The Patagonian region of southern Chile is considered one of the world's
last, great wildernesses, dubbed an "eco-gem" for its rare fauna, ice-sculptured
fjords and almost total absence of industrial development.
But development is threatening this pristine wilderness, driven in part by money
from two of Canada's largest public-sector retirement funds.
The CPP Investment Board and British Columbia Investment Management Corp. have
stakes in a vast electricity project planned for this natural area, putting the
organizations on a collision course with Chilean and North American
environmentalists, and into the middle of a heated national debate over energy
development in the Latin American country.
The two funds, along with Toronto conglomerate Brookfield Asset Management Inc.,
are the controlling shareholders of Transelec Chile SA, a power-grid operator
considering a 2,300-kilometre transmission line that would require one of the
world's longest clear-cuts, a logged corridor 80 metres wide, much of it set to
slice through temperate forests of a type found nowhere outside Patagonia.
The line would take electricity from the remote region to Chile's biggest cities
and copper industry in the north from a new hydro power development, known as
HidroAysen, planned by companies from Chile, Italy and Spain. The project
involves construction of five large dams on two rivers and would boost Chile's
power supply by 20 per cent.
Until now, the sparsely populated region has been almost untouched by industrial
development, and conservationists are arguing it should be left that way.
They also say the 17 million beneficiaries and contributors to the CPP and the
B.C. pension organization will share some of the responsibility for the harm
caused by the project.
"I think a lot of Canadian pensioners would be very upset to realize that part
of their legacy was destroying one of the most beautiful and pristine places
left on the planet," said Jacob Scherr, director of the international program at
the Natural Resources Defence Council, a New York-based conservation group.
He contends that the land, in a world that is now short of true wilderness,
would have more value for Chileans over the longer term if it were left
unspoiled.
The power companies expect construction to begin in 2009, pending Chilean
government approval, with the first hydroelectric station to be inaugurated in
2013 and subsequent plants scheduled to go online by 2019. The lines and dams
are expected to cost about $4-billion.
The rivers to be dammed include the Pascua, which runs through an uninhabited
area of southern Chile's Aysen province, taking meltwater from the Southern
Patagonian Ice Field, the largest expanse of permanent ice outside Antarctica
and Greenland, through steep granite valleys to one of the many seawater fjords
that serrate Chile's southern coastline.
The better-known Rio Baker arises from Lake Bertrand and flows to Pacific waters
at Caleta Tortel, a scenic hamlet built entirely on stilts and connected by
catwalks that descend to a peak-encircled bay.
Ecologists reel off a lengthy rap sheet of the damage the dam project is likely
to cause, including the flooding of 60 square kilometres in the river basins,
fertility loss in downstream soil and habitat destruction of endemic plant and
animal species, including the huemul, an Andean deer so rare that its population
has dropped below 3,000.
But activists believe the power lines, which could have an impact on 14 national
parks or nature reserves, could prove even more damaging to Patagonia's fragile
ecosystems.
"The transmission line will have a bigger impact than the dams themselves," said
Peter Hartmann, Aysen-based director of Chile's National Committee for the
Defence of Flora and Fauna. "Whatever route they take, it's simply not possible
to avoid a great many national parks, nature reserves and conservation areas."
Residents of the region remain divided over the project. Many believe it will
bring much-needed work and investment to one of Chile's least developed regions.
"Most of those in favour of the dams prefer to remain silent, but plenty of my
neighbours believe it will be good for the region," said Alfredo Runin, a land
surveyor in Villa O'Higgins, one of the province's most inaccessible villages.
"Some are only too happy to sell their small holdings to the power companies."
The Canadian entities purchased Transelec in 2006 for $1.55-billion (U.S.). The
$364-million (U.S.) the CPP spent for its 27-per-cent share was its largest
infrastructure investment, up to that time.
CPP Investment Board spokesman Ian Dale said Transelec was attractive because
transmission lines are a long-term asset that will spin off stable cash flow for
decades, helping cover future pension cheques. He said the purchase did not
raise environmental concerns at the CPP, and he contended the pension fund is
"one of the leading institutional investors" in the world in its efforts to
promote greater awareness of responsible investing.
However, Mr. Dale said the fund also has a policy, drafted by the federal and
provincial governments, of not bending to political pressure to divest
investments.
BCIMC, which invests on behalf of British Columbia public-sector workers, has a
26-per-cent share, purchased for $356-million (U.S.).
At the time the funds made their purchase, consideration of the new transmission
line was already under way.
BCIMC spokeswoman Gwen-Ann Chittenden said the corporation did "careful due
diligence" when it made the purchase, adding, "We're obviously satisfied with
the environmental practices of Transelec."
The organization also does post-investment monitoring for poor environmental
practices because lapses in that area can hurt returns. The transmission line,
because its environmental assessment is still under way, has not been subjected
to that type of evaluation.
In Canada, the Chilean investment is being opposed by the Council of Canadians,
which says government pension funds should avoid environmentally hazardous
projects. "We don't need to go down this kind of road to ensure the pension
returns for our retirees," said Brent Patterson, a spokesman.
The electricity project is the largest of several designed to alleviate an
energy shortage in Chile, which has traditionally imported 72 per cent of its
energy needs, most as natural gas from Argentina.
Since 2004, however, Argentina has struggled to supply its own market, and has
slashed export volumes. With Chile's demand for energy growing by nearly 7 per
cent a year, power companies believe they can overcome resistance to developing
some of the country's most prized environmental assets in order to harness
Patagonia's vast hydroelectric potential, according to environmentalists.
Many also fear that the construction of a high-capacity power line connecting
Aysen to Santiago could unlock a slew of other hydroelectric and industrial
projects throughout Patagonia.
"Putting that transmission line up would halve the cost of new projects
throughout southern Chile," said Ian Farmer, owner of Consult Patagonia, a
tourism consultancy in Aysen, and an opponent of the plan. "It could turn
Patagonia into a vast factory for electricity."
Executives from Transelec Chile refused interview requests.
In a rare interview, Hernan Salazar, chief executive officer of HidroAysen,
argued that the project would protect Chile's energy security far into the
future. "The HidroAysen project provides a solution to Chile's energy
challenges," he said. "It contributes to the country's energy security and
independence, and to the diversification of its energy base. It is clean,
renewable and reliable."
Stating that HidroAysen would comply with Chile's environmental laws, he
attacked what he described as "myths propagated by protesters."
"It bothers me that environmentalists base their protests on myths and
falsehoods. To say that hydroelectricity is not in Chile's interests is simply
false. Chile has no gas, no coal and no nuclear power stations. The only
practical option left is hydroelectric power, which would help safeguard the
country's energy independence."
Mr. Salazar grew angry at the suggestion that environmental objections could
derail or force modifications to the plan. "We are building this project for
Chilean society, both now and in the future. These environmentalists are
damaging society and prejudicing Chile's future."
Until recently, government ministers remained tight-lipped on the issue.
President Michelle Bachelet won the election in January of 2006 on a centre-left
platform that embraces environmental protection and investment in renewable
energy.
Yet she has pointedly failed to offer her backing to anti-dam campaigners, and
remained silent for two months while a growing list of ministers expressed their
support for the project.
In February, Interior Minister Edmundo Perez Yoma surprised Chilean commentators
by pledging his public support for the dams. Energy Minister Marcelo Tokman has
also spoken in favour. "As long as [the HidroAysen project] meets all the
environmental norms, this type of electricity generation is welcome," he said in
March.
Other official statements also suggest the government tacitly approves of the
plan. In March, Chile's National Energy Commission incorporated output from
HidroAysen's proposed dams in a long-term electricity price forecast.
Only in early April did Ms. Bachelet ask her ministers not to comment publicly
on the issue until the National Environmental Commission has reviewed
HidroAysen's environmental impact study.
AYSEN PROVINCE
Officially known as Region XI, the Chilean province of Aysen is sandwiched
between the Andes Mountains and the Pacific Ocean, cut off to the north by
fjords and to the south by the Southern Patagonian Ice Field. It is one of
Chile's last true wildernesses, a landscape carved by ice, fire and a sea-borne
humidity, giving rise to the odd combination of cold, moist jungle.
Vast swaths of biodiverse Valdivian forest remain intact, offering habitat to
rare creatures such as the torrent duck, river otter, culpeo fox and the huemul,
an endangered Andean deer. Its slew of national parks, nature reserves and
protected areas make it one of the most compelling ecotourism destinations on
Earth.
Aysen's austere geography deterred settlers far longer than Chile's more
pastoral regions. Only in the early 20th century did determined pioneers clear
enough of the dense forests to support small-scale cattle and sheep farming.
Even today, its 92,000 residents, fewer than two per 259 hectares, wrest a tough
living farming clearings hacked from the forests. Others find work guiding the
35,000 outdoors adventurers who arrive each year to fish trout-rich rivers and
hike, bike or kayak among hanging glaciers, basalt peaks and whitewater rapids.
Aysen's settlements display a certain frontier charm, their rough-hewn houses
patched together with mismatched wood planks, roofed with corrugated iron and
fenced to shelter sheep and goats.
Only one road, the gravel-surfaced, single-lane Carretera Austral, connects the
province's isolated villages. On the orders of late dictator General Augusto
Pinochet, construction of the road began in 1976 at the Pacific port of Puerto
Montt. By the mid-1990s, Gen. Pinochet had been swept from office, but engineers
were still hacking their way through Aysen's fearsome topography. Only in 1999
did they put down their tools at chilly Villa O'Higgins, a village of 340
inhabitants, 1,300 kilometres to the south.
Of the two rivers targeted by the HidroAysen project, the Rio Baker is the
better known. Arising from an offshoot of Lago General Carrera, South America's
second-largest lake, it flows through some of Chile's prime trout-fishing
grounds, emptying into the Pacific 370 km downstream at Caleta Tortel, a remote
hamlet built entirely on stilts. The lesser-known Rio Pascua flows from
glacier-carved Lago O'Higgins and tumbles for 60 tumultuous km through
uninhabited, trackless valleys, draining glacial meltwater into one of the many
seawater fjords that serrate Chile's southern coastline.
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