29 September 2008
On Sept. 4, the Technical Coordinating Committee of IIRSA (CCT) hosted a small day-long meeting to discuss infrastructure and the Amazon. The meeting was motivated by a growing perception that IIRSA and related investment trends in the Amazon region are inducing perverse and unsustainable effects that are undermining the legitimacy of the infrastructure integration initiative.
On Sept. 4, the Technical Coordinating Committee of IIRSA (CCT) hosted a small day-long meeting to discuss infrastructure and the Amazon. The meeting was motivated by a growing perception that IIRSA and related investment trends in the Amazon region are inducing perverse and unsustainable effects that are undermining the legitimacy of the infrastructure integration initiative. Within the IDB, IIRSA’s principal institutional sponsor, the concerns about IIRSA’s image are exacerbated by a controversial internal evaluation that threatens to end IDB’s involvement in IIRSA when the current institutional mandate expires in 2010.
The unusual CCT meeting involved the IDB, CAF, BNDES, Odebrecht, Andrade Gutierrez, Petrobras, several civil society organizations WWF Brazil, Conservation International, Fundacion Tropenbos (Colombia) and BIC as well as several prominent political and economic analysts. Under discussion for months, the meeting was perhaps a first, modest attempt to bring IFIs, corporations, and conservationists together to debate the compatibility of large, high risk infrastructure projects in the Amazon with sustainable, equitable development outcomes. However, critics and beneficiaries of IIRSA talked past each other for the most part. The meeting ended with little hard evidence that infrastructure project design or integration planning would change in any fundamental way.
The exchange highlighted several realities that threaten to undermine IIRSA as an interesting and potentially effective space for coordinating integration planning:
As a cooperative framework for coordination and planning, IIRSA remains fragile and largely ineffective in its ability to address some of the most urgent challenges.
The lack of any legal or juridical framework to institutionalize integration principles remains a major obstacle (UNASUR is not viewed as a viable solution in the short term)
The future of IIRSA as a politically meaningful coordination mechanism on infrastructure integration issues is increasingly overtaken by national and private sector development agendas – particularly, although not exclusively that of Brazil (ej. BNDES, Odebrecht, Petrobras, PAC).
The relevance of IIRSA continues to be undermined by the absence of a multilateral social or environmental agenda for integration, particularly with the growing importance of emerging bilateral initiatives (Brazil Amazon Fund)
The meeting emphasized the social, environmental and economic risks of IIRSA projects advancing much faster than integration planning, and with virtually no planning for social and environmental sustainability.
The discussion sidestepped real discussion of Madeira, Peru Southern Interoceanic Highway and other emblematic high risk projects that undermine any meaningful concept of sustainability.
The various presentations can be accessed on the IIRSA website:
http://www.iirsa.org/BancoConocimiento/A/ama_rio08_infraestructura_amazonia/ama_rio08_infraestructura_amazonia.asp?CodIdioma=ESP
The IIRSA CCT (IDB and CAF) agreed to share the presentations and a summary of the meeting with IIRSA Directors. The lack of any substantive outcome or proposal for follow-up to the meeting left few participants confident there would be any change in IIRSA planning and provided another hint that IIRSA is not capable of actually coordinating the 12 member governments of the initiative, much less the private sector actors that are leading the race to build roads, dams and other infrastructure projects across the Amazon.
Background:
The Amazon region is transected by at least 3 major transnational corridors promoted by IIRSA (Amazonas, Guyana Shield, and Peru-Bolivia-Brazil). IIRSA has come under severe criticism for accelerating the investment in transport and energy infrastructure in the Amazon region without the requisite social and environmental safeguards. Many of the actors associated with IISRA projects in the Amazon basin participated in a prior conference to discuss sustainability and infrastructure, Infrastructure Integration and Environmental Preservation in the Amazon, on Jan. 16, 2008 at the Woodrow Wilson Center in Washington D.C.
The IDB faced many challenges in organizing a direct exchange on IIRSA and sustainable development among the principal stakeholders in the Amazon. The overarching challenge is that IIRSA governments through their Directors on the IDB Board have refused to open the planning debate to the public and the IDB can do little to change this lack of transparency and participation. Despite emphasizing participation as a stated priority and having a bank-wide participation strategy, instances of informed, timely and meaningful civil society participation in IIRSA has been an anomaly in over eight years of IDB coordination of the initiative. While private sector actors hold a privileged position in the decision making process, the IDB has failed to facilitate direct dialogue between civil society organizations with governments about the fundamental assumptions of infrastructure integration.
To name only the most recent example, a civil society proposal to hold a day long seminar with IDB officials and IIRSA coordinators on the use of strategic environmental assessments was vetoed by IDB management because as one IDB official put it, “the Bank can not make the Coordinators attend and can not be seen as convening civil society to discuss IIRSA behind the backs of the owners of the initiative.”
The day-long exchange on infrastructure and the Amazon at CEBRI revealed these limitations of the IDB as a convening force on questions of sustainability in the Amazon. Despite the IDB’s efforts and intentions, sadly, little was achieved in the CCT meeting and even less can be expected in the near future regarding meaningful agreements between corporations, governments and civil society stakeholders on sustainable infrastructure within the framework of IIRSA.
Presentations and Discussion:
Panel 1: Infrastructure and the Amazon
The meeting kicked off with Tim Killeen’s presentation of his study, A Perfect Storm in the Amazon Wilderness: Development and Conservation in the Context of IIRSA. Killeen argued that IIRSA as a plan for the integration of regional infrastructural is necessary and visionary, although only in some aspects. IIRSA projects and regional plans lack a full carbon/GHG accounting and therefore is missing an opportunity to promote sustainable development in the Amazon. Unchanged, IIRSA could contribute to deforestation that pushes the Amazon ecosystem past a tipping point that in turns switches its function from a carbon sink to a net carbon emitter. Among the measures that Killeen proposed to balance infrastructure impacts are biofuels and other transfers of new production and conservation technologies (under specific conditions) and the monetization of carbon markets to pay for ecosystem services, and a more comprehensive and effective use of planning tools such as strategic environmental assessments (SEAs).
Killeen estimated the carbon value of the Amazon, if protected, at between $US1 and $US10 trillion, and argued that reduced deforestation could generate revenues of between $650 million in year 1 and $8.6 billion in year 10. The key question in this scheme is how to effectively monetize the carbon value of a preserved Amazon in way that directly benefits those most responsible for preserving it. To that end, Killeen sketched out several proposals for tying the distribution of carbon credits to ecosystem services verifiable by precipitation regulation, but also to a variety of social services ( a la cash transfer programs) to ensure proper targeting.
In an effort to make a business argument to the private sector representatives in the meeting, Killeen outlined a menu of number of principles to guide carbon market investments that reward high productivity/value added and job creation activities (fish farming as opposed to current cattle ranching), distributional mechanisms to avoid rent seeking and political capture of carbon funds, the urgency of resolving land tenure uncertainty and making tax regimes more effective, and finally to strengthen feasibility assessments to compare alternative scenarios for emblematic integration challenges. Killeen challenged IIRSA planners to justify ongoing and future investments in terms of GHG accounting.
In response to Killeen, the IDB invited two presentations by Petrobras. The first was a proposal by Olavo Tapajos of CIESA in Manaus to accelerate the funding an construction of new logistics platforms linking the interior of the Amazon with major Eastern ports. The proposed Regional Logistics Platforms (PRLs) would link Manaus, Santarem and Villa do Conde for a total costs of R$2.6 billion (see map below).
With the exception of some vague references to indicators, there were no references to any of the sustainability issues or proposals raised by the Killeen presentation. The two presentations seemed to fly right past each other.
The second Petrobras presentation was by Fernando Peillon, of Piatam which provided an overview of the company’s remote ecological monitoring system for the 700km Urucu – Manaus oil and gas pipeline in Amazonas state, which from Coari to Manaus along the Solimoes River basin. Avoiding discussion of the many problems with the environmental licensing process that suspended the project’s license in 2003, Peillon emphasized Petrobras’ significant technological investments in the collection of data, simulated mapping of disasters, and the systematic monitoring of social and environmental impacts.
Petrobras considers the U-M its flagship investment in terms of sustainability. The extractive project began in 1986 and the pipeline is scheduled to be operational by December 2008. This overall project is one of 20 major infrastructure projects launched as part of President Fernando Enrique Cardoso's "Advance Brazil" program and championed by President Lula. The new pipelines, which would traverse remote Amazon rainforest, would provide natural gas to power plants such as the Porto Velho Power Station in Rondonia, as well as to the energy deficient states of Amazonas and Acre.
The 500-kilometer pipeline will pass through some of the most isolated and inaccessible regions of the Brazilian rainforest, crossing under the Rio Negro before reaching Manaus. A 15-30 meter wide road will be constructed along the entire length of the pipeline, effectively opening up this remote Amazon heartland to invasion and colonization. Government and company officials argue the Urucu project would create about 5,000 construction jobs. Petroleum royalties are helping to build schools and hospitals in the town of Coari, but they're also igniting frenetic growth, as well as a surge of drugs, disease and child prostitution. Aware of the social and economic side effects of large construction projects, as well as the potential for oil spills, the $500 million project includes a twenty year research program to monitor the social and environmental impact of the pipeline construction and operation, with the use of specially designed robots and other automated monitoring devices. Petrobras supported researchers from Piatam described a comprehensive data collection process that will permit analysis of change in biodiversity, deforestation and in household welfare among the affected population.
Despite an elaborate description of the impact monitoring plan, no data was actually presented regarding the actual observed impact of the project so far, which is somewhat problematic given the large expenditure in collecting data. The overly positive image of the Amazon pipeline project diminished confidence that the company would be transparent in future reporting. The scale of the project related investments by Petrobras exceeded the capacity of even the federal government in terms of financial resources and technology. An estimated cost of the automated monitoring station alone profiled in the presentation was approximately R$800,000.
The the Petrobras presentations made clear that the private sector and government of Brazil were not considering “if” these types of high risk infrastructure projects would happen, but when and how. While the Ucuru-Manaus pipeline explicitly addressed sustainability, it was not clear how Killeen’s arguments related to carbon accounting actually changed the overall design of the project. The discussion did not address how the introduction of GHG accounting rules would change project design in general, particularly for the many projects of IIRSA that are already underway.
A second related concern involved how distribution mechanisms for carbon credits (REDD or the newly announced Amazon Fund) would ensure that funding leveraged through these mechanisms would in fact benefit the right people and not be captured. A third challenge relates to the need for all high risk integration infrastructure projects to require alternative scenarios with their own comparative cost benefit analysis (i.e. road, rail, river or air transport) to ensure affected populations and policy makers have choices. Finally it was noted that very few actors have the capacity or resources available to Petrobras to internalize the costs associated adequate social and environmental planning, including the cost of coordination.
Panel 2: Protection and Governance
The second panel featured 2 presentations from former IIRSA Coordinator in Peru and current consultant to the Peruvian Ministry of Defense, Rosario Santa Gadea, and former IIRSA Coordinator in Brazil and current official at the Departamento de Planejamiento de Longo Plazo, Ariel Pares. Santa Gadea presented two cases of Peruvian integration projects, the Valle Rio Apurimac and Putumayo River Basin near the northern border with Colombia and Ecuador. Both Peruvian cases defined integration as the “breaking of isolation” for the largely indigenous population that is skeptical of the modern economy. Both cases viewed integration as a national security objective and characterized isolated populations are subjects of terror organizations. In short, integration is a counter-insurgent strategy of the Peruvian state to re-establish order.
Underlying such a skewed and misinformed perception were suggestions that deforestation in these regions were being driven largely by coca production under the hegemony of remnants of Sendero Luminoso and the FARC. In fact, the diagnosis of deforestation in either case was relatively superficial suggesting little actual analysis had been done. Moreover, there was no discussion of the methodology for how baseline data to support dubious assumptions was gathered.
In both Peruvian cases, new highways or waterways were planned to break the isolation of indigenous communities (with no account of people living in voluntary isolation). In Peru, a 500 km road linking Ayacucho with Cusco. In the Putumayo region, the government is proposing a new road of 167 km between Iquitos – Bellavista –Mazan - La Estrecha on the Colombian border. There was little recognition that the rapid unplanned construction of these roads could also strengthen coca production and accelerate other factors associated with deforestation, rather than the opposite. Governance was associated mostly with surveillance and order, with little attention to factors of sustainability, particularly land-tenure.
The dilemma, argued Santa Gadea, was building consensus among the various actors around integration programs. Given the weak analytical foundations and the military orientation of proposed plans, it is not difficult to understand why such a pre-ordained consensus might be hard to reach.
Ariel Pares made a much more detailed argument that protection regimes are often counter-productive in terms of conservation outcomes by not adequately addressing development aspirations of the affected population. Pares profiled five environmental monitoring systems in Brazil (SIPAM, INPE-DETER, EMBRAPA, IMAZON, Petrobras) which have improved significantly in their capacity to remotely monitor deforestation and degradation. By 2011, Brazil will have the capacity to produce satellite images of the planet at 40 meters of resolution every 2 days.
Despite the technological advantages, Brazil has yet to achieve an effective strategy of zoning, monitoring, development promotion and regulation. Analysis shows that Brazil lacks a clear legal framework to provide the right balance of incentives for protection and development. Sanctions only provide a temporary disincentive for deforestation, often conflicting with official credit policies, the lack of secure tenure rights or effective tax policies. Pares estimates that over 93% of the legal Amazon is restricted in some way, leaving only 7% for unrestricted use. The effective governance of some of these protection regimes only creates excessive uncertainty and should be rationalized to achieve a more effective balance between protection and development.
Pares emphasized the lack of coherence between the government’s two major Amazon development initiatives, the PAC and PAS programs.A new paradigm for sustainable infrastructure, according to Pares, has evolved in Brazil – beginning with BR 364 and improving with BR 163 to reach what is now referred to as an expedited strategic environmental analysis. Unless PAC projects are designed with these types of sustainability principles in mind, they should not happen.
In apparent contradiction of those principles, Pares argued that Bolivia’s lack of planning capacity explains why the country has opposed the Madeira Hydroelectric Complex when the benefits for Bolivians should be more clear.
Panel 3: Sustainable Infrastructure Planning and Innovative Financing Mechanisms
In one of the more disappointing panel presentations of the meeting, Guillermo Espinoza, a consultant for the IDB provided an overview of SEAs as tools for sustainable development planning and the FBDS provided an overview of Carbon Market financing for large infrastructure projects. The conclusions of the SEA presentation were relatively self-evident – there are different ways to conceptualize and therefore apply SEAs which nevertheless should focus at the policy level rather than the project level. Espinoza offered no concrete cases to make an argument and added little value to the meeting. The FNDS presentation was largely descriptive, but outlined the primary concerns with the REDD proposal (baselines, leakage, ownership).
Before leaving the meeting, Eduardo Mierelles de Melo, announced that BNDES is preparing the guidelines for an Amazon Fund to promote actions in four areas: 1) strengthen protected areas, 2) strengthen institutions, 3) sustainable development activities in the Amazon, 4) greater use of science and technology for sustainable biodiversity protection. BNDES added that Norway had confirmed an initial contribution of $100 million, but committed $1 billion over the following decade. BNDES reported that bilateral contributions to the Amazon Fund could grow to as much as $21 billion in 10 years.
This growth of an Amazon Fund managed exclusively by the Brazilian government highlights the country’s strategic opposition to multilateral carbon financing mechanisms such as REDD and the Climate Investment Funds organized by the World Bank. The projected scope of the Brazilian Amazon fund suggests that the preferred bilateral approach that separates forest protection from climate commitments is gathering support that is as fast if not faster the support for the World Bank initiatives.
Smaller rainforest countries will not be as effective in attracting bilateral support. The choice of Bolivia, which has indicated an initial support for REDD, as the site of a World Bank “consultation” on its proposed Strategic Framework on Climate Change and Development infers an effort by the Bank to exploit possible divisions between Brazil and its neighbors and thereby weaken the former.
Private sector representatives from Odebrecht and Andrade Gutierrez were asked to comment on the discussion, but offered mostly platitudes about the obstacles associated with a convoluted licensing process in Brazil, and struggling to make clear sustainability arguments.
Proposal for Future Work Agenda – Add sustainability and mix
The final presentation was a six point agenda for IIRSA to build sustainability into its regional planning process. The recommendations involved more systematic use of SEAs (which were relatively ignored for most of the day), the adding of more social and environmental projects to otherwise controversial and unsustainable investments, strengthen enforcement institutions, more technological innovation and better public relations. The quite ambiguous proposal consisted of recycled slogans and self-evident truths, thus elicited little serious response and underscored the lack of serious commitment by IIRSA to follow through on some of most pertinent proposals made throughout the day.
A final appeal was made by the IDB to find an owner for this sustainability agenda, arguing that the IDB and CCT in general was incapable of leading bold, collective action by the 12 member governments. The meeting dispersed with low expectations that the CCT meeting would have much of an impact on the direction of IIRSA, or Brazil. However, the meeting also left little doubt that Amazon infrastructure projects would advance with or without IIRSA and in spite of a relatively weak and atomized planning framework.
IIRSA’s future in doubt
Despite IIRSA’s eight year existence, actual achievements in the coordination of integration planning and execution have fallen far short of expectations. A recent IDB internal evaluation highlighted many of the shortcomings of these efforts to coordinate integration planning. From strategic environmental assessments to production chain planning tools, IIRSA has taken only the initial steps to promote their effective use within and across countries. In turn, the underlying feasibility and environmental impact studies for major IIRSA projects are incomplete or simply inadequate. Most at the CCT meeting agreed that land tenure insecurity has been relatively ignored.
As IIRSA transport projects and a few energy projects speed forward in the absence of adequate planning, there is growing awareness (including evaluators within the IDB) that the value added in terms of sustainable development or deep integration is in doubt. Unable to move the debate on South American integration beyond rhetorical gestures of interest in sustainability, some within the IDB would prefer to see the Bank withdraw from the initiative when the formal 10 year mandate expires in 2010.
As a result, integration policy debate would revert to the a competition between different government and private sector development agendas. For Petrobras and Odebrecht, the Amazon is available for gas, oil and hydroelectricity development in order to avoid the complications associated with gas shipments from Bolivia or inadequate rainfall. For Peru, integration is not just about energy security, but a national security challenge of removing the last safe havens for terrorists or other political opponents.
For the few civil society organizations at the CCT meeting, IIRSA and its sponsors have strengthened the wrong incentive structure that now limits their authority to shift course to more sustainable development practices. This gap between these parallel agendas for integration and the Amazon is not likely to narrow, but to widen in the coming years.