’s major rivers.

Endesa has awarded Ralco contracts to companies in France, Perú and Spain, as well as Quebec, but GABB believes that EDC is the first international financing institution to get involved.

The World Bank’s private-sector arm, the International Finance Corporation (IFC), refused to back Ralco after the public outcry over Endesa’s violations of indigenous people’s rights and environmental covenants of the IFC loan for Pangue, the first dam on the Biobío – also partly financed by EDC in 1994.

If completed, the 155-metre high Ralco dam would flood 3,500 hectares of a unique ecosystem and the heart of the Pehuenche ancestral territory, displacing 700 people, including 400 Pehuenche, and threatening the survival of endangered fauna and flora.

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