The Inter-American Development Bank said on Sunday that new financial support for the controversial Camisea natural gas project in Peru would be dependent on the completion of environmental and technical audits.
The bank is under fierce pressure from environmental non-governmental organisations concerned about the project’s impact on the Amazon jungle and its indigenous population, following five spills of liquid gas during the first 18 months of the pipeline’s operation. The most recent of the spills occurred last month.
New loans of up to $400m (€330m, £230m) would help finance a plant to liquefy natural gas extracted in the Amazon jungle, allowing Peru to increase significantly revenues from the project.
But Luis Alberto Moreno, the IDB president, told the FT at the bank’s annual conference this weekend: “We are not even close to approving the loan. Without the audit we can’t go to the second phase.”
The Camisea project “has forced contact with some of the last native Amazonians living in isolation, led to epidemics among vulnerable indigenous communities, and despoiled one of the world’s most bio-diverse regions with massive erosion and contamination”, said Atossa Soltani, executive director of Amazon Watch.
Ms. Soltani also claims that unqualified workers were deployed on the pipeline and that some pipes laid along the 185km stretch where the spills occurred were corroded even before they were laid.
Bank officials deny the allegations, arguing that the spills are due to the geology of the mountainous Andean region. But they accept that the project – expected eventually to generate revenues equal to 1 per cent of Peruvian gross domestic product a year – has had a “massive impact” on the country, severely testing the management capacity of central and local governments, as well as other institutions. They accept that a social fund that was to be financed from royalties paid on exports has yet to be created.
For Mr. Moreno, a former Colombian ambassador to Washington who took over as president of the bank following a hotly contested election last year, the issue is an unwelcome distraction from his efforts to reshape the bank’s activities, in the wake of the radical improvement in Latin America’s finances.
Countries such as Brazil and Mexico have cut debt and won access to cheap finance on international capital markets and no longer need loans from the multi-laterals. Loan approval at the bank reached $7bn in 2005 but is expected to decline to between $5.5bn and $6bn this year.
Mr. Moreno hopes to win approval from bank governors to increase the scope of bank lending to the private sector, as well as regional and local governments. He is also looking at expanding the scope of lending operations in local currencies such as Brazilian Reals and Mexican pesos. The bank is also set to launch a new $20m fund for infrastructure.
