The Multinational Monitor

May 1997 · VOLUME 18 · NUMBER 5

T H E    F R O N T

Uniting to Block the Dams

CURITIBA, BRAZIL -- "We have stopped dams in the past, and we will stop more in the future," states the "Declaration of Curitiba," issued at the first International Meeting of People Affected by Dams. "Over the years, we have shown our growing power. We have occupied dam sites and offices, marched in our villages and cities, refused to leave our lands even though we have faced intimidation, violence and drowning. We have unmasked the corruption, lies and false promises of the dam industry. We are strong, diverse and united and our cause is just." The declaration, which was endorsed by representatives of dam-affected people and dam opponents from 20 countries, demands an immediate international moratorium on the building of large dams. Attendees of the meeting, held here March 11 to 14, also announced their opposition to the construction of any dam not approved by the affected people "after an informed and participative decision-making process."

The declaration gives a number of conditions that must be met before the call for a moratorium would be lifted, including the provision of reparations to the millions of people whose livelihoods have suffered because of dams, an end to "all forms of violence and intimidation against people affected by dams and organizations opposing dams" and the creation of an international independent commission to review the performance of dams supported by international aid and credit agencies.

Over the past 50 years, some 30 to 60 million people worldwide have been displaced by large dams and tens of millions more living downstream of dams have been impoverished due to the falling productivity of their farmland and fisheries after dam construction.

Conference attendees came from dam-affected communities in India, Argentina, Chile, Mexico, Paraguay, Russia, Taiwan, Thailand and Lesotho. The meeting was organized by the Brazilian Movement of People Affected by Dams (MAB) with help from the International Rivers Network and an international committee including India's Save the Narmada Movement (NBA), the Biobío Action Group from Chile (GABB) and the France-based European Rivers Network.

Delegates from Brazil's MAB made up the majority of people at the conference. Presently, Brazil has around 600 large dams (defined as over 15 meters high), with another 494 more planned for construction. MAB representatives included people from communities threatened by planned dams in the central Amazon who had travelled for up to a week by boat and bus to reach Curitiba; farmers displaced by Itaparica Dam who have just filed a claim with the World Bank's inspection panel, arguing that Bank financing of the dam violated its rules on resettlement and environmental protection; people living downstream of the huge Tucurul Dam in the eastern Amazon, who have suffered filthy water, an explosion in mosquitoes and increased disease since the Tocantins River was impounded; and representatives of the rural communities in the Uruguay River basin which have been successfully fighting a proposed complex of 22 dams for 20 years.

Fulgêncio Manoel da Silva, a farmer displaced by Itaparica and a regional organizer for MAB, told the meeting that where dam-affected people in Brazil had not united to demand adequate compensation, "the effects were terrible with many farmers ending up penniless, with no land or other source of income." Not long after he learned his family would lose their land to Itaparica, he met a family of beggars living under a bridge who made a living farming their own land before being evicted for a dam. This experience shocked da Silva into organizing the Itaparica families. Although displacement has increased the rates of poverty, violence, alcoholism and other social problems in local communities, the regional power company CHESF has at least been forced to provide much better land and community facilities than would have been the case without organized protests, da Silva said.

Simon Ruiz Lerma, president of the Committee for the Defense of Mayo Culture from the state of Sinaloa in northwest Mexico, described how his indigenous community suffered after losing its lands to the Huites Dam in 1992. Ruiz said that his community wanted the dam, believing it would bring irrigation and electricity. Instead, the people of Huites have been left without land, without money to pay for electricity and without even a source of drinking water.

As the Declaration of Curitiba notes, although delegates at the conference came from many different parts of the world, all shared similar experiences of displacement, environmental devastation and cultural impoverishment. The delegates also recounted the unfulfilled promises of dam builders for compensation from dams. Dams have disproportionately affected poor, rural communities, the delegates said. Those who depend most on the land for their livelihood, those who still work directly with natural resources, those whose heritage is woven into the land itself have the most to lose -- and the least to gain --from large dams in their communities. There was widespread agreement that struggles against dams were also struggles for democracy, and for the rights of communities to control and manage their water, land, forests and other resources.

Delegates were unanimous in demanding that no dam should be built until the authorities have obtained the informed consent of the affected people. The conference passed a resolution condemning non-governmental organizations which "legitimate large dam projects by working as consultants for project authorities when the costs and benefits of the dams have not yet been established and when affected people have not been fully informed and consulted on resettlement."

To symbolize the growing unity of dam opponents around the world, the Declaration of Curitiba announced that March 14, currently the Brazilian Day of Struggles Against Dams, will from now on become the "international day of action against dams and for rivers, water and life."

-- Aleta Brown & Patrick McCully

Business Bats for Colombia

BOGOTA -- "The government of Colombia has failed to follow through on promised counter-narcotics action or to confront fully the drug interests that contributed millions of dollars to President [Ernesto] Samper's campaign," said Assistant Secretary of State Robert S. Gelbard in justifying the Clinton administration's February 28 decision to decertify Colombia's drug-fighting efforts. "There is as much cocaine coming into the United States or being produced in Colombia as ever before, more heroin being produced in Colombia than ever before. That's the bottom line." No, it is not, says Michael Skol. Skol is president of the U.S.-Colombia Business Partnership, a Washington-based organization supported by 11 major U.S. manufacturing, energy and service corporations, including Bechtel, Caterpillar, Colgate-Palmolive, Enron, Occidental Petroleum, United Parcel Service and Compaq Computer.

Skol, a former ambassador to Venezuela, says the United States has long been Colombia's most important trading partner. Yet when a country is decertified by the U.S. government, it can lose everything from preferential treatment for its exports under trade pacts such as the Andean Trade Preference Act (ATPA) to landing rights for its U.S.-bound aircraft. Unless a national-interest waiver is issued, decertification automatically disqualifies a country from obtaining financing through the Export-Import Bank of the United States, and deprives projects from political risk coverage through the Overseas Private Insurance Corporation (OPIC).

"Our role -- and we're very specific about this -- is lobbying and educating about the effects of sanctions," says Skol, who is also executive vice-president of Diplomatic Resolutions Inc. "In our view, we succeeded, because while Samper was decertified, the private sector was certified" -- the United States has not imposed various optional trade sanctions on Colombia.

At least one member of the U.S.-Colombia Business Partnership, however, may have its own reasons for directly supporting the Samper government. Occidental is currently embroiled in a dispute with Colombia's indigenous U'wa people, many of whom have threatened to commit mass suicide if Oxy goes ahead with plans to drill for oil on traditional lands. In 1992, Oxy signed a contract with state oil entity Ecopetrol to explore in a 200,000-hectare, violence-prone area in eastern Colombia that is also home to 4,000 U'wa people. In early March, the Council of State authorized Oxy to continue its exploration work, denying a demand by the U'wa that Oxy's license to drill be annulled.

Unsatisfied with offers of consultation, the National Indigenous Organization of Colombia said in a statement, "We gain nothing with the guarantee of the right to be consulted if the government has no obligation to respect the results of said consultation." Oxy, which has already sunk a reported $12 million into the project, declined comment.

Many members of Congress argue that U.S. investment in Colombia helps prop up an unpopular president elected with drug money, and that Samper should be punished for allowing Colombia to become a chief source of cocaine -- and increasingly, heroin -- for U.S. drug users. Besides being the world's top cocaine producer, Colombia is the second-largest source of coca, eclipsing Bolivia this year for the first time and trailing only Peru (both of which were certified, along with Brazil, Ecuador, Mexico and Venezuela).

One group that particularly supports Colombia's decertification is the California rose industry, which has been hurt by competition from cheap Colombian flower exports flowing into the United States duty-free thanks to ATPA.

But with the private sector certified, the flowers will continue to be traded freely.

"We haven't had any negative impact outside of the uncertainty and the expense of lobbying trips to the United States," says Juan Cock-Londono, general manager of flower exporting company Uniflor S.A., just outside Medellin. "I had to go to Washington eight times last year to explain what we do, that our activity is legitimate, and that we're competing legally with our competitors."

The 55-year-old economist-turned-flower exporter concedes that "in a certain way, [sanctions are] forcing the government to act, although they don't like it. The pressure the United States is making has produced positive results."

One of those results is Colombia's approval late last year of a money-laundering and asset forfeiture bill by key legislative committees. The bill, introduced in July by Samper himself, authorizes the confiscation of illegally acquired goods and assets, as well as rights, securities and profits resulting from criminal activities in general.

But most Colombian business interests focus on the potential effects of U.S. sanctions on their business. A Colombian delegation visiting Washington in mid-February argued that "sanctions that injure legitimate business would be counterproductive for the solution of the current crisis. Such a development would be a serious blow to democratic institutions and under-mine Colombia's drive against drug trafficking."

Within a week of its decertification, Bogota retaliated by suspending all aerial fumigation of coca plants and poppies used in making heroin.

Meanwhile, Skol, a former State Department official who helped draft ATPA in 1988, emphasizes the harm done to U.S. business by the automatic suspension of Ex-Im financing and OPIC guarantees. "One of the insanities of this legislation is that if you take away Ex-Im Bank financing and OPIC guarantees, you're hurting American companies and exporters rather than Colombians, and opening up [the Colombian market] to the French and other overseas competitors." Skol says at least two of his members -- Bechtel and Caterpillar -- worry that lack of access to Ex-Im Bank financing and OPIC guarantees may hurt their future investment plans for Colombia.

The Clinton administration appears sensitive to these corporate concerns. "In essence, the Clinton administration and the State Department want to reverse the decertification," says Skol. "In addition to no sanctions, they have talked about abolishing two existing automatic sanctions: prohibitions against granting OPIC insurance and the so-called Section 614 waiver which bans military assistance and sales."

"We have to do something about drugs," he adds. "But aside from drugs and security, Colombia is one of the most responsible, stable economies in the world." -- Larry Luxner

The Canadian Gold Scam

TORONTO -- Returning from Baffin Island in the high Arctic in 1576, British explorer Martin Frobisher was on the verge of bankruptcy. His quest to find a northwest passage to China that would bypass Spanish and Portuguese blockades to the south had failed, and he was forced to sell his ships to pay off his debts. A souvenir rock he had chipped from the island's shore found its way into a wealthy broker's hands, who had it appraised. The appraisal showed the rock to be rich in gold. Along with the broker, Frobisher convinced investors, including Queen Elizabeth I, to bankroll another expedition. The ships returned with 158 tons of rich ore. As word spread of the high-grade haul, investors flooded Frobisher's coffers. However, the ore from his third journey was revealed to contain no gold at all. And despite explicit instructions from the Queen that meticulous records be kept of the assay results, the logs were mysteriously lost at sea in a storm. While Frobisher and his broker blamed faulty equipment and testing, widespread charges of fraud destroyed their reputation and finances. Frobisher's ghost hovers above the floors of the Toronto and Alberta stock exchanges, and on the other side of the globe, near Busang, on the Indonesian island of Kalimantan (Indonesian Borneo). What was touted earlier this year as the largest gold find in the world has turned out to be a hoax of monumental proportions.

The gold find was "discovered" by geologists John Felderhof and Michael de Guzman. In 1993, Calgary, Canada-based Bre-X bankrolled them to conduct drilling on the Busang site.

Estimates from the site climbed from a modest 1 million ounces in February 1995 to 30 million ounces in January 1996 to 71 million ounces in February 1997. After John Felderhof said he felt the deposit contained 200 million ounces, which would make it the largest gold find in the world, the penny stock shot up toward $100 a share on the Alberta Stock Exchange.

Bre-X ran into difficulty, however, when the Indonesian government revoked one of Bre-X's exploration licenses and disputed the ownership of the site in October 1996.

In an ensuing corporate battle rife with intrigue, Barrick Gold, Placer Dome and Bre-X forged alliances with friends and family of Indonesian President Suharto in an effort to position themselves to gain control of the Busang site. Bre-X had been without an advocate in the Suharto clan, poor business strategy in Indonesia, where few major business ventures can take place without a cut going to a member of President Suharto's family.

When the dust settled, in February 1997, a Bre-X-led joint venture had landed control. But Bre-X's share had shrunk to 45 percent; Indonesian companies, mostly controlled by Suharto's close friend and business partner Mohamad (Bob) Hasan, had a 40 percent stake, and the New Orleans-based Freeport McMoRan had a 15 percent share.

Formation of the joint venture, however, was contingent on independent "due diligence" testing of the samples, which was conducted by Toronto-based Strathcona Minerals. Preliminary results in March found "insignificant" amounts of gold, which suggested that someone had tampered with the samples.

Events in Indonesia cast even more doubts on the Busang deposit. In January, a fire at the Busang office destroyed key documents relating to the samples. And on March 19, geologist Michael de Guzman, who conducted the drilling with John Felderhof, apparently committed suicide by jumping out of a helicopter above the Borneo jungle. Freeport President James (Jim Bob) Moffett told reporters in May that de Guzman knew Freeport was not finding any gold at Busang.

The preliminary testing results sent stock prices on the Toronto and Alberta exchanges into a tailspin. Much of the money lost on Bre-X was in mutual funds and pension funds, and many investors did not know their money was tied up in risky mining ventures.

On May 4, Bre-X released the full audit conducted by Strathcona. It revealed "virtually no possibility of an economic gold deposit" at the site. "[T]he magnitude of the tampering with core samples that we believe has occurred, and resulting falsification of assay values at Busang, is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world," Strathcona founder Graham Farquharson told Bre-X Chief Executive Officer David Walsh in a letter.

Freeport and Strathcona believe that the the drill samples were salted at a warehouse in the city of Samarinda, downriver from Busang, where samples were shipped before being trucked eastward to Balikpapan for assaying.

On May 8, Bre-X filed for court protection from creditors.

Bre-X's Walsh blames the audit results on geologists Felderhof and de Guzman, and denies any wrongdoing on the part of the company.

Freeport's Moffett was "disappointed" about the sample results, but says Freeport was "able to identify the situation promptly, prior to the expenditure of any [significant] funds."

In Jakarta, Bob Hasan took the news in stride. "Life goes on," he told the Toronto-based Globe and Mail. "I'm not angry. It's good propaganda for Indonesia. Now everyone in Canada knows where Indonesia is," he added, laughing. "I bet you thought we all lived in huts in the jungle."

Fallout from the scandal includes at least a half dozen class-action suits in the United States. Montreal-based Public Interest Research Associates has signed up more than 500 Canadian investors who will try to recover their losses from the scam. "Shareholders were misled by faulty information, and we are looking to see who was at fault," says Jay Gould of the group.

Walsh, the two geologists, and other key players had cashed in most of their stock long before evidence of the fraud emerged, raising suspicions among police and regulators. (Felderhof alone pocketed $35 million from trading in Bre-X stock.) Ontario Securities Commission (OSC) Chairman John Geller says his agency has been examining whether disclosure and insider trading regulations were violated. The OSC has also set up a task force in response to the Bre-X scandal to review investor disclosure rules for companies claiming mineral discoveries.

The Indonesian police have commenced criminal investigations, and the Royal Canadian Mounted Police (RCMP) is undertaking preliminary investigations. A special prosecutor has been assigned by Alberta's premier if criminal charges are filed. Bre-X itself has filed a complaint with the RCMP, alleging it is a victim of fraud.

The Bre-X saga has all the trappings of a Hollywood thriller -- an intricate billion-dollar global scam, a mysterious suicide, tropical locales. Small wonder that in April, Alliance Communications Corp. announced that it has bought the film rights to an upcoming book on the Bre-X story.

But Bre-X investors, who lost millions on the scandal, are left with the words of George Best, Martin Frobisher's second-in-command, who warned, "All is not golde that shineth."

-- Aaron Freeman

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