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Another Enron Victim: U.S. Funding Agencies

by Danielle Knight

$2.3 billion financing for about a dozen Enron projects
[Editor's note: On February 20, 2002, OPIC revealed that it gave Enron $554 million in loans and $204 million in insurance. Congress also learned the the Export-Import Bank loaned $675 million to Enron and associated companies.]

(IPS) WASHINGTON -- The scandal surrounding the collapse of energy giant Enron Corp. has reached the doors of U.S. government agencies that finance and facilitate private projects in developing countries.

Environmental and human rights organizations say the Enron debacle highlights the need for closer supervision at the Overseas Private Investment Corporation (OPIC) and the U.S. Export-Import Bank (Ex-Im).

Together, these agencies have provided or insured $2.3 billion worth of financing for about a dozen Enron projects in Asia and Latin America, according to Aaron Goldzimer, a social scientist with the Washington-based Environmental Defense, a national environmental group.

At least a few of these ventures, activists argue, have been environmentally destructive and associated with human rights abuses, and never should have received Washington's financial support in the first place.

Not only employees and stockholders have been swindled by the Houston-based company's shady schemes, according to Goldzimer. "The taxpayers have been joint investors in boondoggles that profited Enron but harmed the environment and local communities," he says.

Compared to other export credit lending agencies in Japan and Europe, OPIC and Ex-Im are bound by environmental and social guidelines -- including mandatory environmental assessments of proposed projects. But according to advocacy groups, these standards have not been properly followed and government agencies still finance harmful business enterprises, including some of those owned by Enron.

In 1999, for example, OPIC approved $200 million worth of political risk insurance for the Cuiaba gas pipeline, a joint venture between Enron and Shell Oil that aims to transport gas through eastern Bolivia to a power plant in Cuiaba, Brazil.

Conservation groups, including the World Wildlife Fund and U.S.-based Amazon Watch, strongly oppose the project. They say OPIC's backing of the project violates the agency's rules, developed during the administration of former President Bill Clinton, that ban the funding of infrastructure projects in primary tropical forests.

Environmentalists argue that the pipeline cuts through the world's largest intact dry tropical forest, known as the Chiquitano. New paths cut through the forest by the pipeline, they say, would pave the way for poaching, logging, hunting, farming and settlement.

"The pipeline's 30-meter wide, 200-kilometer access road will bisect and permanently scar one of the most pristine tropical forests on the planet and will accelerate deforestation," says Atossa Soltani, director of Amazon Watch. Activists say so far, the project has resulted in pollution damage to local water supplies, illegal hunting, and harmful construction impacts on local Native communities.

about Dabhol project
Another controversial Enron project backed by the U.S. government is the $2.8 billion gas-fired Dabhol power plant -- described as the largest single foreign investment in India -- that is designed to generate 2,015 megawatts of electricity. Enron was majority owner of the project, a joint venture including General Electric, Bechtel, and the Maharashtra state government.

The Dabhol plant received $640 million in financial support from OPIC and Ex-Im in the mid-1990s, including a $300 million Ex-Im loan and a total of $340 million in loans and political risk insurance from OPIC. In 1999, Human Rights Watch (HRW), a New York based advocacy group, charged Enron subsidiaries of paying local law enforcement to suppress local opposition to the power plant.

"Enron is now being widely accused of arrogance and lack of transparency, but the people of Dabhol have known that all along," says Arvind Ganesan, director of the business and human rights program at HRW.

Enron, she says, has been complicit in human rights abuses in India since 1992, when local opposition ignited over concerns about corruption and the hasty negotiations over the terms of Enron's investment. Farmers complained that the power plant had unfairly acquired their land and had diverted scarce water resources.

The rights group documented how contractors for the power plant harassed and attacked individuals opposed to the project. Police refused to investigate complaints, according to the report, and in several cases, actually arrested the victims on false charges. In one instance in June 1997, Maharashtra police arbitrarily beat and arrested dozens of villagers who strongly opposed the project, which is now up for sale to other investors.

"The U.S. government bears special responsibility for the human rights consequences of Enron's investment because of its aggressive lobbying on behalf of the three U.S.-based companies developing the project," says Ganesan.

Human rights abuses aside, the project never should have been approved by OPIC and Ex-Im for purely financial reasons, say activists. The World Bank repeatedly refused to finance the project because it was not considered economically viable and its terms were seen as only beneficial to Enron.

For several years, relations between Enron and the Maharashtra government have been at a rolling boil over the high cost of electricity generated by the plant. The state eventually cancelled its original plan to purchase power from the plant. OPIC officials confirm that since Enron's bankruptcy, the company has filed a $180 million claim with OPIC in an attempt to recoup financial losses from the venture, arguing that the state government's decision amounts to expropriation.

Ganesan says U.S. lawmakers need to make sure that such troubled projects are never approved for government assistance again and has urged Congress to establish a human rights assessment office at Ex-Im that would report to the legislature.

A provision to strengthen Ex-Im's human rights oversight had been introduced in Congress last year but the administration of President George W. Bush and many corporations opposed the proposal. It eventually died in a House of Representatives committee in November.

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Albion Monitor February 25, 2002 (

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