BNDES Approves Unprecedented Loan for Controversial Amazon Dam

Financing ignores violations of human rights and environmental safeguards, tarnishing bank’s reputation

Brasilia, Brazil: This Monday, the Brazilian National Development Bank (BNDES) announced approval of an unprecedented loan of BRL 22.5 billion (approximately US$10.8 billion) for construction of the controversial Belo Monte Dam project on the Xingu River, a major tributary of the Amazon. BNDES is slated to be responsible for BRL 13.5 billion of direct finance, while Caixa Econômica Federal (CEF), a public bank, will pass through BRL 7 billion and private investment bank BTG Pactual will administer another BRL 2 billion.

The BNDES loan for Belo Monte is the largest in the bank’s 60-year history. Critics charge that the project is economically unviable, due to factors such as burgeoning construction costs that increased over sixfold from BRL 4.5 billion reais in 2005 to current estimates of BRL 28.9 billion.

Responding to the BNDES announcement, nine Brazilian civil society organizations filed a petition yesterday with the Federal Public Prosecutor’s Office (Ministério Público Federal) calling for an investigation of apparent violations of legally-binding requirements related to the project’s social and environmental impacts, risks and economic viability. The petition calls on prosecutors to take urgent measures to prevent BNDES from disbursing loan proceeds to project developer Norte Energia, S.A. prior to completion of a full investigation.

The controversial project has been paralyzed on at least six occasions by affected indigenous communities and fishermen, who have protested over the failures of Norte Energia and government agencies to comply with the government's mandated environmental and social provisions. Eight thousand of the project's own workers have also shut down the dam, recently setting fire to construction camps and machinery and blocking roads, in protest over violations of labor legislation.

Belo Monte has been suspended twice in 2012 by federal judges for lack of prior consultations with affected indigenous communities, as required by the Brazilian Constitution and international human rights agreements. Both the International Labor Organization and the Inter-American Commission on Human Rights (IACHR) have declared that the project violates the rights of affected indigenous communities. Expert and independent analysis has found that Belo Monte is economically, socially and environmentally unviable.

Norte Energía and federal government agencies are facing 15 civil proceedings in the Brazilian courts lodged by Federal Public Prosecutors, the Public Defender’s Office and civil society institutions, as well as international suits that question the large number of illegalities and irregularities committed since the start of the project. Despite massive legal, financial and reputational risks surrounding Belo Monte, BNDES has decided to finance the project anyway, apparently under intense pressure from the administration of President Dilma Rousseff. By approving the loan, BNDES places itself as the main financier of a project notorious for violations of environmental legislation and human rights, including the cultural integrity of indigenous and river communities. Among its environmental impacts, Belo Monte is expected to cause large emissions of greenhouse gases, including methane, a gas that is 25-times more potent than carbon dioxide.

“The State of Brazil and now also BNDES could be responsible for the violations of human rights caused by Belo Monte and recognized by international institutions,” said Astrid Puentes, executive co-director of the Interamerican Association for Environmental Defense (AIDA), an organization that offers legal support to the affected communities. In 2011, the Interamerican Commision on Human Rights – IACHR, part of the OAS, called for precautionary measures to protect the life, personal and cultural integrity of the contacted and uncontacted indigenous communities of the Xingu River affected by the construction of the Belo Monte Dam. The Brazilian government chose to ignore the Commission’s recommendations.

“No serious social and environmental safeguards were implemented by BNDES prior to approval of this loan for Belo Monte using the money of Brazilian taxpayers” argued Antonia Melo, coordinator of the Movimento Xingu Vivo para Sempre. “BNDES claims that part of the funds will be used in the mitigation of the impacts of Belo Monte, but this is just talk. No one guarantees that this money is going to minimize the suffering of those affected. To date, virtually none of the promises made to indigenous, riverine people and fishermen have been met. BNDES already has transferred BRL 2.9 billion to Norte Energia without any serious risk analysis, and you can see the disastrous situation of the people in the region, the deforestation and the lack of infrastructure in Altamira.”

The project is expected to produce only 39% of its installed capacity of 11,233 MW. According to Brent Millikan, Amazon Program Director at International Rivers “if the true social and environmental costs, along with the financial, legal and reputational risks of Belo Monte were seriously taken into consideration, BNDES would never get near the project.”