São Paulo, Brazil

Large Dams and Decision Making: Conflict & Negotiation

• Yacyreta hydroeletric project: the struggle for participation
  Mr. Elias Diaz Peña
• Interregional transfer of water in Northeastern Mexico: The Dispute over El Cuchillo Dam
  Dr. Ismael Aguilar Barajas
• Conflicts resolution and negotiation: the experience of Sistema Hidráulico Yacambú – Quíbor C.A. in Venezuela
  Mr. Miguel Nucete
• The Biobio Hydroelectric Project: a lesson not fully learned
  Mr. Cristian Opaso

Yacyreta hydroeletric project: the struggle for participation
Elias Diaz Peña
Sobrevivencia, Friends of the Earth
PARAGUAY

The Yacyreta Hydroelectric project, one of the largest hydroelectric prjects in the world, is a joint project between Argentina and Paraguay that involves the construction of a complex system of concrete and earth dams, 67 km in length, on the Rio Parana, which forms part of the border between the two countries. The powerhouse will produce 2,700 megawatts of electricity to be used almost entirely by Argentina. The project also includes two spillways with a total spill capacity of 95,000m3/sec, a navigation lock, one irrigation intake at each side, a large drainage canal along the 26km long lateral earth dam on the paraguayan mainland coast, protection schemes and divertion canals for paraguayan inland valleys that would be otherwise flooded by the reservoir.

The project, a typical mega-scheme conceived and begun during the military dictatorships that ruled Paraguay and Argentina, has been plagued by delays, corruption, disputes, political changes, abuse of power in detriment of the affected population, outrageous cost overruns and the recurring reluctance of the Argentine government to provide its share of counterpart financing. An important part of the project cost was financed by the World Bank and the Interamerican Development Bank. In 1973, a binational commission, the Entidad Binacional Yacyreta (EBY) was created by a treaty signed between Argentina and Paraguay. EBY’s mandate is to design, build and implement the project. The hydroelectric complex installations and ancillary works are jointly owned by both countries in equel parts, and the power produced is also owned by both countries in equal parts.

Although the electricity from the joint project is going almost exclusively for use in Argentina, most of its adverse impacts are in Paraguay. The vast majority of the physical works of the dam are located on Paraguayan territory, and the loss of wild lands (including a unique system of large river islands with impressing biodiversity, endemic species of fauna and flora and ancestral home of indigenous communities), homes and livelihoods are also concentrated in Paraguay. If the reservoir is raised from the current level of approximately 76 meters above main sea level to ots targeted elevation of 83 meters above msl, it would cover 1,650 km2, inundating approximately 80,000 hectares in Paraguay and 29,000 hectares in Argentina, above and beyond the original river bed.

At its present level, aside from the wildlands, the project has affected small riverside communities and the cities of Encarnación, Paraguay and Posadas, Argentina, causing enoumous social disruption, as well as other yet unmitigated environmental and economic impacts. People, especially on the paraguayan side of the project are being forced to abandon their homelands, their sources of sustenance from the river, their means of earning a livelihood. There are thousands of low income families in Encarnación living near polluted stagnant water from the reservoir, their houses frequently flooded, their domestic water sources lost by polution, their sanitary systems destroyed by raising groundwater levels, their children exposed to water-bound deseases. The historic district of Encarnación is completely degraded, after 25 years of suspended death penalty, since it is supposed to be flooded at the final reservoir level.

The social, economic and environmental impact mitigation plans, the compensation and relocation programs which have been implemented are insufficient and inadequate. They have been based on inadequate information about the real magnitude and extension of the affectations and the population affected.

The project design and construction (which started in 1983) took place during the harsh period of military dictatorships in Argentina and Paraguay. Participation of the potentially affected populations and of civil society in general in the decision making process was always violently suppressed. With the establishment of democratic governments, a slow and difficult path was followed by local communities, local governments and NGOs to seek meaningful participation. In 1992, consultations were open for the design of Environmental Impact Mitigation and Relocation and Compensation plans. SOBREVIVENCIA, along with other organizations and some members of the affected communities, gave substantial imput for the development of these plans. Nevertheless, lack of sufficient and timely information about the proposed plans and lack of consideration by EBY of the imput offered, resulted in inadequate plans. Moreover, the implementation of these plans was also faulty, and at the time of the filling of the reservoir, although most of the engineering works needed for the functioning of the powerhouse were completed, the mitigation, relocation and compensation tasks were lagging far behind. Thus, when the reservoir was raised to its first stage in August 1994, the enormous damage done to the environment and to the livelihoods of the affected communities was left largely unresolved

Moreover, despite the democratic processes, EBY remained an unchanged reduct of authoritarianism, corruption and abuse of people’s rights. SOBREVIVENCIA, in cooperation with other NGOs, started a difficult process of claims and denunciations before EBY, the Multilateral Banks, the Governemts of Paraguay and Argentina, International Fora, about the problems poised by Yacyreta. This process led to the presentation, in 1997, of requests to the World Bank Inspection Panel and the IDB Investigation Mechanism, for these independent inspection bodies to conduct thorough investigationas into the violations of IBRD and IDB policies that occurred during the design and implementation of the Yacyreta Hydroelectric Project, and asked these Panels to advise the Banks on any remedies which should be implemented to compensate the people affected by the project fully for the harms they have suffered as a result of inadequate environmenal and social mitigation.

Both claims were accepted, and inspection missions were sent to the project area by both independent inspection mechanisms. This inspection process marked the beginning of increased participation and actions of the affected communities to claim their rights. Affected peoples organizations were formed and a Coodination Body was created among them, with the participation of SOBREVECIA. The reports of both inspection mechanisms largely confirmed the claimants’ arguments, and although EBY did not change its attitude towards te affected population, their organizations grew stronger and more vocal. A very important development was the effective involvement of local municipal and provitial authorities in the process.

The dramatic social and political events that took place in Paraguay in March 1999, led by civil society and which resulted in a complete change of government, marked another milestone in the process of participation of affected communities in the process of Yacyreta. A Multisectorial Forum was conformed, with participation of EBY, members of the Paraguayan Parliament, affected community organizations and SOBREVIVENCIA. The direction of EBY in Paraguay was changed, a new series of dialogs started among members of the Multisectorial Forum, EBY, the Banks and the Paraguayan governemt. The problems are yet unresolved, and the path to their solution is still going to be very difficult, but there is an increased confidence that participation will become meaninful and possible in the future of the implementation of the Yacyreta Binational Hydroelectric Project.

Interregional transfer of water in Northeastern Mexico: The Dispute over El Cuchillo Dam. An insight into its economic, engineering, political and legal aspects.
Ismael Aguilar Barajas
Department of Economics and Center of Strategic Studies,
Instituto Tecnológico y de Estudios Superiores de Monterrey, Campus Monterrey
MEXICO

This contribution addresses the recent conflicts over inter-regional transfer of water between the northeastern Mexican states of Nuevo Leon and Tamaulipas, a semi-desert region. El Cuchillo Dam is at the center of this dispute. The Cuchillo Dam was carried out as a multipurpose project. It was officially inaugurated in 1994 by ex-president Salinas de Gortari. The two most important uses were 1) to supply drinking water to the Metropolitan Area of Monterrey (MMA), a key industrial and service Mexican metropoli of 3 million people, and 2) to irrigate lands in northern Tamaulipas, in the proximity to the U.S. border. This dam (located in Nuevo Leon state) receives water from the San Juan River whose stream flow passes through the same state, but that was previously storaged in the Marte R. Gomez Dam (in Tamaulipas state) for agricultural needs of the Irrigation District 026. In order for the project to go ahead, an agreement was signed in 1990. This agreement, signed by the two state authorities, the National Water Commission (CNA) and other federal government agencies, enabled the MMA to receive water from El Cuchillo for human consumption, as long as the needs of Tamaulipas´s Irrigation District 026, the previous users of the stream flow, were also satisfied. Two other events have come into play: A severe drought that adversely affected the region and, related to this point, the low Mexican reserves of the Falcon international dam.

With the above framework, Tamaulipas put pressure on the federal government (represented by the CNA, as the national water authority) to liberate water from El Cuchillo dam. After public and private negotiations between CNA, the two state governments, and over half of the farmers involved, the 026 Irrigation District finally got limited access to water from El Cuchillo, in 1996 and in 1997, not without difficulties and still unsatisfied with this outcome. From early January 1997 to the end of the year the dispute reached the courts. The Tamaulipas farmers took the Federal government and the two state governments (plus other authorities) to court, on the grounds that the former accords that gave Nuevo Leon rights over waters from El Cuchillo were unlawful. It was also on legal grounds that Irrigation District 026 was told, on October 27, 1997, they no longer had a case. Still in early 1998 opposition in both sides continues. In the absence of a long term win to win agreement, it is very likely that waters from El Cuchillo would continue causing social, political and economic unrest. The compensation package that has been designed for the Irrigation District, whose area is above 70 thousand hectares and sustain over 5 thousand families, has not been widely accepted, and thus leaving room for further escalation of the inter-state conflict.

It is argued that in addition to bring in attention to the more visible and recent aspects of the conflict, including the tradeoffs between urban/industrial versus rural/agricultural growth, there is the need to frame this inter-state problem into a more comprehensive context. It is underlined the importance of history in order to better understand the nature of the conflict. The solution being reached so far certainly crosses through different disciplines - from Economics to Politics, but is fundamentally based upon water law.

1.- The occurrence of the present drought affecting northeastern Mexico did bring about a complex set of affairs which otherwise may have been unnoticed, postponed or happened in a lesser scale.- One of the affairs is the inter-state conflicts between Tamaulipas and Nuevo Leon, as a result of interregional transfer of water from El Cuchillo dam.

2.- With the increasing demand for water and the less likely supply in terms of quantity and quality, it seems plausible that conflicts over water use would also escalate. Within this framework, water would be seen as a regional comparative advantage and not longer as a free good. In the absence of proper handling, it is also very likely the emergence and worsening of inter and intra regional conflicts. This would have profound impacts in the socio-economic fortunes of Mexico´s regions.

3- The Rio San Juan Basin, where the conflict is set, is a matter of national interest as opposed to a merely regional dispute over water rights. The Monterrey Metropolitan Area and Northern Tamaulipas maintain national relevance. By linking these two regions, the conflict over El Cuchillo is thus not just a simple local dispute. Furthermore, since part of the needs of the population of the Lower Rio Bravo depend upon this river for domestic consumption, and over the past couple of years the Mexican government asked Texas a water loan intended for agricultural purposes, the conflict´s influence reaches the binational sphere.

4- The drought in general and El Cuchillo affair in particular revealed shortcomings in water management, especially regarding the legal and institutional framework. This conflict neatly shows that part of the problem lies in the interpretation of the law, according to the different interests of the actors involved. This issue does not only deal with an appropriate valuation of water among users, but it also underlines the legal battle as to the right attributions of the federal, state and local levels.

5- This particular conflict also demonstrates the need to reinforce a demand-side approach into water management. So far, increasing water demand has usually been met with more water supply. This route has proven to be extremely costly, not only in financial terms but also in social and political ones. Increasing efficiency in the use of water that is already in the system - be it domestic, industrial, or agricultural - is a must prior to bring in more water from more and more distant places. The role of both technology - in the urban economy and in agriculture - and the market system are seen in this context.

6- There is an accepted view that both Nuevo Leon and Tamaulipas lost with El Cuchillo´s project. Monterrey lost because it had to incurred in severe debts to finance part of the infrastructure, and yet has no full control over El Cuchillo´s waters. Tamaulipas lost because has no control either of the current amount and quality of water to be used; now it has to negotiate with the federal and a neighbor state government, water that used freely before, of course, assuming the existence of flows).

7- However, there is another view for which the conflict did also bring about "good news". One of them is the increasing awareness of water scarcity and the corresponding measures that have been taking. Overall, El Cuchillo means more water for the region and for Mexico too. Whether there is an inter and intraregional appropriate and efficient distribution of these waters, could be seen as a different story altogether.

8- Something that is less likely to be debated is the lack of vision in formulating the agreement that led to the construction of El Cuchillo. Most problems could have been anticipated. It looks like a largely announced story. The wording itself is a major problem. Then, to a large extent semantics has a role in drafting legal and normative documents. The lessons to be learned from this issue, and considered important in preventing future disputes, are straightforward.

9- The emergence of the drought got Mexican institutions unprepared to deal with it. It was clear that there were no government plans to cope with these kind of events, and that it was very unlikely that a single agency could address the wide variety of problems derived from the occurrence of droughts. In other words, tackling them would necessarily require a more orchestrated approach, not just the participation of the Mexican section of the International Boundary and Water Commission (CILA) and other water authorities. Short term -led crisis management very often has replaced long -term planning. Although this is understandable, partly as a response to the day to day difficulties, it has proven to be extremely costly, not only in financial terms, but also in social, environmental, and political ones. Time itself has a value, if only because the wrong strategies consume time that otherwise could well be used to deploy more appropriate ones.

*The conflict over El Cuchillo Dam is framed within the context of the severe drought the region has been passing through. This drought, which has caused a great many problems, is far from the most severe registered in the period of record (1950s). This means that a more severe drought would bring in more devastating effects. This in the context of increasing demand and decreasing supply, and in the absence of appropriate programs which are not dictated by the quickness imposed by emergencies. That is, action is needed not only as a response to crisis.

* It is of paramount importance to gain a further understanding of the complexities involved. A failure to do this very often has meant partial or inadequate perceptions of what the problems are.

* It would seem likely that the conflict will continue until a definitive long-term win-to-win accord is reached. There is the firm belief that this is possible and that works in the best interest of the two states.

* It is also of great relevance to strengthen the institutional setting upon which the conflict has evolved. As stated above, no single institution could be capable of, on its own, handling the crisis originated by droughts in general and this interstate conflict in particular.

* The above point also leads to underline the urgency of greater cooperation from the very binational to the local level. It is through cooperation rather than by competition that shared water resources could be used best.

* In the end, it becomes crucial to foster inter and intra regional systems view of water management. This would call for more comprehension about the way water systems work. It is obvious, for instance, that new upstream developments, does mean less water for the lower part of the basin where the conflict is set. It is needed a closer look at technical, economic, social, environmental, legal and political perspectives. It does not seem that this has been the case so far. Several of the current policy recommendations that are usually heard of have been proposed years ago.

The story of El Cuchillo has hardly been told before in an academic forum. In addition to do this, this paper considers that it is not enough to look at what was in the press in the middle of the crisis, but that is necessary to go into more historical detail. Furthermore, it is done an updating of events, including the gathering, directly from the courts, of legal documents.

1.- El Cuchillo has been a long-standing project. A major point of this paper is that although El Cuchillo Dam was officially inaugurated in 1994, and the major conflict between Tamaulipas and Nuevo Leon were more visible in 1996, seventy years earlier El Cuchillo project was already being discussed. In fact, a study of the Comisión Nacional de Irrigación (1940) indicates that since 1923 there were plans to optimize the use of the Rio San Juan, a tributary of the Rio Bravo, being El Cuchillo one of the two major projects.

2.- The warnings from previous studies. The construction of El Cuchillo went ahead against a known and potential conflictive framework. To a large extent, part of the problems with the Lower San Juan Basin in general and El Cuchillo in particular were already identified several years ago. In other words, a great many of the problems that reached the media in 1996/1997 had been present the first day construction began. A careful analysis of the existing conditions prior to the construction of El Cuchillo, would suggest that the lack of vision in attending them make the emergence of those conflicts a relatively normal event.

Conflicts resolution and negotiation: the experience of Sistema Hidráulico Yacambú – Quíbor C.A. in Venezuela.
Miguel Nucete
Former President of Sistema Hidráulico Yacambú Quíbor C.A.
VENEZUELA

Background.

The Yacambú – Quíbor Project is a hydraulic work located in the State of Lara in Venezuela. The objective is to make use of the water of the Yacambú river located in a humid zone with a yearly rainfall of 2,000 millimeters, from the Orinoco river watershed, and transfer it to a semi arid zone where the yearly rainfall is 500 millimeters, belonging to the Caribbean sea watershed. This project is considered strategic for the development of the Lara State, because it will guarantee the urban water supply to Barquisimeto’s Metropolitan Area, the fifth most important city of Venezuela, which has a population of about 800,000 people. Barquisimeto is located at about 360 kilometers west of Caracas. The project, also will guarantee irrigation water for 15,000 hectares in the Quíbor Valley, located about 30 kilometers west of Barquisimeto. This zone has an important irrigation tradition, with high economic value crops and important production rates, relevant at the national level. The importance of this project for the development of Lara State can be seen from the fact that the water it will contribute is almost twice the water that is at present consumed by all the cities of the state; also, it represents 85% of the water that is produced by the five public and two private reservoirs that exists there.

The project involves the construction of a 162 meters high dam and other related structures, that will permit regulation of 10.4 m3/sec with a reservoir capacity of 435 million of cubic meters, that will flood about 852 hectares. The project also involves the construction of a 26.34 kilometers long and 4.20 meter diameter tunnel that crosses the Los Andes Mountains range, up to 1270 meters depth.

The tunnel is technically very complex , owing to difficult geological conditions, much more complex than foreseen in the studies that were done prior to its construction. Because of these characteristics, since the tunnel was first auctioned in 1975, three important international contractors and some other national contractors participated in its construction; to each one of the three international contractors the contract was rescinded; one of them litigated against the Venezuelan Government, leading to a situation that almost paralyzed the project from 1980 till 1989, generating diverse conflict ridden situations.

The construction of the civil works was started in 1973 by the Ministry of Public Works; however, when in 1977 it was divided into three specialized ministries, the construction was assumed by one of them, the Ministry of the Environment and Renewable Natural Resources (MARNR). Both ministries managed the project decisions from Caracas, which brought about diverse range of problems to the project's normal functioning. As a result, the community felt cut off from the project and had no real understanding of the importance of the project for the development of the state. Both ministers behaved as civil work builders, with no vision or plans related to water use and its impact in the development of the state. No relations were developed with the community's leadership.

In 1986 when the National Government didn’t support the project and didn’t assign it a budget, the Lara community got organized in a popular front in defense of the project, in which all sectors of society participated, without any political or other kind of restrictions. Their struggles, forced the National Government to create of a public company inscribed to MARNR, that would function in Barquisimeto city, and that would have as its objectives, not only the construction of the civil works but making use of the water. The company, called Sistema Hidráulico Yacambú – Quíbor C.A. (SHYQ,C.A.) was created on September 20 of 1989. A civil engineer Miguel Nucete H., working in the Foundation for the Development of the Midwest Region of Venezuela (FUDECO), was appointed to manage the company. Nucete was a technician not related to any political party, who had lived for 23 years in Barquisimeto city. FUDECO was a public institution in charge of promoting the development of four states, one of them being the Lara state. Mr. Nucete had been an important factor in promoting the Yacambú –Quíbor project. At that moment he had more than 10 years as President of FUDECO. Although he was not involved in the feasibility and design studies of the project, during the late 70’s he had coordinated an inter-institutional team that conducted studies related to the impact of the project on the development of irrigation in the Quibor Valley.; also he commanded the respect of the diverse sectors of the community, because of his work as President of FUDECO.

The situation found by the new company could be summarized in this form:

In the Lara state community: there was distrust in relation to the new company, because of the possibility of politicization and inefficient functioning, a typical characteristic of the country; also people thought that although it had headquarters in Barquisimeto, the members of the Board of Directors would be people from Caracas, as happened with almost all public companies at that time. Furthermore, there was little credibility in relation to the possibility of project completion.

In relation to the construction of the regulation and transfer works: they were totally paralyzed and did not have any budget assigned; also there was a national contractor located in one of the tunnel work heading, that was working there until some days before the creation of the company. Additionally, with the objective of bidding for the tunnel construction, MARNR had obtained external resources from a bilateral source, who were used to contracting an internationally recognized consulting company of the country that gave the resources. The consulting company evaluated the status of the tunnel and recommended that the excavation method should use a roadheader, and also stated that the tunnel could be finished in 5 years with a determined cost. Based on this recommendation MARNR bought two roadheaders with the bilateral resources already mentioned. That is, SHYQ,C.A. found some specialized tunnel excavation equipment that is obliged to be used by all bidders. On the other hand, the same consulting company with the support of Venezuelan technicians reviewed the project, made some small adjustments to it and elaborated the bidding documents. SHYQ,C.A., also found that internationally there was much distrust over the project, because in the construction of the tunnel two important internationally known contractors had failed, both working with unit price contracts.

In the Quibor Valley: there was a total rejection toward the project by medium sized and large farmers, living there since the beginning of the 60’s, who had developed an intensive system of irrigated agriculture of high economic value (onions, tomatoes and green peppers), using private financial resources without Government support. For irrigation they used the water of the Quíbor Valley aquifer which has been over exploited and is in a process of salinization. They also used surface waters that flowed through the Quibor Valley principally during rainfall periods. The rejection of the farmers toward the project originated in the mid 70’s. During the process of bidding for the tunnel for the first time, the National Government based on the Agrarian Reform Law, dictated a Decree orientated to expropriate the land to the median and big farmers in the Quibor Valley. That initiated a conflict between them and the Agrarian Reform Institute, and also a national movement of the private sector supporting those farmers. After that the Government announced the paralyzation of the expropriation actions. Another reason for this rejection, was that when the Government was trying to expropriate them, FUDECO and Mr. Nucete working at that time as an engineer in that institution, supported the expropriation action. SHYQ,C.A. also encountered in the Quibor Valley a permanent conflict between the small farmers and the people without land and the medium and big farmers, because since the expropriation decree the former felt they had the right to claim the land of the large farmers.

In the Yacambú river watershed: there was a total rejection of the inhabitants toward the project and in general toward public institutions; they felt that the project was not going to benefit them, because it was going to take their water and transfer it to the Quibor Valley. Also, there were rumors that SHYQ,C.A. was going to expropriate their land where they cropped coffee, because the watershed was going to be transformed as only a water producer for the project. Additionally, they knew of the irresponsibility of most public institutions in Venezuela. They had had bad experiences, because in some expropriations that were done 15 years ago to create the Yacambú National Park, there were some peasants that had been displaced and had not received their payments, in spite of numerous efforts.

As the reader can deduct from the explanation the situation that SHYQ,C.A. found when it was created, there were conflicts in some areas and potential conflicts in others depending on how they were managed.

The board of Directors of SHYQ,C.A. by statutes is formed by seven principal directors and their respective substitute; four directors in representation of the company’s stockholders, that in the moment of the creation were three, MARNR and two other public national institutions; one director representing FUDECO; one representing the Municipal Council of Jiménez ( municipal in which Quibor Valley is located); and one representing the labor sector as it is established by a national law ruling the public companies. Mr. Nucete convinced and negotiated with the Ministry of MARNR on whom the company depended, that all the stockholders representatives would be from Lara, belonging to diverse sectors of society, with good professional backgrounds, not related to political parties, and with prestige in the community. Also, it was established by the Stockholder Assembly since the beginning, that all directors, principal and substitutes, would be invited to all the Board of Directors meetings. Thus all of them were well informed, they felt part of all the decisions, and always had a quorum in the Board meetings.

The President, almost since the creation of SHYQ,C.A., asked the Stockholder Assembly (and this was approved), to constitute a Consulting Council of the Board of Directors, an entity that meets at least once a year, and comprised 27 important community organizations (Chambers of Commerce, of Construction, of Industry, of Small and Medium Industry, several farmer associations from the Quibor Valley and Yacambú river watershed; the four Mayors of the municipalities that were going to be directly benefited by the project; the Parliamentary Group that represented Lara state in the National Congress; the Legislative Assembly of Lara state; various public and private universities; and other organizations from the community). In each meeting the Consulting Council received an explanation from the Board of Directors in relation to the situation of the project, its progress, its restrictions and its perspectives. Members of the Consulting Council then made observations and suggestions that the Board of Directors incorporated in the decision making process of the company. The Consulting Council had become an important instance, because in it some community mobilizations had been generated to support the project, when dangers arose (e.g. with a new National Government or a new MARNR Ministry, or because of political attacks, or due to budget cutting).

SHYQ,C.A. hired its employees based on merits; it was never influenced by political pressures. Also, through a participatory process involving all the units of the company and the Board of Directors, a Mission was defined and based on it four subprojects were developed that permitted SHYQ,C.A. to gain an integral vision of the project ( 1) to finish the Regulation and Transfer Works; 2) agricultural development under irrigation of Quibor Valley; 3)construction of the new water pipe to Barquisimeto and the treatment plant, that would be operated by another public institution in charge of urban water distribution; 4) conservation of Yacambú river watershed). All this led to the formation of a high level technical team, with coherence, an integral vision of the project and continuity. Continuity because the company had the same President since its creation, although there had been various national and state government changes during that period.

We convinced and negotiated with the National Government, when one of the initial SHYQ,C.A. stockholders was eliminated, that its stocks were transferred to Lara State Government, in the context of the decentralization process that had been initiated in the country. That brought the project closer not only to the new partner but also to the community. At this moment, the stockholders are MARNR with a majority of stock, and the Lara State Government.

A systematic strategy of information was established through different mass media communications at state and national level, for information on the importance of the project, its achievements, and its problems. As part of that strategy, a monthly copy of all the information that was published on the project was sent to the stockholders and the organizations that formed the Consulting Council. Also, following the saying "to see is to believe", representatives of diverse community sectors at state and national levels systematically visited the project. Finally, a systematic evaluation was conducted of general public opinion and from diverse actors that participated in the project, with the object of trying to determine situations that could affect it.

As result of this strategy, SHYQ,C.A. achieved respect and support from the community that allowed the project to continue, in the very difficult financial situations that Venezuela faced during the last few years, when almost all important projects underwent a state of paralysis.

The strategy applied was the following:

With the support of the MARNR Ministry and the Lara Parliamentary Group, financial resources for the 1990 budget were obtained with the object of reinitiating the work in the tunnel for which a Venezuelan contractor was hired, meanwhile the complicated bidding procedures for all the work were completed. Also, with the support of the MARNR Ministry, the Lara State Parliamentary Group and the community, the company got the National Congress to approve a law to provide financial resources for the project for the years 1991-1996, a period in which the international consultant mentioned before, estimated that all the works could be finished. In 1995 the financial resources approved under the law dried up, because of inflationary spiral that Venezuela underwent and because of the greater costs that the project incurred, due to the greater complexity of the tunnel construction than the estimated by the consultant. Since 1996, even under the financial difficulties faced by the country, community mobilizations in 1996 and 1999 guaranteed minimum resources that permitted the project to continue. In order to access these resources that are almost all from public credit sources, external and internal, (whose procedures are very slow and troublesome), the company established a net of technical and personal relations with the eight organizations in which administrative procedures had to be carried trough; that permitted us each year to be almost always the first public institution in getting access to resources.

Learning from the conflicts that the project had with the tunnel contractors, an Administration with Performance Fees contract was designed, that also included another clause that made possible that the contract signed in 1991 with an international contractor to build the tunnel, permitted its revision each two years. This rendered possible in the revisions of 1993 and 1995, economical adjustments favorable to SHYQ,C.A.; it also permitted in 1995 to change the method of excavation from roadheader to drill and blasting; it made possible the intervention in 1995 of one of the two work heading of the tunnel, substituting the international contractor for the national contractor who was constructing the regulation works; and permitted in 1997 to take out the international contractor from the work in the remaining heading in the tunnel, substituting it by a national consortium. This was done without any lawsuit, and without going to the tribunals as usually happens at international levels in these kinds of situations in tunnel constructions.

The strategy applied was the following:

The Board of Directors, from the beginning, had representation of Quibor Valley’s small farmers, and afterwards one medium farmer as members. Although the big farmers were never directly incorporated in the Board, there was a representative of big farmers' trade unions of Lara State. Based on the strategy of agricultural development of our country at that moment, also using studies and propositions made by SHYQ,C.A. and negotiations, a new approach was developed in relation to whom the project should benefit. The Board of Directors approved and informed by different means, that a formula had to be found that permitted the participation in the project benefits of all farmers, small, medium and big, who contributed to the development of Quibor Valley. Also, the President of the company personally met some of the big farmer leaders in order to transmit to them the Board of Directors decisions.

The SHYQ,C.A. technical team systematically coordinated with public and private research and development institutions, in order to combine their efforts with individual farmers and their trade unions, and other community organizations in the solution of the problems that were affecting them. This professional work created a favorable environment for the company, not only among the farmers but also in the Quibor Valley community.

Both strategies have propitiated an attitude change toward the company in the medium and big farmers. This change has been publicly declared when they came out to defend the project, when it suffered attacks from politicians or when faced with budget cuts.

The strategy applied was the following:

The work in the watershed was initiated by the company, trusting that MARNR’s technical teams could assume it; but that didn’t work for two reasons. On the one hand there was a traditional public institution attitude to how they related with the community (where the technicians knows everything and the community does not participate in the processes that affect their lives). On the other hand, because the technicians assigned by MARNR lived in Barquisimeto, about two hours by car from the watershed, they spent most of their time travelling in the morning and coming back in the afternoon; they did not stay there at night when the community usually had its meetings. That was the reason why SHYQ,C.A. decided in November 1991 to create a technical team to work exclusively in the watershed, located in the small town of Sanare about 20 minutes far by car from the watershed. The leadership of that team was assigned to an engineer who worked with MARNR in another watershed, with important experience of conservation work, and who also believed in community participation. The idea was that the team had a permanent contact with the public and community organizations that had activities related with the watershed, and lived and shared with them.

Since the beginning the community organizations were told that we were a public institution different to the ones that deceived them, and that we were going to demonstrate that with facts, through our daily work. The team began to reach agreements with them in diverse aspects, that were strictly fulfilled; that began to generate a mutual confidence. A permanent system of discussion, analysis of problems, proposing solutions and getting each one to fulfill his part was established. Periodical evaluations were carried out on advances and limitations. With the participation of all, a Watershed Conservation Plan was formulated, in which it was made clear that the watershed was not only a water producer for the project, but was also aimed at improving the quality of life of its inhabitants, which was one of their dreams. This daily learning process during the last few years permitted a growth of all the organizations involved, to supplement each other, and together develop a valuable experience, that has been recognized in a research program sponsored by the United Nations Development Program. This recognized the project as one of the relevant experiences from my country in decentralization, in our case in the environmental area, where the role of the community has been fundamental.

 

To conclude, I would like to transmit some conclusions, not exhaustive but very important, that could be derived from our experience in the Yacambú – Quibor project:

It is fundamental for a public institution that manages a project like this, to be highly professional, that it has a clearly defined mission where the orientation of the project is determined, and additionally that it has technical and administrative continuity.

It is necessary to include all the actors related to the project, in the decision making process, and establishing in the process proper mechanisms for their participation.

The unique form that a public institution has to establish a beneficial, steady, and lasting relation with the community’s organizations is to behave in a responsible and honest manner, fulfilling the responsibilities that are assumed.

No public organization, at least in Venezuela, could develop a project like this, if it did not coordinate its activities with other public organizations. This is why it is necessary to create coordination mechanisms, formal or informal, that allow the involvement of other institutions as partners, where they can then see the real advantages of the coordination, through the better results achieved.

In a public project of this magnitude and complexity, it is fundamental to maintain a constant evaluation of the public opinion, whose analysis permits adequate information dissemination or interventions at the level that is required.

Finally, it is very important to constantly evaluate what we are doing and how we are doing it, with the objective of introducing necessary changes. This has to be done with the participation of all the different actors.

The Biobio Hydroelectric Project: a lesson not fully learned
Cristian Opaso
Grupo de Accion por el Bíobío (GABB)
CHILE

The process of World Bank financing of the Pangue dam on the Biobio river and the later revision of the handling of the loan request, appraisal and implementation has resulted in a public mea culpa by the World Bank President and the revision of internal Bank coordination and oversight procedures. On the ground however, the Pangue project has already paved the way for the Ralco project on the watershed of Chile´s most important river and in the heart of the country´s Pehuenche indigenous communities. These have worsened their living conditions and today a part of them are living with total uncertainty as to their future.

The Biobio case, a symbol of Bank mistaken policies, but also of self-examination, has yet to be adequately resolved. Key issues of access to information, staff accountability and compensation for policy violations should be immediately looked into and necessary steps taken at the briefest time. The positive outcome of this controversy could help international financial institutions and local governments regain their credibility and help comply with policies that are supposed to represent the most advanced in international laws protecting both indigenous populations and the environment. Only a strengthening of these policies will permit adequate appraisal and implementation of projects.

The Pangue dam, a 450 MW project on the upper basin of the Biobio, was financed by a direct and a syndicated loan coordinated by the International Finance Corporation, IFC, the private branch of the World Bank Goup. The Bank was contacted as early as July 1990 concerning the destructive nature of the project of a series of dams on the ancestral territory of the Pehuenche indians and habitat also of a wide variety of endangered animal and plant species. Despite company documents detailing the dam series, letters and personal visits by Pehuenche traditional leaders and documents describing the irreversible environmental damage were all submitted to Bank staff and management and were reiterated at personal meetings during 1990, 1991 and 1992. All this information was disregarded.

The Bank categorized Pangue as a category A project, demanding an exhaustive environmental analysis. Nonetheless the Bank accepted a partial study of only the first dam of the series. This one dam analysis did not even include downstream impacts. In fact, these were not submitted before the December 1992 executive director´s meeting where the World Bank approved the financing of the dam. At the time the IFC even congratulated themselves because of the precedent setting Pehuen Foundation created to allegedly support the impacted Pehuenche communities.

On November 15, 1995, the Grupo de Acción por el Biobio, GABB presented a claim before the Inspection Panel of the World Bank. We did so on our behalf and that of 47 Pehuenches, 3 Congress members, 339 Chilean citizens and 46 international NGO´s. The claim detailed harm being done, as a direct result of IFC policy violations in the Pangue project, on the Pehuenche, Chileans living downstream and Chileans residing outside the basin. The claim also requested specific remedies to compensate for the damages.

The petition to investigate was formally denied by the Panel but World Bank president James Wolfenshon ordered a special investigation headed by Dr. Jay Hair who concluded his inquiry two years later, in April 1997. The results of the investigation ratified the policy violations alleged in the initial presentation before the panel and recommended a series of steps, among them concrete measure to reverse the situation and system wide policy revisions and reforms. About a third of the report provided information related to ENDESA performance and the Ralco project which the company has been illegally for years now.

In April 1997 Jay Hair submitted his report to the President but could only release, part of it, in July of that year, shortly after the governmental CONAMA had finished a key step in the approval of the project. The government environmental office had asked for the results of the study and so had a member of Congress. But the World Bank did not make them available, deciding to give more importance to to those that gave serious consideration to legal threats raised by ENDESA for violation of client privacy. Only a censored version of the report was made available to the public in July of 1997.

Another investigation that has raised serious concerns for the bank has been the report on the Pehuen Foundation carried out by Dr. Theodore Downing in 1995-1996 and also censored by the company, who refused to have Downing share his results wih the Pehuenche, as was originally agreed upon with the researcher. The issue reached the American Anthropological Association and resulted in serious questioning of Bank procedures by part of the professional association. But to this day has not led to the dissemination of the report to the Pehuenche, some of whom are presently drowned in alcohol and busy signing land swapping agreements that they barely understand.

The timely release in the full of those two internal Bank investigations could have led to a more serious questioning, and perhaps a halt of the Ralco project by part of the Chilean government which has somehow arranged for all the necessary permits for the project, no matter what the costs. The Ralco controversy has downplayed Chilean democracy by weakening new legislation such as the environmental and indigenous laws. It has also weakened internal debate. The questioning of the Ralco project played a key role in the firing of Vivivanne Blanlot, past executive director of CONAMA and the last two directors of CONADI, the governmental indigenous affairs office. The firing of the last director of CONADI, Domingo Namuncura and two presidential appointees, Cristian Vives and Myriam Valenzuela, which took place in August 1998, was openly acknowledged as the result of differences surrounding the Ralco project.

In April 1998, during the second Summitt of the Americas held in Santiago, James Wolfensohn, president of the Bank, ackowledged the Bank´s poor performance in the Biobio and promised personal committment for resolving the issue.

But all those that more almost 5 years ago filed a claim befiore the Panel, and whose allegations were amply ratified by Bank investigations, are still waiting.

The public release, in full, of the World Bank documents is still a task to be carried out by the World Bank and should be one of the main compensatory measures that should be undertaken for the benefit of the credibility of international financial institutions and oversight regulations.

Another, even most important, is the economic compensation and recognition of the right to self-governance involved in the creation of a package of credit and direct subsidy for the productive and governance activities of the Upper Biobio Pehuenches. All affected by the Pangue dam and the illegal construction of Ralco.

These Pehuenche have publicly stated that they do not want to leave their land and should be offered the public benefits and subsidies that are afforded the general population. An important part of the cost of these benefits should be provided by the Pangue company operating in the area and the World Bank, involved in the financing and still holder of an equity stock in the dam.

An outline of this plan was submitted to top Bank management in July of 1998. In it were outlined two posibble courses of action to try to compensate for an unfortunate involvement that can still be partly overcome.

The fact that the IFC maintains an equity in the project and the fact that the IFC and other WBG insitutions have funds for small enterprise development, training, sustainable development projects and institutional capacity building and/or strengthening, raises the following possibilities:

1. That the IFC transfer the ownership of their equity (2.5 %) to the local Pehuenche communities, through an organization that they recognize as representative of their leadership and interests and in order to finance their plans for sustainable development. It must be noted that the 10 Pehuenche communities that live in the area (the original 7 -one of which is recognized as two- plus two new ones legally founded this past year) are taking significant steps towards both strengthening a unified organization and coming up with a Pehuenche development plan. This is happenning in the context of the implementation of the Upper Biobio as one of the countries first Indigenous Development Areas, after a decree issued by the President in April of 1997, based on provisos of the new Indigenous Law.

2. That the IFC and/or other WBG insitutions provide a comprehensive package of financial, technical and training support in order to implement the Pehuenche Development Plan based on the Indigenous Development Area status of the region. It is important to note that there are high expectations in the Pehuenche communities concerning the benefits of this new status, but the government has not committed enough funds for its implementation."

Thus read the document detailing possible compensation measures. To this last day of June of 1999 no concrete plans are in place to implement these possible remedies suggested to the Bank a year ago.

Are there still steps that could be taken to try to reverse a painful process that is still ongoing and that does not speak well of international financial institutions? Is there the necessary will?

As noted in correspondance with the Bank "a comprehensive and concrete package of support could make a big difference in terms of letting the Pehuenches threatened by an eventual eviction of their land due to the proposed Ralco dam being able to freely decide on their future. The great majority of the Pehuenche fanilies that would be affected by Ralco have for a long time clearly stated that they oppose further hydroelectric development in the area, but their desperate economic condition and the lack of visible government support have convinced many that ENDESA projects are their only alternative for bettering their economic conditions."

Although the Ralco project is going ahead with its construction there is an underlying stalemate in the indigenous law that clearly defends a small group of Pehuenche women who refuse to swap their lands. It is important to note that the construction of Pangue and the induced development unleashed by the project, mainly the Ralco project, is going ahead despite these unresolved legal natters. This is adversily affecting some 5,000 families whose territory is being further deforested and eroded. Close to one hundred of those families are about to be resettled in the next couple of years, despite a clear preference to remain on their land, dismantling a social and ecological structure thousands of years old. Also despite technical studies questioning the relocation plan. The relocation plan that the company has boosted has the approval of the World Bank because of the consulting done by a professional that had worked for the Bank in the past. Such statements have not even been publicly denied by Bank management as has been specifically asked for by a Congressional commission.

Nevertheless, World Bank investigations into the matter have surfaced an important amount of information concerning poor performance and violation of policies by part of both Bank personnel and management as well as those from the private company ENDESA. This information has to be made public and submitted to key actors in an adequate manner, among them the Pehuenche and Chilean Congress members. The Ralco project can still be stopped.

Thus for the World Bank the Biobio controversy will only be settled when all information of the internal investigations is made available and when steps are taken to economically compensate for the damage done.

Furthermore, no investigation makes sense if after the fact all efforts are not taken to remedy the mistakes. All policy changes and efforts to better coordinate them among the World Bank Group will fall on deaf ears if those responsible for what is happening in the Biobio are not forced to pay for their mistakes. This has to become literally true if international policies are to be respected. If the pockets of the staff and management responsible will not suffice, the Banks assets should be willing, as much as they are certainly able, to pay for what may be a small price to pay for their credibility.