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Exporting Destruction: Report Says EDC is Putting People and the Environment at Risk

By Asad Ismi

The Canadian government’s Export Development Corporation (EDC) is assisting eight environmentally and socially disastrous projects in the Third World, says a recent report. These are the Antamina mine in Peru, the Chamera I and II dams in India, the Profertil nitrogen fertilizer complex in Argentina, the Bulyanhulu mine in Tanzania, the Urra dam in Colombia, the PT TEL pulp and paper mill in Indonesia, the Manantali dam (a joint project of Senegal, Mauritania and Mali), and the Ralco dam in Chile.

The report, titled Reckless Lending II: How Canada’s Export Development Corporation Puts People and the Environment at Risk was released last May by the NGO Working Group on the Export Development Corporation (a coalition of unions and NGOs), and adds to “Reckless Lending I” issued in 2000. The EDC supported $45 billion in exports and foreign investments in 2000 through insurance and loans. Such financing subsidizes Canadian business while wrecking Third World communities.

“This report once again highlights that the EDC must be required by law to uphold public policies and international standards protecting human rights, the environment, and the social needs of local populations,” said Emilie Revil, coordinator of the NGO Working Group.

The report shows that the Environmental Review Framework adopted by the EDC is inadequate and calls for the Crown corporation to be regulated under the Canadian Environmental Assessment Act (CEAA) and to be made subject to the Access to Information Act.

In a separate report on the EDC issued one day after “Reckless Lending II,” the government’s auditor-general found that 24 out of 26 projects examined were not properly assessed under the corporation’s Environmental Review Framework.

“Canada has to show leadership to ensure that the highest standards apply to trade financing or we are contributing to the worst aspects of globalization–the driving down of labour, human rights and environmental standards,” said Pierre Laliberte, senior economist at the Canadian Labour Congress, which is part of the NGO Working Group coalition.

Spreading disaster

The Antamina copper and zinc mine in Peru, with EDC financing of US$135 million, will level eight peaks in that country’s highest mountain range. It is considered one of the largest mining operations in the world and has forced thousands of residents from their lands and livelihoods. People living near the mine have complained to the World Bank about the mine’s pollution risks, inadequate compensation, and the resettlement process. The mine is 90% owned by the Canadian companies Rio Algom, Noranda, and Teck.

Currently under construction, the Chamera II dam in northern India is continuing the devastation caused by the Chamera I dam (the two are 30km apart). The first dam buried 46,000 trees and turned 18 kilometres of forested valleys into a lake, in an area already suffering from deforestation. The 192 families displaced by both dams have held a hunger strike and blocked traffic to demand adequate compensation from the government. Landslides are increasing, since the Chamera dams are located in an earthquake zone known as seismic zone V–the highest seismic area in India. EDC financing for both dams is US$578 million. The Canadian companies involved are SNC Lavalin, General Electric Canada, Acres International, and Marine Industries.

The Profertil complex in Argentina, with project financing and political risk insurance provided by the EDC, has been shut down twice due to ammonia leaks. Nearby residents feel endangered by these toxic emissions and are demonstrating to have the facility permanently closed. Argentine authorities have failed to carry out a credible safety audit and are not prepared to deal with chemical accidents; people have not been given information on what to do in case of such emergencies. Calgary-based Agrium Inc. owns 50% of Profertil.

The Urra hydroelectric dam in Colombia–EDC financing US$18.2 million–has destroyed the traditional food supply of the Embera Katio indigenous nation and increased the violence directed at the community. A dozen Embera leaders opposing the dam have been killed by paramilitary and guerrilla forces. In June 2001, a paramiltary death squad kidnapped Kimy Pernia Domico, a prominent opponent of the dam. He has not been heard from since. The dam has also displaced hundreds of Embera Katio and unleashed an epidemic of malaria and dengue. The Canadian companies involved are BFC Construction and Agra-Monenco.

The Manantali dam, a joint project of the governments of Senegal, Mali and Mauritania, has brought economic ruin, malnutrition and disease to hundreds of thousands of West African farmers. The dam has upset the basin’s ecosystems and destabilized traditional economic activities, with the result that the region has become the poorest in all three countries. Increased social inequalities and malnutrition have caused a mass exodus of workers from the river basin. The dam has also led to the spread of endemic diseases such as bilharziasis, according to a 1997 report by the African Development Bank. The EDC provided credit insurance for this project to the Canadian company Entreprise Conjointe Lambert Somec GLR. Other Canadian companies involved are Hydro Quebec International, SNC Lavalin, and Sulzer.

The Ralco dam, the second of six to be built along Chile’s Biobio River, will flood 3,400 hectares of land, displace 600 people (400 of them Pehuenche Indians), and threaten the existence of 50 animal and aquatic species. Many illegalities have occurred during the approval process of this project in Chile, including the dismissal of the heads of the Environment and Indigenous Departments. Three court cases have been brought against the dam in Chile. EDC financing was US$17 million. The Canadian company involved is Alstom.

Four of the projects detailed in “Reckless Lending II” underwent some form of environmental review at the EDC, but were approved, anyway. There is little evidence that local populations are being consulted, that environmental and social impacts are being mitigated, or that international agreements on indigenous peoples and human rights are being upheld. A more detailed account of two additional projects provides a closer look at how the EDC damages Third World communities to benefit Canadian companies.

PT TEL (Indonesia)

According to the report, the PT Tanjung Enim Lestari (PT TEL) pulp and paper mill in South Sumatra has subjected the local community to landlessness, unemployment, pollution, loss of livelihood, and health problems. Conflicts have arisen due to illegal logging, forced land seizures to provide plantations for the paper mill, and intimidation by security forces.

PT TEL is set to become Indonesia’s largest pulp mill, and works in conjunction with its sister company PT Musi Hutan Persada (MHP), the task of which is to prepare large pulp plantations for the mill. The Barito Pacific Group, Indonesia’s largest logging company, owns the majority share in PT TEL. The technical leader in the mill’s construction is Montreal-based Klockner Stadler Hurter Ltd. (KSH), an engineering company which operates through its subsidiary, PT Klockner. Sandwell Inc., headquartered in Vancouver is providing engineering consulting.

Preparations for setting up the mill began in 1990 under the notoriously corrupt and repressive Suharto dictatorship. As in many major Indonesian projects at the time, a Suharto family member (in this case his daughter, Siti Hardiyanti Rukmana) was brought in as a major shareholder in PT TEL. In this manner, the Suharto family amassed a fortune estimated at $56 billion, almost half the gross national product.

In 1994 and 1997, the EDC (along with export credit agencies from Germany, Japan, Finland and Sweden) approved US$1.5 billion and US$1.3 billion, respectively, for PT TEL. The EDC provided a loan of US$205 million. The entire output of the mill will be exported mainly to Europe and Japan.

PTs TEL and MHP have been embroiled in conflicts with local villagers. The government has ignored villagers’ protests that the mill and plantation have “taken their land, cleared mature rainforest, and destroyed their livelihoods.” The PT TEL scheme is wrecking a community and its sustainable way of life at a time when 60% of Indonesia’s population live below the poverty line–and the figures are rising.

In 1992, PT MHP began illegal logging of the forests of Benakat villagers despite their protests. The company cleared 1,000 hectares of mature rainforest, one-third of the Benakat community’s ancestral lands. This violates a condition of the agreement signed with the international financiers of the project–that no rainforest will be destroyed for PT TEL.

The villagers were told by local authorities and security forces to give up 1,250 hectares of rubber gardens or risk being charged with “hindering development,” a subversion charge. The farmers were interrogated, threatened with imprisonment, and accused of involvement with Indonesia’s banned Communist party. Those who sold their land got very little compensation. About 4,500 people from six villages affected by the mill construction are now landless and face destitution. An estimated 12,000 people live in these villages.

Traditionally, the people of the Muara Enim district (near the mill) have made a living from small rubber plantations, fishing, and subsistence agriculture.The PT TEL plant will seriously pollute the air in nearby villages by releasing nitrogen oxides, sulphur dioxide, and hydrogen sulphide. These foul-smelling gases are dangerous to human health and form acid rain which damages crops and property.

The mill will pour 70,000 litres of waste a day into the Lematang River. Tens of thousands of people who live in 30 villages downstream from PT TEL are at risk from water pollution, as they use the river for drinking, cooking, washing, transport, fishing, and agriculture.

Bulyanhulu Gold Mine (Tanzania)

Located near Lake Victoria, the Bulyanhulu gold mine in northern Tanzania is one of sub-Saharan Africa’s largest gold mines. Thousands of small-scale miners have been evicted from the area to make way for the mine. These artisanal miners, who have been in a land dispute with the Kahama Mining Company (a subsidiary of Barrick Gold Corporation) that owns the mine, say the government destroyed people’s property and, they allege, killed up to 52 people in July 1996 when police forces were clearing the area.

While the Tanzanian government, Kahama Mining Company, and financial institutions supporting the mine say the allegations are baseless, local authorities and human rights activists are calling for a high-level independent investigation or commission of inquiry. The EDC has issued $173 million in political risk insurance to Toronto-based Barrick Gold. The insurance was part of a package that was co-insured by the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which gave an additional $172 million in guarantees.

While Tanzanian authorities say small-scale miners were peacefully removed from the site, Maalim Kadau, the head of the small-scale miners’ committee in Kakola, a village near the mine, says that, when the authorities started to clear the area, people went during the night when the police were away in order to retrieve equipment and ore left in the pits. He says that up to 52 men who were still in the mining pits were buried alive when local police forces resumed filling in the area with dirt. In the process, he also says that a total of 1,908 people lost houses, farms, mining pits or equipment as a result of the evictions.

While Kadau says he did not witness the actual burials because he was out of town trying to get a court ruling to stop the evictions, he says he personally witnessed the exhuming of bodies of people in August 1996.

“As soon as we uncovered the first body, the regional police commander told us to stop or they would arrest people,” he said. The police then took him to the station as soldiers finished filling in the area with dirt and closing the area to the public, he says. Thobias Athanas, another small-scale miner at the time who is now unemployed, says he also witnessed bodies being taken from the pits.

“I personally saw three bodies that had been dug up by family members,” he says.

The alleged killings have been reported by Amnesty International. In 1998, Amnesty sent a team to the area, but it was unable to substantiate the allegations of deaths and so called for an independent investigation. Barrick Gold says that the Tanzanian government and Kahama and authorities fully investigated the allegations and found them to be based on lies by a local individual in retaliation for the refusal of Kahama to pay this person a bribe.

Boniface Shija, the local councillor elected by the villagers of Kakola, says that a brief investigation by the government was done once the allegations were reported, and no bodies were found. But he says the inquiry was very short and that only a few areas at the mine site were excavated. He agreed that a more thorough investigation was needed.

Tundu Lissu, a Tanzanian lawyer with the Lawyers’ Environmental Action Team in Dar es Salaam, is calling on Canadian citizens to pressure the EDC and the World Bank to withhold financial support for the project until a high-level commission of inquiry is formed.

“The Canadian government and World Bank are using Western taxpayers’ funds to support murder and mayhem in Tanzania in the name of poverty alleviation through foreign direct investment,” he said.


Published in the Canadian Centre for Policy Alternatives Monitor, November 2001.

Asad Ismi is the CCPA Monitor‘s international affairs correspondent and co-author of the report Reckless Lending II: How Canada’s Export Development Corporation Puts People and the Environment at Risk (Ottawa, May 2001) published by the NGO Working Group on the Export Development Corporation (a working group of the Halifax Initiative).