Ms. Melanie Quevillon
Coordinator
NGO Working Group on the EDC
153 Chapel Street, Suite 104
Ottawa, ON  K1N 1H5

Dear Ms. Quevillon

Thank you for your letter of May 9, 2002, in which you expressed concern about the involvement of Export Development Canada (EDC) in the Ralco Hydroelectric Dam project in Chile.

EDC’s involvement in the Ralco Dam project is by way of financing in the amount of approximately US$17.2 million, or less than 5% of the total project value, to support the sale of generators, transformers, runners and other turbine components by Alstom Canada Incorporated. Prior to proceeding with the financing arrangement, EDC applied its Environment Review Framework (ERF), which requires consideration of the environmental and social impacts of projects on the environment in which they are developed. The Corporation determined that the project met the environmental and social criteria in its ERF, in addition to receiving assurances from the utility company that the project met Chilean environmental laws. An independent monitor retained by the Government of Chile has also confirmed that the project is in compliance with applicable environmental regulations. In order to ensure that its environmental performance criteria are upheld throughout EDC’s involvement, the Corporation is receiving regular reports in respect of the operation of the project.

EDC’s financing is contingent on the Ralco Dam project remaining in compliance with all applicable Chilean laws and regulations – not only those in force at the time of financing approval, but any that may apply or be impost on the project subsequently. Should the courts direct the utility company to modify any of its actions or plans in respect of the project, the EDC loan requires the project to comply with all such directives. Departmental officials and EDC staff are closely monitoring the issues surrounding the development of the dam, particularly as they involved sensitive resettlement negotiations in the project area with indigenous peoples. Among the 600 Pehuenche people affected, there are a small number who are not satisfied with the proposed compensation package. We understand that the utility company is attempting to negotiate compensation arrangements that will be acceptable to all parties who are currently dissatisfied. In the case of reported attempts to intimidate or harass individuals, they should be referred to the Chilean justice system for investigation, as is the case with the allegations that have been made by Sara Imilmaqui.

The Department is sensitive to the need for equitable arrangements when social and environmental concerns become a consideration in the activities of Canadian exporters. In a broader sense, that includes working with EDC to implement an effective corporate social responsibility (CSR) framework within the corporation, and ensuring that Canadian companies working abroad are aware of domestic legislation and international guidelines concerning the CSR issues. As to the project in question, please rest assured that we continue to closely monitor all developments. I appreciate your having raised these concerns with me.

Sincerely,

Pierre S. Pettigrew

Cc Canadian Embassy, Chile

Mr. Ian Gillespie, EDC