beyondbrics

Is Peru’s $20bn energy accord with Brazil turning sour?

The news that Odebrecht of Brazil has pulled out of building Tambo 40, a 1,278 megawatt dam in Peru, is the third setback for the scheme this year.

Tambo 40 is one of six hydroelectric projects planned for Peru’s Amazon under the 6,000MW accord signed by former presidents Alan García and Luiz Inácio Lula da Silva.

In a letter to Peru’s mining ministry, Odebrecht cited its respect for protesting indigenous communities as a factor in its decision.

The Ashaninka people say the planned dam would subermerge about 22,000ha of jungle, affecting 15,000 people.

“We welcome this decision by Odebrecht to respect our rights. We hope that other Brazilian dam builders will follow Odebrecht’s lead and make a similar decision,” Manuel Leon, an Ashaninka representative, said in a statement.

The Ashaninka also oppose Pakitzapango, a 2,000MW dam that has stalled because Odebrecht’s concession lapsed before it could complete its environmental impact study.

Then there is Inambari, a 2,000MW dam that fell victim to rolling protests that shook Peru’s south in July. In response to the protests, the Peruvian government suspended the concession granted to Brazilian consortium Egasur.

The Ashaninka and other indigenous communities, helped by groups such as Amazonwatch and InternationalRivers, have long opposed the dams on environmental and social grounds.

Now concern about Brazil’s growing influence in the region seems to be adding fuel to their fire.

Many of the proposed dams were designed by Brazil’s electricity company Eletrobras, with input from companies such as Odebrecht, and much of the funding is to come from Brazil’s national development bank, BNDES.

A leading Peruvian daily, El Comercio, branded the Tambo 40 and Pakitzapango dams “abominably unfair” in a recent editorial and called for a rethink of the deal.

“Peru would send 80 per cent of the dams’ production to neighbouring Brazil in the first decade [of the accord],” it argued. “Sixty per cent in the second decade and 40 per cent in the third. Only after 30 years would electricity remain in the country, with the Amazon unfairly damaged.”

It called the accord “a problem caused by the Apra regime [of former president Garcia]” that needed to be fixed by new president Ollanta Humala.

Humala, who alarmed international investors early in his electoral campaign with a leftist agenda, has since won plaudits by sticking to his pledges to honour contracts and investors’ rights.

Brazilian advisers helped Humala morph from a former coup leader into a centre-left president who is backing Newmont and Buenaventura’s $4.8bn Conga gold mine in the face of community protests. Which way will he jump on dams?

Related links
Power generation: Energy plans require PR and fat purses, FT special report
Brazil suspends Chevron over oil spill, FT
Modern energy 2011, FT special report