Beyond the Bank

North America has a healthy appetite for natural gas, a relatively clean-burning fossil fuel. Peru has several trillion cubic feet of gas in its remote southeastern jungle. Developing this resource is good for the hemisphere’s fuel security, air quality, and the Peruvian economy. It would transform Peru from a net importer of energy into a ...

North America has a healthy appetite for natural gas, a relatively clean-burning fossil fuel. Peru has several trillion cubic feet of gas in its remote southeastern jungle. Developing this resource is good for the hemisphere's fuel security, air quality, and the Peruvian economy. It would transform Peru from a net importer of energy into a net exporter, boosting growth, job creation, and government revenues.

Naturally, building pipelines in a rainforest involves substantial environmental risk. So when a consortium of private companies asked the Inter-American Development Bank (IDB) in 2002 to lend funds for constructing the Camisea gas pipeline, which would run from the Amazon jungle to the Peruvian coast, the bank demanded that these risks be thoroughly addressed.

Like other regional development banks, such as the Asian Development Bank and the African Development Bank, the IDB draws less public attention than the World Bank, so it suffers less from aggressive campaigning by non-governmental organizations (NGOs). But the Camisea project proved that no multilateral institution is immune. The environmental measures that the IDB demanded -- extensive consultations with civil-society groups, grants for poor people living near the project, and reduction of the construction area, among others -- did not impress NGOs, which campaigned to block IDB involvement.

North America has a healthy appetite for natural gas, a relatively clean-burning fossil fuel. Peru has several trillion cubic feet of gas in its remote southeastern jungle. Developing this resource is good for the hemisphere’s fuel security, air quality, and the Peruvian economy. It would transform Peru from a net importer of energy into a net exporter, boosting growth, job creation, and government revenues.

Naturally, building pipelines in a rainforest involves substantial environmental risk. So when a consortium of private companies asked the Inter-American Development Bank (IDB) in 2002 to lend funds for constructing the Camisea gas pipeline, which would run from the Amazon jungle to the Peruvian coast, the bank demanded that these risks be thoroughly addressed.

Like other regional development banks, such as the Asian Development Bank and the African Development Bank, the IDB draws less public attention than the World Bank, so it suffers less from aggressive campaigning by non-governmental organizations (NGOs). But the Camisea project proved that no multilateral institution is immune. The environmental measures that the IDB demanded — extensive consultations with civil-society groups, grants for poor people living near the project, and reduction of the construction area, among others — did not impress NGOs, which campaigned to block IDB involvement.

NGO complaints were not totally without merit. Complete elimination of risk is impossible in such a project. But when Camisea came before the IDB board of directors for approval in September 2003, 45 of the 46 governments represented on the board concluded that, on balance, IDB involvement would decrease the project’s environmental and social impact. The one government that determined otherwise? The United States, whose director protested by abstaining from the vote. American NGOs also succeeded in blocking the U.S. Export-Import Bank’s plans to extend $214 million in credit to the project consortium.

How did NGOs achieve this feat? By merging legitimate but inconclusive environmental concerns with ruthless political tactics. They seized upon the fact that Hunt Oil and Halliburton, two firms linked to President George W. Bush’s administration, stood to profit from Camisea, suggesting that Bush was ignoring environmental concerns in order to reward cronies. This allegation hit the administration in a weak spot, producing a paradoxical outcome: Of 46 governments on the IDB’s board, the only one not to vote for the project was the one with links to Hunt and Halliburton.

The fight is not over yet. The NGOs that campaigned against the Camisea project are pushing the IDB to adopt new environmental safeguards at least as tough as those of the World Bank — safeguards which NGOs can then use to block future projects. If they win, the IDB will have embraced the agenda of the environmental movement, to the possible detriment of poor borrowing countries.

Sebastian Mallaby directs the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations.

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