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Heat from Enron's meltdown hits credit agencies
By Danielle Knight

WASHINGTON - The scandal and crisis surrounding the collapse of energy giant Enron 
Corp have reached
the doors of US government agencies that finance and facilitate private projects in 
developing
countries. One of the biggest controversies involves the Dabhol power plant in India's 
Maharashtra
state.

Environmental and human-rights organizations say the Enron debacle highlights the need 
for closer
supervision at the Overseas Private Investment Corp (OPIC) and the US Export-Import 
Bank (Ex-Im).
Together, these agencies have provided or insured US$2.3 billion worth of financing 
for about a
dozen Enron projects in Asia and Latin America, says Aaron Goldzimer, a social 
scientist with the
Washington-based Environmental Defense, a national environmental group.

At least a few of these ventures, activists argue, have been environmentally 
destructive and
associated with human-rights abuses and never should have received Washington's 
financial support in
the first place. Not only employees and stockholders have been swindled by the 
Houston-based
company's shady schemes, says Goldzimer. "The taxpayers have been joint investors in 
boondoggles
that profited Enron but harmed the environment and local communities," he says.

Compared with other export-credit lending agencies in Japan and Europe, OPIC and Ex-Im 
are bound by
environmental and social guidelines - including mandatory environmental assessments of 
proposed
projects. But advocacy groups say that these standards have not been properly followed 
and
government agencies still finance harmful business enterprises, including some of 
those owned by
Enron.

One controversial Enron project backed by the US government is the $2.8 billion 
gas-fired Dabhol
power plant - described as the largest single foreign investment in India - that is 
designed to
generate 2,015 megawatts of electricity. Enron was the majority owner of the project, 
a joint
venture including General Electric, Bechtel, and the Maharashtra state government. The 
Dabhol plant
received $640 million in financial support from OPIC and Ex-Im in the mid-1990s, 
including a $300
million Ex-Im loan and a total of $340 million in loans and political risk insurance 
from OPIC.

In 1999, Human Rights Watch (HRW), a New York-based advocacy group, charged Enron 
subsidiaries of
paying local law enforcement to suppress local opposition to the power plant.

"Enron is now being widely accused of arrogance and lack of transparency, but the 
people of Dabhol
have known that all along," says Arvind Ganesan, director of the business and 
human-rights program
at HRW. Enron, she says, has been complicit in human-rights abuses in India since 
1992, when local
opposition ignited over concerns about corruption and the hasty negotiations over the 
terms of
Enron's investment. Farmers complained that the power plant had unfairly acquired 
their land and had
diverted scarce water resources. The rights group documented how contractors for the 
power plant
harassed and attacked individuals opposed to the project. Police refused to 
investigate complaints,
according to the report, and in several cases actually arrested the victims on false 
charges. In one
instance in June 1997, Maharashtra police arbitrarily beat and arrested dozens of 
villagers who
strongly opposed the project, which is now up for sale to other investors.

"The US government bears special responsibility for the human-rights consequences of 
Enron's
investment because of its aggressive lobbying on behalf of the three US-based 
companies developing
the project," says Ganesan.

Human-rights abuses aside, the project never should have been approved by OPIC and 
Ex-Im for purely
financial reasons, say activists. The World Bank repeatedly refused to finance the 
project because
it was not considered economically viable and its terms were seen as only beneficial 
to Enron.

For several years, relations between Enron and the Maharashtra government have been at 
a rolling
boil over the high cost of electricity generated by the plant. The state eventually 
canceled its
original plan to purchase power from the plant. OPIC officials confirm that since 
Enron's
bankruptcy, the company has filed a $180 million claim with OPIC in an attempt to 
recoup financial
losses from the venture, arguing that the state government's decision amounts to 
expropriation.

In another example, OPIC in 1999 approved $200 million worth of political-risk 
insurance for the
Cuiaba gas pipeline, a joint venture between Enron and Shell Oil that aims to 
transport gas through
eastern Bolivia to a power plant in Cuiaba, Brazil. Conservation groups, including the 
World
Wildlife Fund and US-based Amazon Watch, strongly oppose the project. They say OPIC's 
backing of the
project violates the agency's rules, developed during the administration of former US 
president Bill
Clinton, that ban the funding of infrastructure projects in primary tropical forests.
Environmentalists argue that the pipeline cuts through the world's largest intact dry 
tropical
forest, known as the Chiquitano. New paths cut through the forest by the pipeline, 
they say, would
pave the way for poaching, logging, hunting, farming and settlement.

"The pipeline's 30-meter-wide, 200-kilometer access road will bisect and permanently 
scar one of the
most pristine tropical forests on the planet and will accelerate deforestation," says 
Atossa
Soltani, director of Amazon Watch. Activists say that so far, the project has resulted 
in pollution
damage to local water supplies, illegal hunting, and harmful construction impacts on 
local
indigenous communities.

Ganesan says US lawmakers need to make sure that such troubled projects are never 
approved for
government assistance again and has urged Congress to establish a human-rights 
assessment office at
Ex-Im that would report to the legislature. A provision to strengthen Ex-Im's 
human-rights oversight
had been introduced in Congress last year but the administration of President George W 
Bush and many
corporations opposed the proposal. It eventually died in a House of Representatives 
committee in
November.

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