Aluminum project finds few friends in Patagonia

Aluminum project finds few friends in Patagonia

Planet Ark - 14 October 2003

Puerto Chacabuco, Chile - In a long, skinny country like Chile, location is usually a matter of north or south. But in this remote corner of Patagonia, people say they live in the Far West - a land there for the taking.

There, beneath snowy peaks that drop into icy fjords, the Canadian mining company Noranda found the ideal site to invest nearly $3 billion in an aluminum smelter and three hydroelectric plants. More than a decade later, however, the project is nearly dead in the water after environmentalists, salmon farmers, politicians and citizens banded together to let the Canadians know they were not welcome in the region of Aysen.

Chilean President Ricardo Lagos dealt what might have been the coup de grace in August during a visit to Puerto Chacabuco by saying this was not the place for an aluminum plant.

A few weeks later, Noranda halted its Alumysa project and withdrew its environmental study from the final stages. "The president...said it should be built elsewhere and we have to take note of that," said Noranda's vice president for communications, Denis Couture. "We didn't say we would not build it. We said we are suspending the work and asking the environmental agencies not to continue evaluation until we have determined that this is all appropriate."

Noranda has also failed to find an international partner as it waded through the long environmental feasibility process. The impasse could last awhile even though Lagos quickly appointed two ministers to salvage what could be the largest foreign investment ever in Chile and the country's good standing with foreign capital.

But Noranda continues to believe in its original site. Although almost all the materials for making aluminum need to be imported, the area offers optimal hydroelectric resources at low cost -- a key to a competitive smelter.

Politics Get in the Way

Despite the huge setback to the project, those fighting Alumysa say they cannot afford to rest on their laurels.

"Our fear is the dogma that foreign investment is sacrosanct," said Peter Hartmann, the director of the National Committee to Defend Flora and Fauna based in Aysen. Chile is indeed a prime choice for foreign capital in Latin America thanks to its political stability, high growth, a new free trade deal with the United States and the government's open-door policy for foreign investment, even in the strategic mining and energy sectors.

Most recently, Lagos' government backed the completion of the $570 million Ralco dam project by Spanish-controlled electric utility Endesa despite protests from indigenous groups that it flooded sacred land.

Fernando Dougnac, a Santiago lawyer working for the environmentalists, said the case highlights how vulnerable Chile's natural resources are to political meddling. "Today, we have been favored by the intervention of the president and other times we have been severely harmed," said Dougnac. "Chile's environmental institutions are in bad shape. Exhaustive technical analysis ends in politics."

Salmon Farmers Strike Back

Salmon farming, for many the source of fortunes on the fjords for years to come, has played a pivotal role in swaying politics against the plant.

Chile's salmon exports will reach $1.2 billion this year and Puerto Chacabuco is the new frontier for an industry set to surpass Norway as the largest salmon farming nation.

"If Alumysa comes, we're leaving the fjords and going to process in Puerto Montt," said Salmones Friosur plant manager Edgardo Avello, referring to the cradle of Chilean salmon. He worries clients from Japan and the United States will stop buying when they see the aluminum plant across the bay.

The same goes for the bay's nascent eco-tourism industry featuring cruises to nearby glaciers. "The other activities in the region are on hold because they think 'If Alumysa goes ahead, why should I continue to invest,'" said Sen. Antonio Horvath, a center-right politician opposing the investment in his home region of 100,000 people.

Alumysa will need 8,100 workers for construction and 1,100 on a permanent basis. But many locals, like salmon worker Ana Maria Santana, call it "bread for today, hunger for tomorrow."

They fear the long-term impact of the smelter on their natural resources and health. Some suggest that Noranda build the hydroelectric plants near the fjords but move the smelter far inland or over to neighboring Argentina.

Noranda says it has no deadline to decide how to proceed, but even its staunchest supporters, like supermarket owner Pablo Balattini, are growing weary with the wait. "I have no illusions. We've been waiting 14 years for this dream."

And he may be waiting three more years. Dougnac, the lawyer, said he wouldn't be surprised if Noranda made a new push for the project once a new president is elected in 2006.

Story by Mary Milliken