Paraguay

Government speeds up arrival of electro-intensive company

Gustavo Torres

15/12/2012

Opinión

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Paraguay has no bauxite mines, nor the necessary supplies — pitch, calcined coke, tar or fuels — to produce aluminum, or the skilled labor and ports to make and ship the product, much less a market in which to sell it. However, the electro-intensive multinational firm Rio Tinto Alcan intends to set up shop in the country to take advantage of its hydroelectric power supply.

That’s how the members of the “No al Golpe de Rio Tinto Alcan,” or “No to the blow from Rio Tinto Alcan” campaign see it. The group intends to gather 100,000 signatures in opposition to the company’s arrival in Paraguay. The first part of the campaign began in July and ended Nov. 28 with a day-long mobilization in the capital of Asunción, where the group delivered 24,480 signatures to the Ministry of Industry and Commerce, with copies for the National Congress, demanding an end to negotiations with the company and stating that Paraguay’s citizens should be consulted on any investment, such as the one by Rio Tinto Alcan, that will have such a large impact on the people.

Rio Tinto Alcan is the second largest aluminum producer in the world, an activity considered electro-intensive because more than 30 percent of its production cost is from energy. The company, headquartered in Canada and funded also with British and Australian capital, estimates it will produce 670,000 metric tons of aluminum annually. That will require importing all of the raw materials to make the product, primarily from Brazil, and necessitate steady use of 1,100MW, adding up to 9,600 GWh annually. Meanwhile, national industries collectively use less than one-sixth of that (1,623 GWh/year), according to technical experts from the “No al Golpe de Rio Tinto Alcan” campaign.

“What Paraguay has is a lot of hydroelectric energy, which is indispensable to the production process, and unfortunately there are complacent officials willing to hand it over for almost half of its lowest value, for 30 years, [which is then] renewable for another 20 years. This deal will force everyone in Paraguay to pay the other half of its electricity consumption with either electricity rate increases, as happened in Brazil, or with higher taxes and reduced public spending. This amounts, over 20 years, to US$ 3.5 billion, or eight times Paraguay’s external debt, just so Rio Tinto Alcan has a ‘suitable climate’ to invest in Paraguay,” campaign member Sarah Zevaco told Latinamerica Press.

Moreover, Rio Tinto Alcan placed conditions in order to invest in Paraguay: the company is requiring that the government build a port and logistics terminal to import raw materials from Brazil and export the aluminum ingots it produces to manufacturing centers, where they will become auto parts, aircraft, cables, pans, cans and other processed products. It also demands a 500 kW line from the Itaipú and Yacyretá hydroelectric plants — which Paraguay shares with Brazil and Argentina, respectively — to the factory, as well as dredging the Paraná River to make it accessible to deep draft ships.

These public works will cost between $700 million and $1 billion according to estimates from the Ministry of Public Works and Communications. When it comes to paying for the projects, the Ministry of Industry and Commerce suggested managing a private sector loan and partnering with Rio Tinto Alcan for their implementation. It is estimated that Rio Tinto Alcan plant will consume 60 percent of the national annual consumption of electricity, or 47 percent of the electricity produced by the country, paying less than what it’s worth for 30 years. The company will import 100 percent of supplies and export the entirety of its production.

Negotiations underway

The arrival of Rio Tinto Alcan in Paraguay in October 2009 “coincided” with the start of infrastructure construction by the national government for the installation of a transmission line of 500 KW from the Itaipú hydroelectric plant.

In January 2011, an Interagency Task Force was formed by decree to analyze the investment proposed by the company and decide on its fate in Paraguay by 2016 so that citizens could play a participatory role in the decision. During the administration of President Fernando Lugo (2008-2012), two public hearings were held on the installation of Rio Tinto’s factory, on Dec. 19, 2011, and June 1, 2012, organized by the Vice Ministry of Mines and Energy and supported by other state institutions.

The first hearing determined that the company should pay $62 per MWh — $32 more than what Rio Tinto wants to pay — while the second hearing vetoed any agreement with the electro-intensive multinational.

However, after the June 22 parliamentary coup d’état, appointed President Federico Franco declared himself publicly in favor of Rio Tinto Alcan and accelerated negotiations, proposing to sign a letter of intent or preliminary agreement within three months, ignoring the state of negotiations. In October, the government announced it was hiring US economic consultant Jeffrey Sachs to prepare the letter of intent.

Latinamerica Press consulted economist Luis Brunstein, professor of Economics at Hiram College, in Ohio, United States, and also a panelist at the two public hearings, who believes that in “the historical moment the country was facing, with historically low levels of poverty, with a relatively low public debt, a social inclusion program that was beginning to bear fruit, with high levels of social stability both locally and regionally, Paraguay should not be in any rush to give away its natural wealth without getting anything really advantageous in return . Foreign investments that suit Paraguay are those that stimulate the local supply chain and are profitable without asking for government tax breaks in return.”

Similarly, Mercedes Canese, former deputy minister of Mines and Energy under President Lugo, accused Franco’s government of accepting Rio Tinto Alcan at all cost, without serious studies or the right conditions for the application of environmental regulations.

“He wants to subsidize energy with a price of $45/MWh or even less, [while] arguing that there is no subsidy, when the guaranteed energy cost was $60/MWh in 2012, including transmission costs, and the price will only increase continuously and it is the one paid by the domestic industry... The benefits and return on investment for the State via taxes will be marginal, not even reaching 7 percent of the value of exports according to the Ministry of Industry and Trade, so we cannot speak of national development when one private company is the beneficiary,” Canese told Latinamerica Press.

According to media reports, Franco’s administration will ink a preliminary agreement with Rio Tinto Alcan in the third week of December for the installation — in the same spot where the company will set up its offices — of an industrial park around the plant where at least half of the aluminum produced by Rio Tinto will be made.

Canese added that the “letters of intent or preliminary agreement of industries to come to the industrial park cannot be bargaining chips due to their hypothetical nature; they do not provide any guarantees. For all these reasons, we call on the State authorities to assume their mission according to the interests of the majority of the Paraguayan people, and therefore cease negotiations with Rio Tinto Alcan, instead launching a concerted plan of industrialization with all sectors of the population, so that industry policies can enable dignified work, respect for the environment, care for natural resources and integration with policies of access to rights (health, education, work, decent life),” she said.

Campaign continues

The reasons to oppose Rio Tinto Alcan, according to Canese, are that “the lack of transparency in negotiations violates what our Constitution expresses in Articles 1 and 2, which establishes a government [that is a] ‘representative democracy, participatory and pluralistic, based on the recognition of human dignity,’ and that sovereignty resides in the people, in addition to risking the possibility of a development, since in 20 years no surplus energy will be available for new projects around the plant given the forecasts of energy consumption — as residential and industrial energy consumption increase — and threatens our biodiversity and life by denying the potential environmental impacts.”

Meanwhile, the “No al Golpe de Rio Tinto Alcan” campaign continues collecting signatures.

“At first we wanted to turn in 100,000 signatures to the administration over a one-year campaign, but the government moved forward on the negotiations with Rio Tinto Alcan ... Nevertheless, the campaign remains on track, and a second batch of signatures will be presented at the end of December, to add as many citizen petitioners as possible. Included in this campaign are social, partisan, community, student and citizen organizations and it is intended to inform, discuss and influence the political decision-making on this investment, reject its installation and to stop the negotiation,” said Nathalia Correa, coordinator of the team organizing the campaign’s petition.

“Once the negotiations end, with the delivery of signatures to Parliament we seek a binding call for a referendum, as the Constitution states,” Correa said. “Otherwise, it will be overpowering the rights of citizens. We can confirm that the campaign achieved visibility and citizen awareness of the Rio Tinto Alcan issue,” Correa added. —Latinamerica Press.

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