ACD Comments on Changuinola 1 (Chan 75) Large Hydro Project (Panama)

Comments on Chan 75 by the Alliance for Conservation and Development (ACD) and the Center for Biological Diversity

Carbon Management Service



Dear members of the Certification Body:

We want to express our highest regards for the members of the certification body and the work do.

Respectfully, we recommend that the certification body rejects the request for Certified Emission Reduction (CER) that was presented by AES Corporation for the Changuinola I (Chan 75) hydroelectric project in the Republic of Panama. This project has already caused very severe social and environmental damage to the Ngobe, an indigenous group living in the La Amistad Biosphere Reserve, an internationally-recognized protected area also shared with the Republic of Costa Rica. Here we present some of the most pressing environmental and social issues about this project, providing reference to those guidelines of the World Commission on Dams that apply to the Government of Panama, the Company (AES Corporation), and its Contractors (the European consortium Changuinola Civil Works).

Environmental Concerns

The Chan 75 hydroelectric project is being constructed in the Palo Seco Protected Forest, which is part of the La Amistad Biosphere Reserve (Panama-Costa Rica), and the Mesoamerican Biological Corridor. Furthermore, the headwaters of the Changuinola River constitute part of the core of the La Amistad International Park, a UNESCO World Heritage Site that is also shared with the Republic of Costa Rica. In addition, the Changuinola River drains into the San San - Pond Sak Wetlands, an internationally recognized wetland according to the Ramsar Convention.

In spite of the globally valuable biological diversity of this region, which includes hundred of rare, endemic, endangered, and migratory species, AES and the National Environmental Authority (ANAM) have failed to conduct an appropriate environmental impact assessment (EIA) of the Chan 75 hydroelectric project, disregarding Guideline #5 of the World Commission on Dams.[1] The design of the project changed completely after the approval of the original 2005 EIA, most importantly raising the dam height to 99.2 m and increasing the size of the reservoir to 1,394.39 ha. Later adjustments and separate EIAs for the access road and relocation sites were categorized as null impact, and hence avoided being submitted to public consultation.[2] Even the original 2005 EIA failed to conduct an appropriate consultation of the affected indigenous Ngobe communities. In addition, no social studies, archaeological surveys, or biological inventories were conducted until after the start of the construction. In spite of ANAM's requirement to deliver this information before the start of construction, AES Corporation has completely disregarded Ngobe complains about the destruction of archaeological sites. Furthermore, AES has not yet released to the public the biological surveys that were conducted by the Smithsonian Institution between 2006-2007. Considering this situation, no independent revision panel could possibly be created, in spite of the interest and comments expressed by a number of conservation and scientific organizations (Guideline #22).[3]

The La Amistad International Park constitutes one of the most diverse regions in the world (see attached petition to UNESCO to list La Amistad as a World Heritage Site in Danger). Early this year an international research team announced the discovery of three new species of salamanders in the Costa Rican side, very close to the border with Panama ( Most probably these new species are present in the Changuinola River Watershed that spans the park limits in both countries, and up to this moment the public ignores whether these and other rare, endemic and/or endangered species may be present in the area to be flooded by the Chan 75 project. In the early stages of construction, AES has not taken any measures to control illegal hunting and the destruction of natural habitat, and therefore there is no guarantee for the long-term survival of biologically important species, such as jaguars, tapirs, and harpy eagles. Destructive and uncontrolled forest extractions have probably escalated with the project roads construction at the borders of La Amistad International Park, area that was so far isolated.

A number of conservation organizations have repeatedly denounced the imminent destruction of the majority of the fish and shrimp fauna of the Changuinola River Watershed above the dam site if Chan 75 is to be constructed. Different developmental stages of migratory fish species (=diadromous fish and shrimp) move naturally on yearly cycles between the San San Wetlands and the La Amistad International Park. Although they constitute the majority of the aquatic biomass of the La Amistad World Heritage Site, no assessments have been conducted about the ecological effects of these changes over the food chain. Similar hydroelectric development in other parts of the Caribbean Basin has resulted in the complete extirpation of these diadromous species. The fish ladders that are being proposed by AES have never been tested and would probably not work for tropical fish species that do not migrate up the streams as adult individuals like salmons do in the temperate latitudes.

These fish also constitute a main source of protein for the thousands of Ngobe indigenous peoples living above the dam site in the Changuinola River Watershed (Guideline #16).[4] In addition, we ignore the possible biological and social effects of these ecological changes on the San San - Pond Sak Ramsar Site downriver. No such assessment has been possible, because ANAM and AES have not even considered the cumulative and synergic effects of the other three dam projects in the Changuinola River Watershed. No Strategic Environmental Assessment (EAE) or Multiple Criteria Analysis (ACM) has ever been conducted for this hydroelectric development (Guidelines #4 and #6).

Social Concerns

As stated above, AES and ANAM have failed to conduct appropriate consultation with the affected Ngobe indigenous peoples. In this regard, they have completely disregarded the first criterion of the World Commission on Dams - acquire public acceptance of the project. Instead of procuring a negotiated solution, AES has used all sorts of illegitimate means to obtain individual agreements with particular members of the indigenous communities, contravening Guideline #2 (see attached petition of the Inter-American Human Rights Commission).[5] These have included offering exorbitant and unjustified amounts of money to certain individuals, signing contracts with unauthorized individuals, harassment, intimidation, and police repression. No fair and previously agreed compensation has ever been established, and these abusive practices have created numerous conflicts within the communities and between the Company and indigenous peoples[6]

AES and ANAM have never obtained the free, prior, and informed consent of the affected indigenous peoples - Guideline #3.[7] Instead, the Company has said at all moments that the indigenous peoples have no rights over the lands where they have been living; that the project would be constructed regardless of their opposition; and that therefore they should accept any benefits being offered by the Company. Otherwise they would lose all they have without any compensation. This completely violates criterion 5 of the World Commission on Dams - Recognizing Entitlements and Sharing Benefits. As a matter of fact, the PDD document fails to mention even once that the population they are displacing is indigenous. Furthermore, the Environmental Impact Assessment completely ignored Guideline #17, and hence no surveys of the existing properties were available during the first year of the project.[8] In so far, AES have been incapable of guaranteeing the availability of enough land, of the same quality and near the new communities, for the population that is loosing theirs. In addition, no analysis of poverty risk has ever been conducted (Guideline #18), and the relocation plan was imposed to the communities, and not negotiated as suggested by Guideline #19.[9] Accordingly, no legal benefit-sharing mechanisms have yet been established (Guideline #20).

Along the same line, the National Environmental Authority (ANAM) has granted a concession of 6,215 Ha of the Palo Seco Protected Forest to AES for the construction of the Chan 75 project without the free, prior, and informed consent of the indigenous population. The concession document only mentioned once the existence of the indigenous communities within the area, and instead offered the creation of special funds for community development based on the environmental payment services paid by AES solely to ANAM. Considering that ANAM is also the DNA for the Clean Development Mechanism (CDM), and that this institution has no legal mandate to collect environmental service payments for community development, carbon emission registration of the Chan 75 project will create a situation of conflicts interests, lack of transparency, and even corruption.

Based on the concession of the Palo Seco Protected Forest, AES has hired the National Police to provide vigilance 7 days a week, and police units have assisted the company and its contractors Changuinola Civil Works (CCW) to invade and destroy the farms of indigenous peoples even against the will of the legitimate owners. According to the contract between AES and the National Police, the Company's property includes the indigenous communities of Charco de La Pava, Valle Rey, Guayabal, and Changinola Arriba (see attached contract). Currently, construction if progressing amidst the indigenous communities of Charco de La Pava and Valle Rey, who have complained about the dust, noise, and sleep deprivation produced by the construction work that is continuing day and night (see attached response to the IAHRC). Recently, the Company has given an ultimatum of a month to relocate three houses in the community of Charco de La Pava that would situate the construction a few meters away from the majority of the houses in the community, including the school and the Church. This community has not yet accepted to be relocated to the proposed new site, and the proposed place has not yet been habilitated for human habitation (see attached pictures).

Assessment of Alternatives

AES and the Government of Panama have completely ignored criterion 2 of the World Commission on Dams - Comprehensive Options Assessment. Misleadingly, the PDD for the Chan 75 project presents the construction of a 250 MW carbon plant as the only plausible alternative to the construction of the Chan 75 hydroelectric project (Alternative 3, page 11). However, the Comision de Politica Energetica (COPE) has identified numerous other options for energy production in the country, including the use of natural gas for thermoelectric generation, as well as several forms of clean energy, like solar and wind power[10]. Contrary to the statement made in pages 6 and 15 of the PDD, Panama does not currently have "carbon-intensive grid", and the Government of Panama has made a public commitment to increase the supply of low-carbon energy during the next decade.

Fuente: Comision de Politica Energetica, MEF, Panama

Fuente: Comision de Politica Energetica, MEF, Panama

Precisely for this reason, Law 45 of 2004 was approved to provide fiscal incentives to hydros and other low-carbon energy alternatives. Apart from the Changuinola projects there are more than 24 hydroelectric projects with Environmental Impact Studies already approved. Furthermore, AES report also fails to mention the construction of Hidrocandela in 2005, another hidro power facility in operation, neither does mention projects already under construction as that of Paso Ancho, in Chiriqui Province (See attached PDF).

Although AES has received three concessions for the construction of three hydroelectric plants over the main stem of the Changuinola River (see attached documents), and another company, EEPPM, has a concession over the neighboring Bonyic tributary, no strategic environmental assessment or multiple criteria analysis have ever been conducted in contravention with Guidelines #4 and #6 of the World Commission on Dams.[11] As expressed above, the EIA for the Chan 75 project was also highly deficient (Guideline #5), and was approved without conducting any archaeological or biological surveys (Guideline 14).[12] Although AES eventually provided extemporaneous and incomplete archaeological data that dovetailed mandatory public scrutiny, the biological surveys conducted by the Smithsonian Institution under contract with MWH have not yet been released to the public, an entire year after the start of construction. Accordingly, no appropriate mitigation measures have yet been identified for a project affecting the La Amistad World Heritage Site, the San San Ramsar Site, the La Amistad Biosphere Reserve, and the Mesoamerican Biological Corridor.


Contrary to the PDD, AES has continuously expressed that they have financial solvency to construct the Chan 75 hydroelectric project. They have secured a very favorable long-term contract with the main national distribution company, Union Fenosa, S.A. In addition, the Republic of Panama has very favorable legislation to promote hydroelectric development. As a matter of fact, most hydroelectric producers, including AES, are looking forward to export energy to the Central American market[13]. Furthermore, they had the benefit to sell regularly into the spot market at prices equal or similar to those of thermoelectric plants with intrinsically higher operating costs.

Since the first announcement of the Chan 75 venture in January 2006, AES has emphasized that their long-term investment is secured through a ten-year Power Purchase Agreement (PPA) with Panama's largest electricity distribution company, Union Fenosa, S. A. (see web site at, and The Fitch report also emphasized the financial stability of the Republic of Panama, as well as the high electricity spot prices in the Panamanian national market

These favorable economic conditions have allowed AES to experience steady economic growth in the Republic of Panama[14]. AES growth perspectives will increase significantly during the next few years with interconnection with Central America and Colombia. The Republic of Panama is already integrated into the Central American grid; and a new transmission line is currently being completed (see newspaper clip). In addition, the governments of Panama and Colombia have advanced negotiations with the help of the Inter-American Development Bank (IADB) to connect Panama to the South American grid (see newspapers clips). In fact, two years before acquiring the Chan 75 hydroelectric project, AES had expressed interest to export energy to the Central American market (see newspaper clip). By increasing the total installed capacity of Chan 75 from 150 MW to 223 MW, AES has secured a much higher rate of return, and an increased capacity to export to the international market.

Public Consultation

In the PDD document the company affirms that they had undergone a thorough consultation process and that 95% of the population agrees with this project. However, AES fails to communicate that their Public Hearings for the Environmental Impact Assessment in an urban area far away from the affected communities, populated by indigenous people with little access to cash to afford the travel. For these reason the majority of "stakeholders" that participated were not the ones directly impacted by the project. As the petition to the Inter-American Human Rights Comission clearly states, since 2005 Ngobe leaders in the area have constantly been voicing their complaints about deficiencies of AES's "consultation" procedures. Furthermore, apart form our own communications and those of the Ngobe, other organizations of the region, like CEDETENG and ANAI, had tried to voice their concerns for the last three years. AES and the Government of Panama never addressed them.

With regards to the need to obtain CERs to finance investments for conservation and sustainable development, AES has publicly announced that they had $10,000,000 available for the relocation of the affected communities, as well as an additional amount of money for the creation of a Trust Fund to support the implementation of the Management Plan of the Palo Seco Protected Forest (El Siglo, January 28, 2008, attached PDF)

Legal Issues

The Chan 75 hydroelectric project is marred in a number of legal cases in Panama and abroad. Domestically, these include a constitutional protection for the Ngobe population (Amparo de Garantias), two criminal investigations for miscategorization and falsification of the archaeological information of the EIA for the access road, and an administrative action against the concession contract of the Palo Seco Protected Forest between ANAM and AES. Internationally, there are separate petitions to UNESCO to list La Amistad International Park as a World Heritage Site in Danger, and to the Inter-American Human Rights Commission for human rights violations against the local Ngobe communities.

Considering that ANAM is also the DNA for the Clean Development Mechanism (CDM), we consider that the Executive Board should reject this request for carbon credit certification. Granting CERs to AES for Chan 75 will establish a negative precedent for clean development projects around the world. ANAM had the legal mandate to grant the water and protected areas (BPPS) concessions to AES, as well as the logging permits and environmental impact approvals. All of these transactions have represented millions of dollars of income for this government entity, especially the concession of the BPPS that was associated with annual environmental services payments to ANAM. In clear conflict of interest, as a DNA, ANAM is also responsible for filing the PDD requesting CERs that will represent an important source of income for the construction of Chan 75

With regards to AES request of CERs to finance the implementation of the Management Plan of the Palo Seco Protected Forest, this financing will be administered by ANAM through the environmental services payments. Although this government institution has pledged to use these funds to help the affected Ngobe communities, ANAM has no legal mandate or technical expertise to manage funds for community development in indigenous areas. As a matter of fact, this dubious agreement is based on a non-existent law project for environmental services payments that has not yet been discussed, let alone approved by the National Assembly. If the Executive Board grants CERs to AES to finance the implementation of the management plan of the BPPS, there is a high potential for the misuse, waste, or deviation of these funds to pay for ANAM administrative costs, without any commitment to compensate the indigenous communities that are being relocated without their free prior, and informed consent.

Finally, we urge the Executive Board to follow the Linking Directive that states that CDM credits from hydropower projects over 20 MW can only be used within the ETS if the projects respect the criteria and guidelines of the World Commission on Dams (WCD). Considering that the Chan 75 project does not comply with the guidelines of the WCD, and that there are legal actions both in Panama and in the Inter-American human rights systems that are yet to be resolved, we respectfully recommend the EB to reject and/or postpone the approval of CERs for Chan 75 until these crucial questions are finally addressed. We also request the EB to consider carefully the question of additionality, and request any additional information that has not yet been provided and submitted to public comments by AES Corporation.

Sincerely yours,

Osvaldo Jordan

International Affairs Coordinator

Alliance for Conservation and Development (ACD)

Peter Galvin

Conservation Director

Center for Biological Diversity

[1] Guideline #5 "Project-Level Impact Assessment for Environmental, Social, Health and Cultural Heritage Issues". World Comission on Dams Report: 278-307

[2] Currently, the Attorney General Office of Panama is investigating the miscategorization of the access road to the dam site of Chan 75.

[3] Guideline #22 suggests the creation of "Independent Review Panels for Social and Environmental Matters".

[4] Guideline #16 refers to "Maintaining Productive Fisheries".

[5] Guideline #2 suggests implementing "negotiated decisión-making processes".

[6] and attached PDF

[7] Guideline #3 suggests obtaining "free, prior and informed consent".

[8] Guideline #17 requests establishing a "baseline social conditions".

[9] Guideline #18 refers to "Impoverishment Risk Analysis", and Guideline #19 proposes "Implementation of the Mitigation, Resettlement and Development Action Plan".

[10] SNC-Lavalin y CAI, 2001. Estrategia y Plan de Promocion y Desarrollo de Recursos Naturales Renovables: solar, geotermica, eolica y pequenas centrales hidroelectricas. Informe IV, Estrategia de Suministro Futuro de Electricidad de la Republica de Panama. 215p.

[11] Guideline #4 refers to Strategic Impact Assessment for Environmental, Social, Health and Cultural Heritage Issues, and Guideline #5 to Project-Level Impact Assessment for Environmental, Social, Health and Cultural Heritage Issues.

[12] Guideline #14 asks for Ecosystems Baseline Studies.


[14] Source of Graphs: The AES Corporation, Form 10-K: Fiscal Year 2007:

More information: 

Dams Threaten Biodiversity and Indigenous People in Panama

International Rivers Comments on Changuinola 1 (Chan 75) Large Hydro Project (Panama)