Chapter 1 – The Environmental Legacy of Yesterday’s Loans

The Environmental Legacy of Yesterday’s Loans

ONE MORNING IN FEBRUARY 1989, the citizens of the Amazonian village of Pedras awoke to find that the Uatuma River had died. From the foot of the mango tree that marked the river bank to the far side of the shore, the water was covered with a blanket of fish carcasses so thick that, according to village matriarch Fofrasia Castro da Silva, “You could have walked across the water and not even have gotten wet.” Until that day, the river had been the source of the villagers’ food and water, and of their livelihood.

“I sat right down and cried…. We had beautiful water, a beautiful river and life here was wonderful. But they killed our river and now life here is very hard. What they have done is a crime.”

The “they” in Mrs. Castro da Silva’s lament were the people at Eletronorte, the Brazilian state electric utility for the Amazon region. What they had done occurred almost a year and a half earlier — they had closed the floodgates of the Balbina dam.

The Balbina dam was conceived in the 1970s, at the height of the OPEC oil crisis and of the Third World’s borrowing boom when big was still beautiful, when money was still easy, and when the generals still ruled Brazil. The country would need to increase its debt to finance Balbina, but such increases were considered necessary: Balbina would help Brazil shake its dependence on imported oil. At least that was the plan. But the dam was plagued with controversy: corruption was rampant, the economics were dubious, and the environmental damage staggering. Balbina’s reservoir would flood 2,360 square kilometers of pristine tropical rainforest to build a modest 250 megawatt dam. In contrast, the Tucurui dam, also in the Amazon, would flood a comparable area to provide 8,000 megawatts. Before Balbina could be finished Eletronorte ran short of funds. Cash starved, Balbina’s construction crept along at a snail’s pace until 1986, when a $500 million World Bank loan allowed it to continue.

Criticism continued with it. The local press dubbed Balbina a “monument to institutional insanity.” Environmentalists inside and outside the country criticized its grotesque inefficiency. Even the director of Brazil’s Special Secretariat for the Environment described Balbina as a “disaster and everybody knows it … one of the greatest errors committed in the Amazon.”

Eletronorte responded to its detractors by launching a public relations blitz with Orwellian slogans such as, “Whoever is against Balbina is against you.” In one radio advertisement broadcast every 15 minutes, the voice of Curupira — the spirit of the forest — assured listeners that he would not allow Balbina to exist were the dam not good for the fish and wildlife. A television commercial showed a cave woman being clubbed over the head with a large bone, suggesting that Brazilians would revert to Neanderthal times without Balbina.

With opposition to the dam reaching a fever pitch, the Brazilian government decided to end the debate: without warning, Eletronorte closed the floodgates 30 days early.

The problems that many feared soon began to surface. The National Institute for Research in the Amazon discovered that the area to be submerged was grossly underestimated. To determine the topography of the ground that lay beneath the lush tropical forest canopy, engineers had mapped the top of the forest canopy using aerial photographs, and then subtracted what they thought was the average tree height. This method was unreliable in the extreme; some of the tallest trees obscured the network of ravines in which they stood. According to the engineers who worked on Balbina’s topographic survey, its margin of error was so great that a 4,000-square-kilometer reservoir (almost four times the size originally estimated by Eletronorte) was “within the range of possibility.”

Apart from the ravines, the surrounding terrain was flat, so flat (the reservoir’s average depth was less than eight meters) that when Balbina’s floodgates closed water spread as it would on any flat surface — everywhere. As the ravines filled up with water, they formed approximately 1,500 islands, 60 tributary streams, and a labyrinth of canals, disturbing an area twice that of the reservoir. The little hilltops that were all but submerged by the reservoir’s rising water soon became the scene of appalling carnage.

The forest’s animals had headed for higher ground as the water rose. Their refuge soon became overcrowded; unable to escape, they began to die. “It was a horrible thing to see,” said one resident. “The islands are covered in corpses, corpses on top of corpses on top of corpses. There are dead turtles, monkeys, jaguars … everything.” This immediate aftermath of the floodgate’s closing was only the beginning.

In its haste to fill the dam, Eletronorte had failed to clear the reservoir area of the trees and vegetation that were once home to countless unknown species. The vegetation left to decompose soon depleted the river of oxygen, produced hydrogen sulphide gas, and turned the water acidic. The reservoir, with its millions of submerged and bleached-out tree trunks, became slick with scum, the smell unbearable. The once teeming river quickly became incapable of supporting its previous life forms.

According to Jamie de Neles Miranda, one of several thousand riverine people who depended on the river and the forest for their survival, many of the submerged trees were dangerous. The leaves of one tree, if brewed into a tea, would give a person a fever; the bark of another could be used to kill fish in ponds; a third was so toxic that food couldn’t be cooked over its fire. “I know hardwoods and I know what’s under that water behind the dam,” he explained. “There are many, many kinds of poisonous plants under the reservoir and that’s why the river is dead.”

With the water supply poisoned and the fish and wild animals now gone, an epidemic of skin rashes, intestinal disorders, headaches, nausea, and vomiting broke out. To make matters worse, they were followed by malaria — a common occurrence around large stagnant bodies of water that provide a perfect breeding ground for malaria-carrying mosquitoes.

While the Balbina dam brought sickness and destitution to the riverine people, it brought death to the upstream Waimiri-Atroari Indians. With their numbers already halved by years of conflict with governments and corporations which had systematically appropriated their territory for highways and cassiterite mines, these unfortunate Indians in the 1970s found themselves in Balbina’s way. The Brazilian agency for Amerindian affairs (FUNAI), to clear the area of Indians, began to relocate them. Their job became gruesomely easier by the day. From 1973 to 1979 the Waimiri-Atroari’s population diminished from 3,500 to 1,100. By 1986, just a year before Balbina’s floodgates closed, their population was reduced to 374 — mostly children. In fourteen years, more than three thousand Indians had disappeared.

Balbina was but one of many hydroelectric dams to wreak havoc on the Brazilian Amazon. The Tucurui dam — the largest dam ever to be built in a tropical rainforest — required the relocation of 18,000 people, including an entire Indian tribe. Like Balbina, Tucurui’s floodgates were prematurely closed to stem public opposition: a court order was threatening to prevent the reservoir from filling.

With the river’s flow interrupted, the water was starved of oxygen, killing hundreds of thousands of fish and reducing the area to a stench-filled and macabre zone — so macabre that alarmed officials, prior to the ribbon-cutting ceremonies, ordered the fish removed by the truckload to avoid embarrassing the dignitaries performing the honors.

The environmental carnage didn’t end with the dedication ceremony. Rotting trees, interrupted sediment flows, and leaks from 350 partially filled drums of dangerous defoliants bought in a failed attempt to rid the area of trees, and then forgotten, combined to poison the Tocantins River. Tens of thousands of people downstream had their lives all but destroyed. The dam also stopped the silt that had enriched the soil when the waters rose each year during the rainy season. Harvests of rubber and acai palm fruit from the Tocantins floodplains and islands fell dramatically as the riverside trees rotted away. The river, once a source of life, became devoid of fish and shrimp. “Before the dam, our life was good,” one resident said. “It was bountiful. Everything — fish, shrimp, good water. Now all we have is the consequences of the dam and that’s it: hunger and polluted water.”

Ecosystems less publicized than the rainforest were also falling to the financiers who sought to redirect their fate. The once thriving agricultural community of Singrauli in India has been reduced, with foreign loans, to a destitute population eking out a living from soils contaminated by the twelve open-pit coal mines and the five coal-fired electricity generating plants they now have as neighbors. Water contaminated by coal-ash slurry and air laden with dust and sulphur dioxide have contributed to a public health disaster involving widespread tuberculosis, skin diseases, and digestive tract disorders: 70,000 now toil in the mines and the plants where their farms once stood. So blighted is Singrauli that the Indian press compares it to “the lower circles of Dante’s Inferno.”

Hydroelectric dams and thermal-powered electricity generating plants — long the darlings of international financiers — account for roughly 25 per cent of the Third World’s debt. They are also responsible for much of the destroyed farmland and forests, for induced earthquakes, for the spread of diseases, for the alteration of hydrological regimes, for the erosion of coastlines, and ultimately for the reordering of river and land around which millions of people had organized themselves over the centuries.

Next to energy, agricultural projects — often irrigation schemes — contributed most to Third World debt.

In Ethiopia’s Awash River valley, irrigation systems for sugar cane, cotton, and banana plantations destroyed the valley’s rich floodplains — a mixture of savannas, swamps and riparian forests. To make way for the plantations, 20,000 people were expropriated from their lands, mostly without compensation. Forced to leave, the people and their livestock crowded onto lands held by other tribes near the newly irrigated plantations, forcing them, in turn, to spill onto the lands of their neighbors. Normal migration routes were blocked and tribal warfare intensified as the region’s land base eroded. When the rains failed in the early 1970s and again in the early 1980s, the people, bereft of their former resources, became wards of famine-relief stations. To the Afar people of the Awash River valley, the misery wrought by this foreign-aid-financed agricultural scheme was so much worse than the droughts and other hardships of the past that they could only explain it as punishment from God.

Cattle ranching projects in Botswana promoted such intensive grazing that grasslands were destroyed and traditional pastoral people’s economies decimated. Tobacco plantations in Africa, also recipients of foreign aid loans, wreaked havoc on tropical soils by draining them of nitrogen, phosphorous, potassium, and other vital nutrients, consuming one acre of forest to cure each acre of tobacco.

WHILE ILL-CONCEIVED agricultural projects would leave much of Africa in ecological ruin, industrial investments would earn for Brazil the title of the world’s worst polluter. Brazil became home to many of the world’s most polluted cities, including Cubatao, a place often cited as the worst on earth.

Located between Sao Paulo, the country’s biggest city, and Santos, its biggest port, Cubatao seemed a perfect site for development when Brazil’s military government began its drive to industrialize in the mid-1960s. Petrobrás, Brazil’s national oil company and largest borrower, was the first large company to open there, followed by another 25 local and multinational companies, turning the outskirts of town into a sprawl of steel, cement, and fertilizer factories.

As the Wall Street Journal explained: “From the start, the generals who ruled then made it clear that they cared less about pollution than about modernizing at almost any cost. That was good for industry, but disastrous for Cubatao.”

Scores of factories spew pollutants into the atmosphere. The air in some sections contains twice the level of contaminants considered safe by the World Health Organization. Cubatao has the highest level of acid rain ever recorded. Up to half its 100,000 inhabitants are thought to suffer from respiratory ailments, and expectant mothers worry that their babies will be born deformed. Its river is a mass of sludge.

Cubatao became Latin America’s most important petrochemical complex and one of the most polluted cities on earth: every day 800 tons of toxic gasses spewed from the 24 petrochemical factories, poisoning the air, water, and land. For 25 years, a lethal red rain fell daily on Cubatao. Authorities gave up attempts to measure the air pollution: the instruments would not stand up to the corrosion. Some 74 different pollutants burnt the eyes and lungs of Cubatao’s inhabitants, earning for it the nickname, the “valley of death.” Vegetation and wildlife disappeared, 44 per cent of the workers in the heavy industrial plants suffered from lung disease, and children died by the thousands from tetanus, tuberculosis, lung ailments, diphtheria and typhoid. Many never lived long enough to die of such diseases. For every 1,000 births, 40 babies were stillborn and another 40 died in the first few months of their lives. Cubatao also held the unenviable world record for anencephaly — the total or partial absence of brain tissue in newborns — with one case for every 250 births.

Next to Brazil, Mexico may be the world’s dirtiest country, thanks to its rush to develop its oil and petrochemical resources, creating in the process another hell on earth.

In the Coatzacoalcos River basin, the leading oil-producing region in the Gulf of Mexico, researchers from Mexico City’s Center for Ecological Development declared an 8,000-square-kilometer area to be “ravaged,” calling every aspect of the ecosystem — water, land, and air — “severely afflicted” by the exploitation of petroleum deposits and the growth of refineries and industrial complexes. Nothing escaped the oil industry’s assault, neither “flora, fauna, nor humanity,” said the Center. River and coastal pollution achieved unprecedented levels: carcinogens were found in nineteen species of fish, crustaceans, and molluscs; nickel deposits in the river sediment “were much greater than those normally encountered in areas of human activity”; and air pollution in the form of high levels of sulphates and formaldehyde were nearly as high as those in Mexico City, accounting for the very high incidence of respiratory and eye illnesses suffered by the people in the area.

Mexico City’s air is reputed to be among the world’s worst, causing respiratory ailments, stinging eyes, skin rashes, intestinal disorders, and up to 100,000 pollution-related deaths annually. In 1986 it was blamed for birds dropping out of the sky and writhing in death throes on people’s front lawns.

Third World governments and their international financiers have viewed pollution as both necessary and a sign of wealth. “We welcome pollution,” one Third World delegate declared at the first-ever Stockholm environment conference of 1972. “Brazil can become the importer of pollution,” elaborated Brazil’s Planning Minister.

Hell bent on industrialization, Third World governments, and those in the north who wanted their business, would build hydro dams, steel mills, roads, irrigation canals, petrochemical plants, mines, and smelters as if there were no tomorrow.

But tomorrow came all too soon, choking more than the environment: the hydro dams, steel mills and other investments were choked too.

Sources and Further Commentary

For the details on the Balbina dam, I am indebted to the prolific and excellent work of Dr. Philip M. Fearnside, a research professor at Brazil’s National Institute for Research in the Amazon. See in particular his study Brazil’s Balbina Dam: Environment Versus the Legacy of the Pharaohs in Amazonia, published by the National Institute for Research in the Amazon (INPA), Manaus, Brazil, 1989. See also, “Amazon rainforest could be wiped out” by Kelly Toughill in The Toronto Star, November 5, 1989; “Brazil wants its dams, but at what cost?” by Marlise Simons in New York Times, March 12, 1989; articles in World Rivers Review, San Francisco, November/December 1987, and July/August 1989; International Dams Newsletter, San Francisco, September 1986; “Extracting Power from the Amazon Basin” by John A. Adam in IEEE Spectrum, August 1988; International Water Power & Dam Construction, U.K., May 1986 and September 1988; Correspondence between the Environmental Defense Fund (Washington) and the World Bank from 1986-1989 as well as EDF Testimony before various congressional committees over the same period.

The World Bank denies that it directly funded the Balbina dam — indeed the bank had earlier rejected a project loan to Balbina on environmental grounds. But the $500 million Power Sector Loan from the World Bank in 1986 — a general loan to be used to help pay for imports for power sector investments — was what the Brazilian government needed to get various stalled dam projects — including Balbina — completed. No sooner had the Power Sector Loan been approved than full-scale work on Balbina was resumed, and just over a year later the dam’s floodgates were closed. Furthermore, it is clear from the secret minutes of the Board of Executive Directors meeting, at which the $500 million Power Sector Loan was considered, that the bank knew full well that many controversial projects would be financed with the Power Sector Loan. See “Summary of Discussions at the Meeting of the Executive Directors of the Bank and IDA, and the Board of Directors of IFC, June 19, 1986,” from the vice president and secretary of the World Bank to various bank officials including executive directors, the president, vice presidents and department heads.

The Canadian engineering company, Monenco, was involved in the “Design of the 250 MW Balbina, Brazil, hydroelectric project, in consortium with another Brazilian firm.” See Monenco Annual Report 1977, Montreal, Canada. My requests to Monenco for further information on their involvement in the Balbina dam have not been answered.

For further information on the plight of the 2000 families adversely affected by the toxic-laden waters discharged from the Balbina dam, see the excellent work of the Justice and Peace Office of the Scarboro Foreign Mission Society, Scarborough, Ontario, Canada.

For further details on the Tucurui hydroelectric dam see “The Problems That Plague a Brazilian Dam” by John Barham and Catherine Caufield in The New Scientist, London, October 11, 1984; “Hydro dam in Amazon threatens river life” by Augusta Dwyer in The Globe and Mail, Toronto, January 3, 1989; various articles in International Water Power & Dam Construction, U.K., July 1983, July, September, and November 1984, January 1985, and February 1990 (the last includes a detailed list of the environmental effects of Tucurui). Also see “Brazil’s Debt and Deforestation — A Global Warning” by Sandra Steingraber and Judith Hurley, Food First Action Alert, Institute for Food and Development Policy, San Francisco, 1990; also see Dr. Philip Fearnside’s paper on Balbina mentioned above.

Dr. Fearnside explains how projects like Tucurui operate at the expense of the taxpayer and private electricity ratepayer: “Power tariffs in Brazil are, on average, much lower than the cost of energy production. This discourages energy conservation and provides substantial subsidies to energy-intensive industries such as aluminum smelting. Aluminum production in the Grande Carajás Program area is particularly favored, since Eletronorte has agreed to supply power to the plants at a rate tied to the international price of aluminum, rather than to the cost of producing the energy: for the Alunorte/Albrás plant in Barcarena, Pará (owned by a consortium of 33 Japanese firms together with Brazil’s Companhia Vale do Rio Doce), only US 10 mils/kwh is charged, while the power, which is transmitted from Tucurui, is estimated to cost US 60 mils/kwh to generate (Walderlino Teixeira de Carvalho, public statement, 1988). The rate charged the aluminum firms is roughly one-third the rate paid by residential consumers throughout the country, and so is heavily subsidized by the Brazilian populace both through their taxes and their home power bills.” From Brazil’s Balbina Dam: Environment Versus the Legacy of the Pharaohs in Amazonia, page 33.

For information on Singrauli see “Indian Coal Development Creates Hellish Conditions,” Probe Alert by Probe International, Toronto, May 1990, and the correspondence between the Environmental Defense Fund (Washington D.C.) and the World Bank and EDF’s congressional testimony on this subject from 1987 on.

For references on the percentage of debt attributed to energy sector investments see the article by John Adam in IEEE Spectrum (as above); The Foreign Debt and the Energy Sector of Latin America and the Caribbean, by the Latin American Energy Organization (OLADE), Quito, Ecuador, 1987. Reiner Lock, a legal advisor to the U.S. Federal Energy Regulatory Committee (1985-89), told the U.S. Congressional House Committee on Energy and Commerce in 1989-90 that in most developing countries, “state investments in electric power have contributed to somewhere between 25% and 40% of their national debt buildups since World War II.”

For further details on the Awash River valley development scheme see “Ethiopia: Famine, Food Production, and Changes in the Legal Order” by Peter Koehn, in African Studies Review, vol. 22, no. 1, April 1979.

For further reference to Cubatao, Brazil, see “Industrialization of Brazilian village brings jobs at cost of heavy pollution and even death” by Lynda Schuster in The Wall Street Journal, April 15, 1985. By 1990, Cubatao, with the help of a half-billion-dollar cleanup, was on the road to recovery. An article in The Globe and Mail reported that, according to Sergio Alejandro, regional manager of Cetesb, the Sao Paulo state pollution control agency, “Cubatao is like a sick person who’s been moved out of the intensive care unit, but who will have to take certain precautions for the rest of his life.” See “Off ecologists’ critical list” by Paul Knox in The Globe and Mail, Toronto, November 6, 1990. According to the article, of 320 major sources of air, water and soil pollution identified by Cetesb, 286 are now being treated, and the 557 tonnes of dust and noxious gases that used to be released into the air every day, have been cut by 70%. “Clandestine dumps have been found to contain 150,000 tonnes of soil contaminated with organic chlorides, enough to keep the high-temperature incinerator at a Cubatao chemical plant burning almost constantly for the next 10 years,” The Globe and Mail reported. The worst polluter is a state-owned steel mill.

For details on the environmental consequences of oil development in Mexico, and the report released by the Center for Ecological Development, see “The Cost of Mexico’s Filthy Riches” by Mike Rose in South, U.K., June 1987. On Mexico City’s environmental problems see “Pollution killing thousands in Mexico City” by Linda Hossie, in The Globe and Mail, Toronto, November 23, 1988.