Leaky pipes, stingy aid slow Peru gas project

Echoing sentiments of nearly every villager interviewed for this story, Matias Rios, the mayor of the tiny community of Camisea, says companies don't do enough and local government officials pocket the money meant for development "We were promised schools, houses for teachers, running water," he says. "That was two years ago. Where are they?"

Villagers worry most about their subsistence lifestyle. "Before the companies came, people here fished and hunted," says Mr. Huinchompi. "They brought us development but they also brought contamination and scared away fish and animals we need for food." Myriam Caceres, a nurse in a nearby village, says she sees cases of malnutrition due to lack of fish.

Some companies offered compensation and programs to restock fish populations. But Peter Kostishack of Amazon Alliance, a US-based watchdog group, says concerns over fishing could lead the region's peaceful communities to protest, as happened in 2005 when Machiguenga Indians blocked worker access to certain sites.

Leonardo Cardenas Rio, a farmer living near Camisea, expects protests if villagers' complaints aren't met. "We won't destroy things but we will keep them from coming here," he says.

Despite Camisea's controversy, Hunt Oil spokesperson said in an e-mail the company "is very close to signing a mandate letter" with the bank for the project's next phase.

Bernardo Frydman, an IDB official in Washington, said in a telephone interview last week that the Peru LNG export phase is "important for Peruvians and Americans, given the strategic value of gas for the energy matrix in the region." He said the bank hasn't made a commitment but expects to sign a mandate letter which is "a formal engagement for the bank to analyze the project."

He said an IDB-sponsored technical audit of the pipeline, the final stage of which is due at the end of the year, would not be made a condition in order for the bank to analyze the project. "The result would, however, influence our willingness to formally consider the loan," he says.

Although poor Peruvians living near the project feel they have missed the benefits, most citizens support Camisea, says Manuel Saavedra, president of CPI, a Lima-based polling firm.

"Many advantages really have not been realized for the average citizen, but most people see this is an important investment for job creation and generating resources," he says.

Peru's recently elected president, Alan Garcia, plans to reevaluate royalty schemes in government contracts with Camisea's consortium members. The contracts were signed when gas prices were low and many Peruvians feel the government should increase its share of hydrocarbon operations, as governments in Venezuela and Bolivia have done.

"Many in Congress want Garcia to take another look at the contract so that the interests of the people and those of private investors are more balanced," says Fernando Trigos, a Peruvian aide to the congressman who spearheaded last month's congressional inquiry into the project.

Mr. Garcia in June defeated Ollanta Humala, a populist candidate favoring gas nationalization who received overwhelming support from poor Peruvians in the Camisea project area.

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