Will a natural gas project in Panama actually benefit local communities?

Alexandre Andrade Sampaio

City of Colón, November 2016. Credit: Alexandre Andrade Sampaio

There wasn’t a single traffic light. The roads were filled with potholes. Wires hung from every street corner and once-charming buildings, now in ruins, threatened the safety of its residents.

A community leader was showing me downtown Colón. In the midst of such neglect and precarious living standards, I found it hard to believe that Colón — Panama’s second largest city and located in one of its richest provinces — is said to resemble the charismatic city of New Orleans in the United States.

My colleagues from the organization Alianza para la Conservación y el Desarrollo (ACD) tell me that Colón has largely been left to its own devices for decades, except for the Free Trade Zone, the largest free port in the Americas where products from all over the world can be found at affordable prices. In the Free Trade Zone, streets are well paved, traffic is coordinated and security is prioritized. However, unless they have a special permit, residents of Colón are not allowed to shop there. In addition to the Free Trade Zone, Colón is home to the Atlantic terminals of the Panama Canal and the Panama Canal Railway.

From an outsider’s point of view, it is shocking to find so much poverty where so much investment has been made; where commercial infrastructure is meticulously maintained even as Colón residents live in precarious conditions. Unfortunately, private investments and richness have not translated to real benefits for the people of Colón. Instead, these investments highlight a tendency to prioritize private interests at the expense of the city and its inhabitants.

A new investment threatens to repeat this pattern. The US $1.1 billion AES Liquified Natural Gas project supports the construction, operation and maintenance of energy infrastructure for liquified natural gas that will be transported from the coast of the United States to Colón. The International Finance Corporation (IFC), has committed US $150 million to the AES Corporation, the company in charge of implementing the project.

I first found out about this project through my work with the Early Warning System, a joint initiative by International Accountability Project and the Center for International Environmental Law that monitors harmful development projects early in the project cycle. After completing a preliminary analysis of possible human rights impacts, it became clear to me that communities risked experiencing negative impacts. Energy investments of this size and nature inherently carry environmental risks related to the quality of air, water and biodiversity in the project area. Project documents note that animal life and the general environment of the region will be significantly altered.

Trees taken down in neighborhood affected by the project. Credit: Alexandre Andrade Sampaio

In fact, communities in the surrounding area are already witnessing these impacts, as forests near their homes are razed to make way for construction activities. Workers and the population, as a whole, may face fire and explosion hazards resulting from the processing, storage and transporting of natural gas. Marine ecosystems and the surrounding vegetation are also expected to be threatened by the operations of the proposed power plant. For example, for the plant to function, water will need to be drained from the sea and then discharged at high temperatures. Project documents fail to clearly explain tangible improvements in communities’ quality of life, a characteristic that should be central to projects financed by development banks.

When pursuing a project with such comprehensive risks, the minimum that that companies or funders can do is involve the affected population in meaningful consultations, to listen to their concerns and incorporate their recommendations. In this way, they can minimize or possibly avoid negative impacts and seek to fulfill local priorities, which should be the bedrock of all development projects.

However, in a workshop organized by Alianza para la Conservación y el Desarrollo and the International Accountability Project in November 2016, we learned that not a single resident we spoke with had been consulted about the project before the IFC approved financing. Six months later, they were still not made aware of the full impacts. Lack of engagement and limited access to project documents meant many residents learned about the project for the first time during the workshop. Even though, the company has noted that it held two public consultations, one in November 2015 and the other in March 2016, no one I met in Colón knew about these consultations or who was actually consulted. Moreover, the IFC has not shared any supporting documentation proving these consultations were held or if there had been any substantive follow up or outcomes from these consultations.

It is hard to understate the importance of meaningful and transparent consultations. Many of the residents I met had been resettled previously by other development projects, some without compensation. They were very afraid of being resettled again as a result of this project. A community-led report is currently being prepared to record these concerns and document the shortcomings in transparency and consultations organized by the company.

It should be noted that AES Corporation is currently facing questions over their conduct with regard to consultations for a separate project in Panama. A case against the State of Panama before the Inter-American Commission on Human Rights accuses AES Corporation of violating the consultation rights of indigenous peoples who were affected by the construction of the Chan 75 Dam in Bocas del Toro.

My experience analyzing this project and interacting with communities suggests that the IFC has not sufficiently prioritized the well being of those affected. Without timely and transparent consultations, organized around local priorities, it is difficult to believe that the project will ultimately attend the needs of those living in Colón. Communities fear that like previous investments, such as the Free Trade Zone, companies and investors will greatly benefit while those affected will remain in unsafe conditions, now confronting a new threat by a project that impacts their health, environment and households.

Residents hope they may avoid this path by preparing a report to be taken into consideration by those financing the project. We hope this may be an opportunity for sustained and effective dialogue, where communities’ concerns are acknowledged and prioritized in the design and implementation of the project.

Alexandre Andrade Sampaio is the Policy and Programs Coordinator at International Accountability Project based in Brazil.

IAP is a human and environmental rights organization that works with communities, civil society and social movements to change how today’s development is done.