Ricardo Carlstein.

I met with the founder of Biofuels SA, an Argentina-based maker of small-scale biodiesel plants, in the posh environs of Buenos Aires. Carlstein sat at his desk and explained how any person can be a fuel plant by using his invention, a technology protocol he calls “high-temperature pressurized” (simply put: a way to cook biofuels at abnormally high temperatures, one that cuts effluence by rendering obsolete the need to “wash” the fuel).

A massive, bearded man in T-shirt, slacks, and New Balance running shoes, he reminded me of my high-school football coach, pointing through charts and graphs, his playbook for debunking South America’s increasingly hyped biofuels revolution. For him, getting out of the climate mess means upending the traditional energy matrix of multinational energy firms. “The key is small-scale, decentralized processing, based on individually owned and operated small-scale plants,” he says. “We have over 200 units in the market, worldwide, proving this strategy works.”

With the precision one would expect of a Princeton-educated aeronautical engineer — who also has an economics degree from University Catholique de Louvain, Brussels — Carlstein told how Big Oil and agribusiness are stomping the biofuels buzz, how the only way to fix the world’s climate mess is to cook up biofuels at home, how nothing less than a “democratic” revolution is called for.

“There is a tendency to surround all things pertaining to renewable energies with a veil of technical difficulty that is simply nonexistent,” he said. “It’s easier to make biodiesel than it is to make vichyssoise.”

Instruments of Instruction

With hardly a dime to his name after a soured business deal left him bankrupt, Carlstein started his company six years ago, “turning an idea and $1,000 [U.S.] into a company invoicing in the low millions of dollars per year but with a backlog of orders.”

Homebrew your own biodiesel with the BIO200-MKV.

Photo: Biofuels S.A.

Carlstein’s company says its reactors — which supposedly produce high-quality biodiesel with half the energy input needed in conventional plants — are capable of churning out 45 to 4,500 tons of biodiesel per year, at a purchase cost of about $4,000 to $210,000. His reactors are designed to be built anywhere, “are meant to be made locally, generating synergy between client and manufacturer,” he says, adding that he has sold units to wanna-be producers in several countries from Argentina to Spain, Costa Rica to Canada.

And his customers are happy, he says, in part because the recipe is so simple. He says folks only need the seed or the oil to get started: “Biodiesel can be made from tree oil crops such as jatropha or the Chinese tallow tree, generating fuel and energy while at the same time we reforest the planet and make use of marginal lands presently not suitable for agriculture.”

Mainstream green groups have put tentative support behind biofuels, lured by climate-friendly traits but scared by the prospect that agribusinesses such as Monsanto will team with companies such as BP and Exxon to plow South America into a global garden for fuel crops that will feed the developed world’s energy addictions.

Carlstein hopes his ideas of keeping diesel production energy efficient and localized will mean fewer industrialized, monoculture plantations; less environmental damage (scientists say stripping down rainforests to plant monoculture fuel plantations can negate any climate benefits); and less social dislocation (indigenous farmers in South America commonly complain of being beaten off land by large-scale producers, both literally and figuratively).

OK, so the biofuels revolution has a dark side, especially if Big Oil and Big Ag drive it. But will the idea of “every person an Exxon” take hold? Can the world get its head around something that seems so simple?

A Long Way to Go

Certainly the concept has yet to get traction here in South America, where biofuel is fast becoming a buzzword in the continent’s two agricultural powerhouses. Brazil is the world’s ethanol king, producing 16.5 billion liters of sugarcane-based ethanol last year. And Argentina, the world’s biggest soybean exporter, is playing catch-up with a new law offering tax credits to registered biodiesel makers, and requiring a 5 percent biofuels mixture at the pump. Meanwhile, big names like George Soros and Archer Daniels Midland are steering millions to biofuels projects on the continent.

All that industrial momentum spells a hard row to hoe for Carlstein’s grassroots talk. He says the combination of corporate players, the venture capitalists who back them, and the regulators who oversee them makes a tough match. “No one in power relishes the idea of greater freedom for the people,” he says. “Bureaucrats feel their power to regulate disappearing, and financiers find no market to skim.”

Sadly, he says, even academia misses a lot of technical points. Not to mention the average Joe, who “needs to hear something in the media before they can believe it.”

But he’s trying to convert them.

After three hours of talking, he walked me to the door and pointed out two shiny new Volkswagens that he runs off the fuel he makes.

I left his house with a headache and many questions. Can the biofuels revolution ever be more than greenwashing if agribusiness and energy companies take control? Will monoculture plantations and massive, million-dollar biofuel factories help poor farmers, and protect biodiversity and soil quality? Will corporations and politicians continue with fossil-fuel strategies, concentrating energy production and relying on wasteful distribution networks? Or will fuel production become a democratized, down-home kind of thing?

Nothing is clear, but Carlstein is bent on pushing his answers, to get fuel production out of corporate hands and into the backyard and barns of the little guy. The reason: time is running out, as the world faces a climate crisis.

As I walked to the train station, something Carlstein said kept rattling in my brain: “Remember, yesterday used to be tomorrow.”

Bean there, sprayed that.

Photo: iStockphoto

Monsanto says that much of the meal crossing the Atlantic to feed Europe’s cows and pigs contains traces of its genetically modified Roundup Ready Soybeans. Known as RR, the soybeans are tweaked to withstand the company’s Roundup herbicide. This resistance lets farmers blanket entire fields with the chemical mixture rather than surgically applying it to kill off weeds.

Monsanto holds a patent for the seed in Europe, but not in Argentina, where a dispute over technology rights keeps the U.S.-based agri-giant from collecting technology fees on RR seed sales. By using its European patent to disrupt Argentina’s lucrative soy-meal trade with Europe, the company hopes to strong-arm Argentine farmers into paying up.

Meanwhile, the tricky lawyering is shedding light on what critics say is a dubious corporate strategy to make Argentina a mega-lab for GM soybeans, one that’s already spawned deep environmental and economic problems far off the radar screen of the international media.

The Patent Play

Walking into the Social Forum for the Resistance Against Industrialized Agriculture in downtown Buenos Aires last month, I wasn’t sure what to expect. Instead of suits and ties, I found lots of facial hair and rumpled clothes — technology wonks, students, professors, scientists, and landless peasant farmers gathered to protest the sins of large-scale industrial agriculture. One middle-aged water-quality activist wore a papier-mâché spigot on his head. An interpretive artist twirled a rubber hose and let out angry groans. Though less legible than the speakers’ PowerPoints, her message seemed thematically congruent: the soy is hitting the fan in Argentina — and Monsanto’s bad behavior is to blame.

I got a café cortado and searched out Adolfo Boy, an agronomist with the Grupo de Reflexion Rural, a technology watchdog group. “Ask yourself why Monsanto, with all its lawyers, never got a patent for gene RR in Argentina,” he said, thumbing through a binder exploding with dated newspaper clips.

He rewound to the 1990s, when the firm brought its new genetically tweaked seeds to Argentina. His theory — shared by many here — is that Monsanto intentionally left RR seeds in the public domain so Argentine farmers would use them, spread them, create new plant varieties, and, most important, lock themselves into buying the pricey Roundup herbicide.

Argentina first approved RR seeds in 1996, and Monsanto tried to build its royalty fees into the price, but a thriving black market kept the seed prices too low for the company to recoup the fees. Meanwhile, up in the land of strong patent enforcement, U.S. farmers were paying a $6.50 patent-based technology fee every time they bought a 50-pound bag of RR seed. Around that time, seeds that sold for $9 a bag in Argentina were going for $21.50 in the United States. A report issued at the time by the U.S. government’s General Accounting Office blamed the price difference on lack of property-rights enforcement in Argentina. The American Soybean Association asked Monsanto to refund more than $300 million to U.S. farmers. The company refused.

As Argentina struggled to recover from a devastating economic collapse that hit in 2001, the illegal trade in RR seeds grew. By 2005, according to one estimate, only 20 percent of Argentina’s $1 billion annual soybean seed trade was legal. Monsanto had had enough. It stopped direct seed sales in 2003, though Argentine companies continued to sell seeds containing RR genes and paid some licensing fees.

Having missed out on the chance to collect fees at the point of sale, Monsanto lawyers in 2004 said the company would charge a $1-per-ton export fee on Argentine soy and soy derivatives shipped abroad (and $2.50 per ton between 2006 and 2011). Argentina’s farmers and government officials refused.

Monsanto has denied that it made a strategic decision not to pursue patent rights in Argentina. It didn’t respond to requests for comment for this story, but in an open letter published in an Argentine paper, El Clarin, Monsanto rebuffed the public-domain theory, claiming the company tried to get a patent but was blocked by legalities.

Evidence suggests otherwise: as farmers were getting to know its RR seeds, Monsanto did not object — as Argentine law allows it to do — when farmers registered some 200 plant varieties containing Monsanto’s RR technology with the National Seed Institute, according to a report by the French newspaper Le Monde Diplomatic. Had Monsanto been truly interested in exercising legal rights over RR seed, the theory goes, it would have made use of the law, stopping others from incorporating it in other varieties.

Monocultural a Manos

What’s clearer than Monsanto’s patent strategy is the astounding rate at which the RR soybean took hold, and the repercussions it has wrought.

Since RR was approved for use here in 1996, Argentine jungles and savannas have been cleared to make room for more than 34 million acres of the crop. The rate at which forests in northern Argentina are being turned into soy plantations is three to six times higher than the world average, and the country now ranks second only to the United States as the biggest producer of GM crops in the world.

As GM operations push out traditional farming here, civil and environmental groups are crying foul, making Argentina a case study for the technology’s unintended economic, social, and environmental consequences. Agronomists say the herbicide-resistant soybean is leading to serious problems, including deforestation, soil degradation, pesticide pollution, and genetic contamination.

Soybean fields forever.

Photo: iStockphoto

“Argentina is placing its future economy and food security in danger by choosing to ignore the ecological downside of such heavy reliance on a no-till, herbicide-based system,” said Charles Benbrook, an agronomist and consultant who worked for the Carter administration and conducted a study in 2005 on GM soy’s impacts in Argentina. “They are going to run into serious problems.”

GM cheerleaders say the crops enhance food security, feeding the hungry masses with higher yield power. But statistics fall crossways. Walter Pengue of the University of Buenos Aires and Miguel Altieri of the University of California-Berkeley report that wheat, dairy, and fruit production has dropped significantly in Argentina as farmland has turned to soybean monoculture.

Monsanto claims RR soybeans decrease the need for repeated herbicide applications. But some weeds build resistance to herbicides, and when they do, different herbicides are needed in the mix. Pengue and Altieri report that in the Argentinean pampas, eight species of weeds exhibit resistance to glyphosate, the active ingredient in Roundup. The fear: the more plants become resistant, the more farmers turn to different pesticides, further complicating the soup of poisons being spread through the country’s fields.

There are also concerns that all this genetic tinkering is causing GM soy to have lower protein levels than regular varieties. A study published in the Journal of Agricultural and Food Chemistry in 2004 analyzed soybeans and soybean meal from the world’s top producers: Argentina, Brazil, China, India, and the U.S. Those from Argentina, which Benbrook says at the time were 98 percent Roundup Ready, had the lowest crude protein content. Those from China, which grew no GM soy at the time, had the highest. “This points directly to the possibility that RR has resulted in significant decline in protein level,” Benbrook said, adding that it mirrors concerns that protein levels in soy and corn in the United States are decreasing.

Meanwhile, experts say that GM crops may be playing a role in rising social dislocation. In 1998 there were 422,000 producers or local farmers in Argentina; by 2002, that number had dropped by 25 percent to 318,000.

And there are health worries stemming from the widespread use of Roundup, which has reportedly been sprayed aerially and drifted onto non-RR crops and into communities. Dario Gianfelici, a general physician from the small town of Cerrito in a soy farming region, says he has seen medical problems in farmhands that stem from herbicide exposure. “I don’t have the money or the manpower to [raise awareness] like I would like to do,” he said in a telephone interview, “but I continue to talk about this.”

Attention, Class

With people like Gianfelici and Boy sounding alarms, Monsanto is scrambling to bolster its public image. To create a new generation of customers friendly to the idea of consuming GM products, it has joined the likes of Bayer S.A. and Dow AgroSciences Argentina S.A. in funding ArgenBio, a trade association that offers teacher workshops and downloadable educational materials for use in Argentine schools. Gabriela Levitus, ArgenBio’s director, says the group’s purpose is “to divulge information about biotechnology.”

One woman’s information is another woman’s propaganda. Said Silvie Sieb, a grade-school teacher from the province of Entre Rios who attended one of the workshops, “It’s pure show business so they can turn kids into customers.”

Sieb said the presenters explained how “inofensivo” the RR soybeans and Roundup herbicide are. But, she said, “They did not say that it is destroying our soil and reducing biological and productive diversity with a monoculture cultivation that serves to feed the pigs of Europe and Asia, and next the cars of Europe with soy-based biodiesel.”

Meanwhile, over in Europe, a body of the European Union released a nonbinding decision in August saying it disagrees with Monsanto’s claims that soy meal derived from genetically modified seeds infringes the company’s patents. But Monsanto’s lawyers are still beavering away, undeterred.

Activists hoped Chile’s new
president, Michelle Bachelet,
would stop the mine.

Photo: Queen/ WireImage.com.

The far-reaching cyber-alert describes a messy international situation. Indigenous farmers in the mountainous Andean border between Argentina and Chile, it says, are fighting an international company that plans to mine for gold beneath massive glaciers. Doing so, the letter continues, will contaminate two key rivers fed by the glaciers, ruin water systems for the area’s impoverished people, and line the pockets of yet another foreign corporate invader. Oh, and the mining company has ties to the elder George Bush.

The message’s rounds have been so extensive that hoax-busting websites investigated, and they now report what folks in South America have long known: Pascua-Lama is very real. The proposed open-pit mine would sit at an elevation of about 15,000 feet, yielding an estimated 18 million ounces of gold and 685 million ounces of silver over 20 years. The brainchild of Canada’s Barrick Gold, it would be the world’s first binational mine, and is slated to begin operations in 2009.

Though the email played loose with some facts, it was enough on target to prick Barrick into crafting a point-by-point rebuttal — choosing to clarify, for instance, that former U.S. President Bush served in an “honorary capacity as an adviser to Barrick’s international advisory board for two years in the mid-1990s” and “was neither a director nor officer of the company.”

But other than causing a PR headache, the e-protest has failed to make real-space dents. Now that the government of Chilean President Michelle Bachelet has given Pascua-Lama the OK — rejecting 44 of 46 complaints filed by local opponents after Barrick’s environmental impact study was initially approved in February — the company simply awaits a nod from Argentina. That country, which would host one quarter of the mine, has left the decision in the hands of provincial officials who are said to favor the deal.

While opposition to Pascua-Lama continues in the form of lawsuits filed by indigenous-rights groups, last week’s decision drained many green hopes. It was, however, a feather in the cap of Barrick’s public-relations team.

For well over a year, Barrick has worked to break the ice with locals — who it says wrongly believe the mine will hurt water supplies — and to dispel the concerns of activists around the world.

It’s just an “ice reservoir” — what’s
the big deal?

Photo: Eduardo Ubal, courtesy of OLCA.

Vince Borg, the company’s vice president for corporate communications, declined to comment for Grist. However, he has worked through other media channels to downplay negative portrayals of the project — stressing, for example, that glaciologists declared that the ice fields in question were not glaciers, but “ice reservoirs.” Barrick has also worked to counter claims that the entire lode is located under ice. “This is simply not the case,” says the company’s rebuttal to the chain mail. “[Ninety-five percent] of the orebody is not under glaciers/ice fields. Protection of the remaining 5 percent is a key condition of the Chilean authorities’ approval of the project.”

Ana Lya Uriarte, director of the Chilean environmental commission that gave the approval, assured local media last week that the glaciers “would not be removed, transferred, or interfered with, much less destroyed.” And Barrick Chile Director Jose Antonio Urrutia issued a statement saying that “as with all of its other operations around the world, in Chile Barrick will maintain its philosophy of responsible mining.”

But those promises are worth a bucket of melting ice to Lucio Cuenca of the Chile-based Latin American Observatory of Environmental Conflicts. “People don’t have trust in the government, and the [government's announcement] is rhetorical, saying only that there will be no harm done to the glacier,” Cuenca says. “But the deposits are under or near the glaciers, so it is very hard to believe they are not going to destroy [them].” Another major concern for activists is the plan to use a common mining technique involving cyanide, which they worry could contaminate local river systems.

For now, opposition groups are pinning their remaining hopes on Argentine authorities. But Raúl Montenegro, president of the Foundation for the Defense of the Environment in Cordoba, Argentina, says local mining officials “are conditioned by political power” and have already made up their minds. He says the technical capacity of Argentina’s regulatory machine is lower than Chile’s, and accuses Barrick of giving Argentine officials an inferior environmental impact study. “There were two reports filed, and two different levels of information,” he says. “It was much deeper for [the] Chilean side.”

The controversial lode lies about 400
miles north of Santiago.

What’s more, Montenegro says, Argentina’s federal mining agency is legally bound to involve itself in Barrick’s request. He says leaving the decision to lower-level officials is a way of giving tacit approval while keeping hands clean in the capital, Buenos Aires. San Juan, the province in question, approved a nearby mine also run by Barrick in 2003 — an ominous bellwether, Montenegro says.

Ana Folgar of Argentina’s Mining Secretariat confirmed that the decision has been placed in the hands of officials in San Juan, and referred Grist to them for comment. Those officials did not respond to interview requests.

It’s the Economy, Estupido

Understandably, Barrick has played up the economic benefits for locals, promising 5,500 new jobs during the construction stage and 1,660 when the mine is up and running. In addition, the company estimates that each of those jobs will lead to the indirect creation of 2.5 more jobs in the local economy. For any developing country, that kind of promise makes environmental decisions even more complicated.

Residents of Vallenar, Chile, protest
plans for the Pascua Lama mine.

Photo: Natanael Vivanco

Critics say Pascua-Lama is another example of how permissive national laws, lax environmental enforcement, cheap labor, and peaking ore prices are prompting a modern-day gold rush in South America, home to some of the world’s most sensitive ecosystems. And as indigenous groups, farmers, and greens butt heads with multinational mining interests and royalty-hungry governments in Argentina, Chile, and Peru, the money machine keeps turning.

A Canada-based consultancy, Metals Economics Group, reports that in 2005, nearly a quarter of worldwide mining exploration budgets — which totaled $4.89 billion — found their way to Latin America, making the region “the most popular destination for exploration.” Victor Di Meglio, director of the Argentine Mining Chamber, a trade group, told reporters last year that he expects investments of $4.5 billion in Argentina alone over the next five to six years. Chilean officials reportedly expect mining investments to total $10 billion by 2008, and Peru’s prospects aren’t far off that mark, according to reports.

Those figures give the shakes to activists who say unemployment, poverty, and corrupt governments spell an all but open road for potential environmental abuse. And they are bound and determined to keep Pascua-Lama from being added to the list.

According to Mines and Communities — an international coalition created by three British-based organizations — the Pascua-Lama fight isn’t over. Legal actions are under way to nullify the environmental-impact approval granted by Chile in February — and even to challenge the legitimacy of the treaty between Chile and Argentina that laid the foundations for this project in the first place.

So What Can You Do?

Those involved in the battle over Pascua-Lama say you shouldn’t count on email saving the day. “This is a local fight,” says Lucio Cuenca of the Latin American Observatory of Environmental Conflicts. “The awareness has been welcome, but I am afraid it doesn’t do much on the local level.”

However, the organizations involved do need support, say activists, including financial donations. To learn more about the situation, visit Mining Watch Canada.

A logger drives his freshly cut mahogany logs upriver toward Ivochote, a scratchy, low-slung jungle town in Peru’s eastern Amazon. Hoping to convert his illegal revenues into some weekend lovin’, he takes maca, a traditional Peruvian libido enhancer. He heads to a nearby brothel, but its employees are too busy protesting pollution caused by a foreign mining company to entertain him. Frustrated and ready for action of any kind, he gives up and joins an angry crowd marching to Lima to oppose the 2006 U.S.-Peru Trade Promotion Agreement, signed in April.

Far-fetched, maybe — but mahogany, maca, mining, and frustrated movements are all part of this controversial agreement, which lawmakers in Washington and Lima are preparing to ratify in coming weeks.

Bush with trade buddies in late 2005:
Presidents Alejandro Toledo of Peru and
Vincente Fox of Mexico, and former
Canadian Prime Minister Paul Martin.

Photo: Whitehouse.gov/Eric Draper.

What are the environmental impacts of the Peruvian free-trade agreement? Besides ramping up international trade and investment — which can directly boost environmental damage — critics say the deal peels away social and environmental safeguards, expands corporate power, and endangers biodiversity.

It’s the same chorus of criticism that surrounded NAFTA and CAFTA. Washington’s plan for taking those models into South America was the proposed (and politically stagnant) Free Trade Area of the Americas, which attracted public ire in 2001 and has yet to be resuscitated. Rather than deal with a unified front of nations, U.S. trade negotiators have recently pushed to ink separate agreements with Peru, Ecuador, and Colombia.

Activists are concerned about all of the deals, but in Peru the stakes are enormous. When it comes to trade worries, says Margrete Strand, a Sierra Club official in Washington, D.C., “environmentalists are unified that Peru is one of the most important countries.”

Like Ecuador — a poor country dependent on its exploitable natural resources — Peru has become a friend to extractive industries over the years. High oil and ore prices mean governments are willing to put their countries on the selling block, and their land and people suffer for it. Critics say U.S. trade policy should help ensure that resource extraction makes as little ecological footprint as possible. The new agreement, they say, does not require parties to respect international environmental accords.

Case in point: Swietenia macrophylla, or big-leaf mahogany. Though it’s covered by the Convention on International Trade in Endangered Species — a voluntary species-protection treaty between 169 governments, including the U.S. and Peru — activists say Peruvian officials look the other way, granting logging permits without a baseline understanding of the mahogany population and failing to enforce regulations. The secretariat of CITES has criticized Peru for failing to live up to its promises. Meanwhile, the Natural Resources Defense Council and Defenders of Wildlife estimate that most of Peru’s big-leaf mahogany exports are logged illegally, and that 80 percent of that tainted harvest winds up in the United States.

A copper mine in Tintaya, Peru.

Photo: Oxfam America.

The failure of the Peruvian free-trade agreement to force its parties to adhere to CITES or other multinational environmental accords irks greens and some lawmakers, including Rep. Lloyd Doggett (D-Texas). He has taken trade representatives to task in congressional hearings, a fact cheered by mainstream greens who say good trade law should, at the least, require adherence to environmental standards. Even better, they say, it should help build technical expertise in poor nations, so something like a mahogany count would be feasible.

A second concern is intellectual-property rights, the legal privilege granted over the products of human brain power. The new agreement is less lenient in this area — but to the benefit of the U.S., critics say. That’s where our imaginary logger’s (very real) aphrodisiac enters the picture. The plant species known as maca, Lepidum meyenii, is a member of the radish family, and a poster child for biopiracy. It grows in the harsh and lonely altitudes of the Andes and is said to boost sex drive — a fact our logger might have learned from his native Quechua ancestors. In 2001, this Andean treasure became a U.S. patent belonging to PureWorld Botanicals, Inc., a company said to have “unlocked maca’s chemical secrets.”

The Peruvian Coalition Against Biopiracy has called for the World Intellectual Property Organization to look into the matter, claiming the company violated international norms covering sustainable use of biodiversity. Marcos A. Orellana of the Washington, D.C.-based Center for International Environmental Law says the Convention on Biological Diversity — an international treaty adopted in 1992 at the Rio Earth Summit — ensures “the rights of indigenous communities to their traditional knowledge in areas such as medicines and seeds.” It also mandates that they share the economic payoffs, which could steer profits from products like maca back into biodiversity programs.

The third major concern might be the most troubling. Were our logger’s imaginary brothel town anything like Cajamarca, home to Latin America’s largest gold mine, its residents would be smart to fear the aftershocks of the new trade agreement. That’s because of a provision embedded within its pages — an under-the-radar tool of U.S. trade negotiators that critics say lets foreign investors attack legitimate public-health and environmental protections.

Invested Interest

It’s known as the investor-state provision. And for a glimpse of what could happen if the agreement goes through, we need to rewind.

Life without lemons? A
protest poster warns of
mining’s effects on local
farmers.

Photo: Earthworks.

For years, shoddy enforcement of Peru’s already-lax environmental laws, combined with accidents, has meant big messes — and increasing outrage on the part of residents. In 2004, Cajamarca’s citizens protested plans by U.S.-based Newmont Mining to open another mine on Cerro Quilish, a nearby mountain. They said it would pollute a major watershed that feeds Cajamarca and a nearby farming valley, and took to the streets, fighting mad. Eventually Newmont, perhaps sensing that public anger would not dissipate, backed down.

Had the trade agreement been in place, says Miguel Palacin of CONACAMI — a network of Peruvian communities that lobbies for stronger mining laws — it would have put the kibosh on that kind of civil action. Investor-state provisions help protect corporations by letting them sue countries — in secret, international arbitration — for losses in anticipated revenues. In theory, Newmont could have sued the Peruvian government for untold amounts of cash for having had to abandon its plans.

In a poor country like Peru, says Palacin, such fines — or even the threat of them — could scare the government away from passing strong public-health or environmental laws that could jeopardize corporate profits. “Unbeknownst to many people, buried inside these kinds of trade agreements is a new and dramatic legal restriction on governments’ ability to function,” agrees John Echeverria, director of Georgetown University’s Environmental Law and Policy Institute. (Neither the U.S. Trade Representative nor representatives of the Peruvian government responded to interview requests.)

Like snowballs rolling downhill, the investor-state and intellectual-property rights provisions have swelled as they moved south from NAFTA, Echeverria and other trade-law experts say. Expanded thresholds in one deal become new baselines for negotiating future deals. Mainstream greens in Washington point out, for instance, that Peru’s investor-state provision is more corporate-friendly than its predecessors. A March letter [PDF] to Congress from groups including Friends of the Earth, Earthjustice, and the Sierra Club said the agreement provides foreign investors even greater rights to challenge environmental laws than does highly controversial CAFTA, approved last year.

“CAFTA gave investors the right to file suit against alleged breaches of natural resources contracts,” the letter reads. “The U.S.-Peru FTA expands these rights by broadly defining natural resources contracts to include every aspect of the extractive, productive, and marketing processes. These new rights would enable multinational corporations to attack legitimate attempts by communities to protect their health and environment even if their activities are only tangentially related to natural resource extraction.”

Critics also say the agreement makes it harder to get companies to avoid or account for mistakes, and Palacin says the deal will solidify a status quo that prefers corporate to community interests. Instead, he says, the deal should hold companies from the developed world to the more advanced environmental standards of their home countries.

A Risky Road

With half of Peru’s people living below the poverty line, and nearly 20 percent in extreme poverty, few Peruvians have the time to worry about such issues. Even if they do, it’s hard to spot the facts in the current cloud of confusion. “I don’t know it,” a weathered Machiguenga Indian near the jungle village of Camisea said recently, when asked about the deal. “They talk about it, but nobody tells me what it is.” His sentiment was echoed by others in the community.

But things may be changing. From Ecuador to Peru to Bolivia, indigenous groups that have historically been discriminated against are becoming more sophisticated and organized. They are rising up against traditional oligarchies and corporate thievery. And in Peru, the new trade agreement is emerging as a political condensation point, one that lassos disparate groups under the same cause. In fact, CONACAMI is organizing a march on the capital later this month to ask that the deal be put to a referendum.

Their proposal is backed by Ollanta Humala, a retired military colonel jockeying to become Peru’s next president in runoff elections slated for early June. Like Venezuelan President Hugo Chavez, who opposes trade links with the U.S. (except for his country’s oil sales), Humala is against the trade deal. Meanwhile, his center-left opponent, former Peruvian President Alan Garcia, is warmer to it, but reportedly favors renegotiation. At the grassroots level, the anti-trade agreement front — which has united labor unions, agriculture groups, students, small businesses, and transportation unions — feels Humala is the candidate most on their side, says Palacin. But he stresses that the former military colonel is a political unknown whose party lacks history and organization.

And what if the Peruvian Congress doesn’t listen to the people it represents? Will Peruvians shut down highways or pipelines like poor protestors have recently in neighboring Ecuador, where that Congress is considering a similar trade agreement with Washington? “Peruvians aren’t like Ecuadorians,” says a 56-year-old cab driver in Lima. “We don’t make as many problems when we don’t like something. But at some point the people will be tired enough to do something. Maybe this is the point.”

If there is an uprising, Palacin admits there may be a government crackdown just as in Ecuador, where officials ordered troops to knock back protestors. “There is a risk for us,” he says. “But we accept it. We don’t have any other roads to take.”

The boat ride down southeastern Peru’s Urubamba River cuts through mountains and sweltering jungle, passing wooden shacks of colonos — mixed race and grindingly poor Peruvians lured to the jungle with promises of free land — and nativos, tribes recently brought into contact with the modern world. The area is a biological gold mine, home to endemic and rare species, and some of the world’s last uncontacted humans. It’s also home to an asset that may become the Amazonian rainforest’s biggest threat: the mamma jamma of South America’s natural-gas lodes.

The Camisea pipeline.

Big Oil has been pushing its pipelines into the Amazon rainforest frontier since the 1960s. Nowadays, prompted by high oil prices and militarization of the Middle East’s fossil fuels, the eastern slope of the Andes and the Amazonian jungle lowlands are being stripped, sawed, plowed, and piped into a global barrel of politically cheap fossil fuels. From Colombia to Ecuador, Brazil to Peru, themes are common: sloppy extractive industries tainting key ecosystems, polluting water, killing plants and animals, and causing strange human illnesses. The Camisea Natural Gas Project is the king of all extraction projects in this region, a billion-dollar operation that taps jungle gas here in the Lower Urubamba, then pipes it over the Andes and down to the Peruvian coast.

In the tiny village of Camisea, a community of Machiguenga Indians downriver from a processing plant, nude children play in the river water. Mangy dogs with floppy teats sniff for food as half-starved chickens peck at dust for invisible morsels. Past a group of shacks where women sit weaving traditional cloth and boiling yucca, Matias Rios, Camisea’s chief, tells me how barges and helicopters arrived in 2001, driving away fish and wildlife, causing malnutrition. “We have almost nothing to eat,” he says. “We did not need chickens five years ago because we could fish and hunt. Now we have to bring them here by boat.”

Indigenous communities are at risk.

Photo: © Amazon Watch.

He calls over his 5-year-old son and another boy, whose backs and chests are covered with tiny lesions, which Rios and his wife say are caused by bathing in contaminated water. “The companies have sent representatives here to look at the problem, but they always say the water is clean,” he says.

Supported by the Inter-American Development Bank (IDB) — which is backed by the U.S., among other nations — and part-owned by U.S.-based Hunt Oil, the Camisea project promises cheap gas for Lima, Peru’s capital. It also promises future tax revenues when natural-gas products are eventually sold to Mexico and the U.S.

But big promises have turned into big problems: The pipeline has ruptured five times in the first 18 months of its operation. The country’s prime minister, who reportedly has ties to Hunt Oil, has blamed at least one failure on local saboteurs. And now concerned residents, activists, and workers are trying to shed light on the project before things get even worse.

Time for a Breakdown

Camisea is “a tale of political scandal, technical flaws, and environmental degradation,” says Maria Ramos of Amazon Watch, a California-based watchdog group that has worked alongside the World Wildlife Fund, Oxfam, and international civic organizations to draw attention to the project’s failings.

Pipeline route.

In 2000, the Peruvian government gave a petroleum consortium including Texas-based Hunt Oil and Argentina’s Pluspetrol the right to mine the area’s gas reserves. It also handed another consortium, Transportadora de Gas del Peru (TGP) — formed in part by Pluspetrol and Hunt — the right to build two pipelines to carry natural gas and natural-gas liquids (NGL) out of the deep jungle. Together they help form Camisea, a $1.6 billion Herculean straw for sucking out an estimated 11 trillion cubic feet of natural gas.

Getting it to North American markets will require another link in the chain: another phase of Camisea is the construction of a 4.4 million ton per year liquefaction plant on Peru’s southern coast, a project estimated to cost $2.1 billion. Hunt Oil, the lead shareholder for the facility, has completed “front-end engineering and design,” according to the company’s website, and the Camisea consortium is asking for $400 million in backing from the IDB for the project. The Washington Post reported last week that Hunt is also seeking IDB help in lining up an additional $400 million in loans from private commercial banks.

The project has been an activist howler from the get-go. The Overseas Private Investment Corporation and Export-Import Bank of the U.S. rejected Camisea financing for environmental reasons, and financial services company Citigroup withdrew under pressure from activists. But the Inter-American Bank gave Camisea the OK, arguing that its endorsement would lend credibility and policing power to the embattled project. In September 2003, the bank coughed up $135 million, committing itself to continuous monitoring of the companies and tacking on loan conditions that demanded, among other things, heightened environmental and social controls and evaluations.

A plant among plants.

Photo: Amazon Watch.

After Camisea went online in 2004, things quickly went south. In late December, just five months into operation, a 14-inch section of the NGL pipe ruptured, dumping an estimated 183 cubic meters of liquid, which was cleaned up by the companies. Eight months later, in August 2005, there was another rupture without a substantial spill. Two more failures with spills occurred in September and November of that year.

Under fire, TGP promised to invest up to $30 million to fix the problems. But Camisea was already topping the Amazonian enemy list. And while many of the same companies that are in the Camisea consortium proceed with plans to tap into some 2.5 million acres of nearby jungle, questions mount: Why did a brand-new pipeline have four breaks in 15 months? Where was the IDB, which bought into the project to keep it on the up and up? Where was the independent audit it had required as part of the loan? And were problems going to be fixed before future projects got rolling?

Fitting the Pieces Together

During the rainy season, the Lower Urubamba is Peru’s most dangerous region, prone to rockfalls and mudslides that turn chunks of mountainside into brown milkshake. The consortium and the IDB have cited the soil’s instability as the main reason for the failures. But in February, E-Tech, a California-based nonprofit technical-assistance organization, issued a stinging independent audit of the pipeline — one that caught attention from the press, and will likely form part of a recently announced safety inspection being planned by the Peruvian government.

The key to E-Tech’s report was Carlos Salazar, a welder who’d worked on the pipeline as a supervisor for Techint, an Argentine company. He’d seen improprieties. He wanted to talk.

“He said, ‘I want to be part of an independent audit,’” says Bill Powers, an engineer with E-Tech. Salazar — whom Powers says has since gotten anonymous threats — painted a picture of slapdash construction, hurried by company fears of contractual late fees that could have hit $90 million. Delivered to IDB in February, the report concluded that the pipeline was weak and could rupture at six different places.

The report packed hard allegations: improperly certified welders; fast promotions from welder’s helper to welder; improperly welded pipe ends; risky pipe jointing used to adapt to difficult terrain rather than searches for more stable routes. One claim — that 30 to 40 percent of the pipe materials were left over from other South American projects and of substandard quality — hit so hard, Powers said TGP threatened him with a lawsuit. That threat dissolved, however, when on March 4, for a fifth time in now 18 months, the pipeline ruptured again, in a place E-Tech had flagged as vulnerable. The ensuing explosion burned a woman and her child.

That’s when the government of Peru jumped, promising to fund an independent audit — an inspection of the pipeline’s safety. But it reversed that decision days later, announcing that TGP would instead give funds for that purpose to Osinerg, the Peruvian government agency responsible for overseeing the pipeline. Alfredo Dammert, an Osinerg official, stressed to reporters that TGP would have no hand in the audit. Meanwhile, a Peruvian congressional committee has launched an inquiry, and plans to call construction contractors to testify next month.

You Can’t Bank On It

Powers, an engineer with a degree from Duke University, says one rupture on a new pipe is rare, and five is unheard of. The IDB should have been watching, he says, and should now step up and demand real audits and fixes before signing on to other projects in the region. “But the bank is behaving more like a member of the consortium rather than the set of eyes they claimed they would be,” says Powers.

Wrong-of-way through the Andean foothills.

Photo: Terra Erosion Control.

The IDB, which has poured billions of dollars into Latin American extractive-industry projects in recent years, stands behind its work. The bank’s environmental and social expert, Robert Montgomery, says it has done its job. “Step way back to the start and look at it now in terms of social and environmental standards,” he says. “Even critics say IDB made a big difference.”

Montgomery said the bank monitors Camisea on an ongoing basis, using “external, independent environmental and social consultants in the field on a daily basis.” Echoing claims by the consortium members, Montgomery says the ruptures “in several cases” were generally due to shifting soil putting lateral pressure on the pipes. “The E-Tech report makes a series of allegations, some quite serious, but does not provide any specific information or documentation to really support these allegations,” he says, adding that “the principal reasons for spill event are generally known, and do not necessarily correlate to the allegations made in the report. Regardless, the IDB, the government of Peru, and TGP are clearly interested in resolving the spill issues and are open to any input.”

As for the breaks: “People ask me if the breaks are normal, but it’s hard to say what is normal for this, because there aren’t many projects that take natural-gas liquids from the jungle and go over the Andes with it,” says Montgomery. “You can’t build that kind of pipeline and not have some unanticipated issues, but the number of events in this time period was not expected.” He says IDB had required the consortium companies to perform an audit as part of the project approval by the bank, but after the last spill decided “to enhance the process to help alleviate worries in communities.”

The IDB did release an environmental and social impact report two years after Camisea broke ground. But Amazon Watch says it was “woefully inadequate, calling into question whether its real purpose was to provide cover for the project rather than seriously engage with the urgent issues facing the Lower Urubamba and its peoples.” The group says only 21 of the report’s 138 pages actually dealt with environmental and social impacts.

Tribe This On for Size

Ecological worries aren’t the only factor raising alarm. Earlier this year, the Peruvian government’s Office of the People’s Defender, the public ombudsman, criticized Camisea for violating indigenous rights. The report cited early Peruvian government studies saying that technically prohibited contact between workers and some native communities has caused startling upticks in cases of diarrhea, syphilis, and other illnesses.

The study said one isolated tribe, the Nanti, has been hit so hard with foreign germs and infectious disease that only one in four children reach adolescence. Despite the fact that contact is prohibited by the Camisea project and by the International Labor Convention 169, critics say oil companies still seek contact with tribes living atop lands they want to use.

Aliya Ryan of the Peruvian nonprofit Shinai, an advocacy group for indigenous causes, says she and her colleagues know of one tribe that was contacted by a Dominican Catholic Mission arriving in helicopters owned by Pluspetrol. The missionaries “went to give vaccinations, but they baptized people and gave them Christian names,” she said. “They came in a helicopter, visited for a short time, and then left. They could have brought illnesses, but [because there are no communication links] there is no way of knowing other than traveling there.” Pluspetrol did not respond to an interview request, and a Hunt Oil representative in Houston referred questions about the pipeline to TGP.

So where do Peru’s top politicians stand on the mess? Critics of Prime Minister Pedro Pablo Kuczynski say he is an apologist for Big Oil. Last month, after Kuczynski suggested that the fifth pipe failure was likely sabotage by locals, the newspaper La Republica criticized him, noting he had good reason to dance an industry beat. Citing testimony given before the Peruvian Congress’ oversight committee, the article said Kuczynski had once served as a financial adviser to Ray Hunt, Hunt Oil CEO. (Hunt is a Bush presidential campaign contributor and board member of Halliburton.)

Alcides Huinchompi of the Machiguenga Council of the Urubamba River — which represents the region’s indigenous communities — says talk of sabotage is simply not true. “We want justice, but we have been fighting for it through dialogue, not violence,” he says. “But if we are pushed, there is a point that we will defend ourselves and what is ours.”

They may get some help. Col. Ollanta Humala, the popular front-runner in a presidential runoff election set for May, has criticized the pipeline project, and, more broadly, called for boosting taxes and royalties on foreign companies operating in Peru.

As the IDB and Peruvian government appear to be pressing for solid audits, Hunt Oil and others are still counting on bank funding for the planned liquefaction plant and associated facilities. In April, however, Luis Alberto Moreno, IDB president, told The Financial Times the environmental concerns were too great to proceed before a study was completed. “We are not even close to approving the loan,” he said. “Without the audit we can’t go to the second phase.”

Soy is growing up down south.

Photo: USDA/Keith Weller.

The 28-year-old industrial engineer, in cap, jeans, and scruffy beard, taps through a PowerPoint presentation choked with graphs, statistics, and cartoon renderings of how his prototype biodiesel plant can help farmers become self-sufficient. Then he opens a dark brown bottle filled with soybean diesel. “When it burns,” he says, “it smells like there’s a McDonald’s in the field.”

Backed by Don Mario, an Argentine seed company, Defferrari has developed what he hopes is a bit of methadone for global oil addiction: a localized way for soybean farmers to turn part of their harvest into homespun fuel. And this entrepreneur is far from alone. Kick-started by high oil prices and talk of peak oil, South America is making an incipient push to reshape the future of fuel.

It’s not an easy task. “International financial institutions, from the International Monetary Fund to the Inter-American Development Bank, have loaned with a favorable bias upon extractive industries, and little effort on renewables,” says Mark Langevin, a politics professor at Chapman University in Santa Maria, Calif., whose work focuses on Brazil. Observers also say that politics and economies of scale currently mean more noise than payoffs for the South American biofuel industry.

But that’s not stopping engineers in the continent’s agricultural powerhouses, particularly Brazil and Argentina, from exploring how to make and export cleaner fuels. And as the U.S. prepares to take its own biofuel production to another level, some are wondering if the global market will end up smelling more like salsa or apple pie.

Border Petrols

Defferrari hopes his $152,000 prototype plant in Chacabuco, about 145 miles west of Buenos Aires, will herald a trend that will become as common as cow dung. The plant can churn out about 360 gallons of biodiesel and 10 tons of animal feed from 12 tons of soybeans per day. Not only does it produce fuel that’s about half diesel’s market price, it’s automated, requiring humans only to load the contraption and turn it on and off.

“This is about farmer protection, about making them self-sufficient,” Defferrari says. “This is the kind of plant that three or four farmers could invest in together.” He’s got interest — and not just from farmers. His work has landed him in local magazines, in wire stories, and on CNN. And though he won’t give details, the budding entrepreneur says he is planning a trip to Chicago for meetings with a big energy firm.

In Argentina, which reaps high volumes of soybean and sunflower seeds, biodiesel is often pitched by industry watchers as the alternative fuel with the most national potential. But production in the country is currently at an “artisan level, of little volume,” says Claudio Molina, head of the Argentine Association of Biofuels. According to AgroDiario, an Argentina-based agriculture magazine, an estimated 20 plants are operating in the country, but they are not legally registered.

Some hope tighter regulation and legal subsidies will help cultivate the fledgling industry here. Argentine lawmakers are mulling a bill that would mandate a 5 percent mix of biodiesel with regular diesel, creating an annual demand of 660,000 tons by 2009. But the bill is stuck — unlike in Brazil, whose young biodiesel industry is helped by a mandated 2 percent mix by 2008, and 5 percent by 2013. Brazil opened its first commercial biodiesel refinery in March.

And South America’s biggest country is a leader in another important fuel. Last year, the global production of ethanol displaced about 3 percent of the 317 billion gallons of gasoline consumed on the planet, according to a report from the Renewable Energy Policy Network for the 21st Century. Nearly 40 percent of that global supply came from Brazil, the largest ethanol market and maker in the world.

Brasilia Arabia

It’s easy to imagine Eduardo Pereira de Carvalho as a loud-talking channeler of Henry Ford, whose 1920s enthusiasm for crop-based ethanol was eventually drowned by cheap oil. As head of the Sao Paulo Sugarcane Agroindustry Union, Carvalho speaks with a revolutionary’s flare, ticking off reasons why his country is the Saudi Arabia of ethanol.

Brazil produced 4 billion gallons of ethanol in 2004, some 37 percent of the world total, while the U.S. churned out 3.4 billion gallons, 31 percent of the world’s share. The country also exported 634 million gallons — 112 million of that to the U.S. — and its government is pushing to clear more land for production. Its vast size and tropical climate are perfect for the production of sugar cane, which is said to have better energy conversion rates than corn, the primary source for ethanol in the U.S. What’s more, Brazilian producers burn cellulosic stalk of sugar cane to make energy that fuels the entire industrial process. “That is why our production costs are half that of corn,” Carvalho says.

While Brazil builds its ethanol empire — eyeing customers from Venezuela to China — other South American nations are also getting on board. Most are embracing mandatory fuel mixes for cost, security, and environmental reasons, but some hope to become bio-fountains spilling into a global fuel revolution.

In September, Venezuela — which now mandates ethanol blending in some parts of the country and may require a 10 percent mix nationwide in the future — said it will spend $900 million over five years to bring 15 new plants online. Colombia passed a law requiring a 10 percent ethanol mix in cities with populations over 500,000, but geography restricts its sugar cane production, meaning it will likely have no exportable surplus. Peru is pushing ethanol, with California as a potential market, while Argentina is putting its ethanol empanada in the mix too. It has become the world’s 17th-biggest ethanol maker, producing 42 million gallons last year, according to F.O. Licht (though its output goes mainly to agrochemicals, drinks, and cosmetics). And tiny Paraguay and Uruguay are also seeking to get involved.

That said, nobody holds a caipirinha to Brazil, whose confluence of geography, economics, and politics has spawned an industry that, unlike the U.S.-based ethanol sector, is now capable of standing without the crutch of tax subsidies. And its fortunes rose three years ago when Brazilian automakers began churning out “flex-fuel cars” that run on a combination of power sources, including ethanol. Carvalho says the country’s car industry is heading to 100 percent flex fuel, and predicts that “within a year or so there will be no more new gas cars made in Brazil.” In early November, automakers rolled out a flex-fuel car that will be sold in the U.S. next year. While all that makes some U.S. ethanol makers nervous, Carvalho and others say there’s room for collaboration. In April, Brazil’s minister of development, industry, and foreign trade, Luiz Fernando Furlan, traveled to California on an ethanol cheerleading tour. While there, he suggested that U.S. and Brazilian companies could jointly market their products to China, widely considered to be the globe’s emerging mega-consumer of energy.

Fuelish Notions

Such a partnership would be a new spin on an old story. Thanks to geography, Uncle Sam has historically been a fossil-fuel friend of its Latin American neighbors, buying black gold from oil-flush nations like Ecuador and Venezuela, which provides some 10 percent of all U.S. oil imports. For many, those historic relations and proximity make bio-imports a no-brainer. But will the U.S. ethanol industry, which some see as a subsidy-heavy pet project of farm-belt politicians, fight that flow? Early signs point to yes.

For instance, U.S. ethanol makers now have their corn boiling over plans by U.S.-based Cargill to build a refinery in El Salvador. The ag giant will take advantage of a trade-law loophole in the Caribbean Basin Initiative: by processing Brazilian ethanol in a CBI signatory country, Cargill can export the fuel duty-free into the U.S. The Central American Free Trade Agreement could have closed the loophole, but didn’t.

Cane you dig it?

Photo: iStockphoto.

In reports and position papers, the Minneapolis-based Institute for Agriculture and Trade Policy, a think tank, claimed CAFTA could let millions of gallons of Brazilian ethanol into the U.S. without tariffs. “CAFTA stands to destroy thousands of jobs created by the U.S. ethanol industry and make the U.S. dependent yet again on foreign fuel supplies,” says Ben Lilliston of IATP.

And what about the U.S. biodiesel industry, a neophyte with production rates of only 30 million gallons last year? South America will not likely find new amigos there, especially after a boat full of South American biodiesel docked in Florida last month, qualifying for a U.S. biodiesel tax break. The American Soybean Association immediately called on Congress to eliminate a loophole in the 2004 law in question.

Some things are going well for the U.S. biofuel market, like the odd assortment of environmentalists, evangelical Christians, and conservatives running around Washington pitching it as a key to America’s fuel security. Lawmakers are drumming up ways to protect ethanol makers from a deluge of imports, and the energy bill President Bush signed this summer requires the country to use an annual 7.5 billion gallons of ethanol and biodiesel by 2012.

But America’s homespun biocombustibles industry, especially ethanol, is still in a knot over South American competition. Um, samba lessons anyone?