Financial Crisis Stops Xalala Dam - For Now

Protest against Xalala DamThe indigenous Ixcan communities are strongly opposing the proposed Xalala Dam in Guatemala. Partly due to their opposition, private funding for the dam has now dried up. Will the World Bank and the IDB bail the project out, or will they realize that the time for change has also come for them?

Guatemala’s electricity utility INDE has proposed a $400 million, 181 megawatts hydropower project on the Chixoy River. The Xalala Dam would displace at least 2,300 indigenous people, and severely damage their environment.

In April 2007, the communities of the Ixcan people held a referendum (or Consulta Popular) on the proposed project. Of the more than 21,000 people who voted, 91% rejected the dam proposal and oil exploration on their territory. “It’s not that we're against development,” said the mayor of one of the affected villages. “We just want it to be our own kind of development.”

The Guatemalan government disregarded the Ixcan people’s right to self-determination, and invited investors to bid for the right to develop the Xalala Project. Nine international companies expressed an interest, but only one – the Brazilian company Odebrecht – eventually submitted a letter to the government. Odebrecht did not bid for the project, but explained that due to the opposition of the affected communities (among other reasons), it would not get involved.

Dams are a risky business, and it is no surprise that in the global financial crisis, private funding for such projects is drying up. Yet renewable energy projects are also being axed. BP just withdrew from a 149 megawatt wind farm in Inner Mongolia (China), Centrica has suspended three windfarms offshore from Great Britain, and numerous smaller renewable energy projects are similarly affected.

Given the meltdown of private finance, the role of governments and public lenders will be critical. The economic crisis is an opportunity for governments to create green jobs by promoting renewable energy and energy efficiency in a Green New Deal. Barack Obama has made renewable energy a priority of his new government.

In the meantime, the Guatemalan government is not giving up. It has announced that it will seek financial support for the Xalala Project from the World Bank and the Inter-American Development Bank. Upstream of the proposed dam site, the two banks financed the Chixoy Dam in the 1980s. The Guatemalan military massacred at least 400 indigenous people of Rio Negros village for this infamous project. The survivors are still fighting for reparations.

Like Odebrecht, the international financial institutions should now learn to respect the views of affected people. I have no doubt that the Ixcan communities will make it very clear to the World Bank and the IDB that the time for change has also arrived for them.

Peter Bosshard is the policy director of International Rivers. His blog, Wet, Wild and Wonky, appears at