Dire Straights

A new Counter Balance report, ‘Dire Straits: EIB investments in Panama and their impacts on indigenous communities, workers and the environment’, investigates three recent projects in Panama: the expansion of the Canal, and two hydro-electrical projects – Dos Mares and Barro Blanco. The international companies[1] running the projects get away with workers right’s violations and breaking environmental standards while they leave indigenous peoples depending on the land and the river completely out of the process.

“With some decent due diligence and monitoring of the projects a lot of this could have been avoided. This report shows again that the European Investment Bank (EIB) has not the capacity, the know-how or the will to properly scrutinise the projects it finances”, says Caterina Amicucci, co-author of the report.

The projects were basically imposed on the people living in the area without proper public consultation. Despite the ongoing protests by local communities and CSOs since the idea for the projects was launched, the EIB signed loans worth 396.5 million for the expansion of the Panama Canal and €140.9 million for the hydro-electrical dam of Dos Mares.

The bank also intended to give a €40 million loan for the Barro Blanco dam. However, local groups filed an official complaint to the EIB because Genisa – the company running the project – was denying the presence of indigenous peoples in the area. “The company was not able to publicly defend the poorly funded studies and preferred to withdraw its request for an EIB loan before the bank took action. If nobody had rung a bell, the EIB would have financed the project despite the fact that indigenous peoples have been opposing the development of hydroelectrical projects in their land for 15 years”, says Desislava Stoyanova, Counter Balance coordinator and co-author.

Dos Mares will be only one of seventeen dams on the same overcharged river which makes it damaging for the environment and the farmers depending on the land. “The dam is not yet completed but the plastic films used to build the canal are already floating around”, says Amicucci. “Moreover local farmers accused the companies (two subsidiaries of GDF Suez) of land grabbing. The surface of land taken by the company is not in proportion to the size of the project which feeds the suspicion of land speculation. The situation is shocking, an accurate ex-post evaluation is urgently needed.”

A recent Wikileaks cable revealed that “the administrator of the Panama Canal, Aleman, might have tipped the bid towards the consortium that included CUSA, which is run by his cousin Rogerio Aleman”. The consortium’s bid was one billion dollar lower than the other competitor. The foreign minister Juan Carlos Varela admitted in a meeting with the US ambassador that “the consortium was very weak and he had real doubts about their ability to perform”.

The fact the EIB has the most far going tax haven policy of all international financial institutions does not seem to hinder the bank to invest in Panama, one of the few jurisdictions still on the OECD grey list – the closest you can get to being a tax haven nowadays. Moreover, Panama – one of the smallest countries in the region – is the third beneficiary of the EIB for the Asia and Latin-America region (ALA), right after Brazil and China but before countries like Indonesia, India and Argentina. Panama’s secretive jurisdiction makes it attractive for corruption, money laundering and tax dodging. Aggregated EIB loans to Panama amount up to €709 million.