PUBLICATION The Ottawa Citizen
DATE Sun 19 Mar 2000
PAGE NUMBER A1 / Front
BYLINE Paul McKay
STORY LENGTH 1308
HEADLINE: `This is a race to the bottom': Crown agency spends billions secretly backing environmentally destructive projects others won't touch Export Development Corp. `will do anything,' critic says; EDC VP insists agency `routinely' turns down projects that are environmentally `risky'
Canada's federal Export Development Corp. is using secret loans and billions in taxpayer dollars -- to underwrite foreign mega-projects that are plundering the planet, say leading environmental experts.
"They have no rules. They will do anything. They go where others fear to tread," says Patricia Adams, an economist, author and executive director of environmental watchdog Probe International in Toronto.
The target she attacks most fiercely, among dozens, is the world's largest power dam, now under construction in China.
"Three Gorges is the worst example. All the other export credit agencies were staying away until Jean Chretien told the EDC to go ahead. After that, they jumped in."
Ms. Adams, and colleagues from Ottawa, Washington and China, have condemned Three Gorges as a corruption-ridden financial fiasco involving the forced relocation of 1.3 million Chinese people. The dam will flood rich river lowlands and create a reservoir longer than Lake Superior.
The World Bank and two U.S. counterparts of the EDC have refused to fund it. But the EDC has committed $170 million to support two Canadian companies supplying power station equipment such as turbines, generators and computers. Both General Electric and SNC-Lavalin gave major donations to the federal Liberal party.
Between 1992 and 1998, General Electric, of Lachine, Que., gave $66,730 to the federal Liberal party. SNC-Lavalin, which is providing computers to the Three Gorges project, donated $295,817 in political contributions for the same period.
\We are a participant, as is Germany, Japan, France, Austria,\ says EDC vice-president Eric Siegel, who has personally visited the site. "The Chinese made a determination that they were going to build Three Gorges. They have been actively building it for a number of years. Canada's participation has been to put the best turbine technology into the project."
"The Yangtze River has routinely flooded, with the loss of hundreds of thousands of lives. So the Chinese have looked at all the risks and determined that the project was, overall, beneficial and environmentally acceptable. We reviewed that before making our decision."
Jon Sohn, a Washington attorney and former official with OPIC, a U.S. federal export agency, says Canada's EDC is among the most environmentally reckless of all G7 country export credit agencies.
"The EDC is undercutting internationally recognized standards. In the short term, that might provide a competitive advantage. But this is a race to the bottom. When you have projects that are beyond the lines of sustainable development, like Three Gorges, that's not going to meet OPIC or World Bank standards."
Recently, even the Chinese premier has openly condemned the corruption embedded in the massive construction project, and promised brutal retribution to those convicted. Projected completion costs have climbed past $30 billion.
The EDC investment in Three Gorges is only a fraction of the billions of dollars the federal agency spends to help finance new mines, pulp mills, power dams and fossil fuel projects in every part of the globe. The loans, guarantees and credit insurance come with one main condition: Canadian companies get a piece of the action.
In China alone, the EDC has loaned $1.5 billion to build two Candu reactors. Only weeks after the bloody Tiananmen Square massacre in 1989, the EDC loaned the Chinese government $130 million to build another massive hydro project in a remote province.
Dozens of other projects are making Canada a dirty word internationally. Among those backed by the EDC:
- The Omai gold mine in Guyana, the site of a massive cyanide spill that poisoned an ocean-flowing river (EDC financing: $163 million U.S.);
- The Ok Tedi copper mine in Papua New Guinea, site of a major tailings dam break and poisoning of river (EDC financing: $88 million);
- The Lihir gold mine in Papua New Guinea, which dumps toxic mine wastes directly into the Pacific Ocean (EDC loan guarantee: $29.6 million);
- The Idah Kiat pulp and paper mill in Indonesia, which has chronic air and water pollution emissions, and depends on clearcut rainforest wood (EDC financing: $285 million);
- The Musi Pulp mill in Indonesia, supplied by clearcut rainforest wood. Cutting rights have been granted to a corrupt timber tycoon, and daughter of former dictator Suharto (EDC financing: $50 million);
- The Kumptor gold mine in Kyrgystan, site of a deadly cyanide spill (EDC financing of $50 million, and backing of Canadian companies' equity stake);
- The Marcopper gold mine in the Philippines, site of direct dumping of toxic tailing in river and ocean estuary. Company and officials charged after 1996 contamination. (EDC financing: $1.6 million.)
More EDC-financed megaprojects are under construction or planned. They include:
- a pending Candu reactor sale ($1.5-billion loan) and five more hydro dams in Turkey ($1 billion);
- the Antimina copper mine in Peru ($285-million EDC loan);
- mineral smelters from Indonesia to Chile;
- fossil-fuel power plants from Pakistan to Latin America;
- hydro dams in India;
- a gold mine in Tanzania; and oil-extraction projects across the globe.
The Citizen has obtained financing details on several dozen projects, which the EDC declined to discuss. The agency is not subject to federal access to information laws.
"Three-quarters of our lending now is to commercial entities, and those entities may introduce confidentiality requirements of EDC,"says Mr. Siegel.
"Some information is to private interests who really control the disclosure of the terms and conditions of the loans."
"There is a blanket, draconian secretiveness about this institution,"says Pamela Foster, spokeswoman for an Ottawa-based watchdog group that monitors the EDC for its environmental, human rights and labour standards.
"It's impossible to know where public money is going. People are concerned about $1 billion in the HRDC boondoggle. There was $40 billion worth of business that happened through the EDC last year, and we don't know where one dollar of that went."
"Some of the deals have turned out to been environmental disasters. But we only learned about it at that stage."
Mr. Siegel argues that the EDC is leading international efforts to improve environmental standards, and access to decision-making for environmental groups.
"What we have done is we have introduced our own framework, self-regulation, and we have become very proactive internationally in the pushing the other similar entities to adopt similar practices. We have been quite successful ... in raising the bar with other (export credit agencies)."
Ms. Foster contends the EDC is doing the opposite.
"Asking the EDC to come up with environmental standards is like asking bank robbers to design the security system for a bank. It will be full of holes. What the EDC is doing is taking their environmental framework and shopping it around. Of course it's attractive to other export credit agencies, because it doesn't do anything rigorous to protect the environment."
"The EDC makes a big deal about putting their `framework' on their Web site and encouraging comments from the public," says Mr. Sohn, who now represents the U.S. environmental group Friends of the Earth. "But they won't tell you which projects they support. They won't release any information about projects. They won't say what standards are being applied to a project. So it's just lip service."
"Export credit agencies are bottom feeders. They are taking the riskiest, most destructive projects that the private sector can't (financially) stomach. For the worst of the worst projects, the private sector just won't build them without these guarantees from governments. Canadian taxpayers are on the hook for the most destructive projects around the globe."
The EDC's Mr. Siegel responds: "I can tell you that we routinely look at projects and say, `We are not prepared to provide support,' either because it is environmentally, unacceptably risky."
"More often than not, what is really the value of the EDC is we force mitigation into the project."
"We will continue to press, in any project, for reasonable mitigation of potential environmental risk."
Paul McKay is a Citizen reporter.
His e-mail address is email@example.com