BBVA´S POLLUTING INVESTMENTS

The heavy crude oil pipeline in Ecuador.

The heavy crude oil pipeline in Ecuador has come under severe criticism on account of its negative impact on Ecuador’s ecosystems which in turn is causing the displacement of communities to unpolluted areas. Among the impacts are the destruction of six active volcanos, a large number of reserves of fresh water and virgin rainforest, as well as a major risk of environmental accidents. In 2000, the Ecuadorean government granted a concession to the OCP Consortium (made up of five Ecuadorean petroleum companies active in the Amazon region.) for the construction, management and control of the pipeline over a period of twenty years. The pipeline was built by OCP Ecuador, S. A., a subsidiary of OCP Ltd. The total cost of the project was estimated at 1.300 million dollars and daily output at about 220,000 barrels. Financing was basically through a syndicated seventeen-year, US$900-million loan ending in July 2018 with the remaining $400 million covered by OCP Ltd.’s capital. In July 2001 OCP and sixteen banking institutions from eight countries led by the Westdeutsche Landesbank of Germany signed a loan agreement. Nine banks were involved in the syndicated loan which provided 590 millions dollars, of which BBVA contributed 150 million.

Before providing the money, the banks introduced guarantees and risk-reducing mechanisms so that they would recover their money even if the project were to die. The main condition was that each oil company that used the pipeline would have to sign a contract with OCP Ltd. specifying the volume of crude it wanted to transport and the amount it would pay for the volume contracted regardless of whether it was in fact ever transported. Such contracts are pillars of the financial structure and reduce the risks to one: that one or more of the oil companies could go bankrupt (Encan, Occidental, AGIP, and Repsol-YPF are considered blue-chip firms involving minimal risk.)

Sources:

Profundo, “ The financing of the OCP pipeline in Ecuador”. (www.profundo.nl/publicaties/ocp.html)
AID Environment
Campaña Internactional contra OCP (which among other organisations includes Acción Ecológica of Ecuador, Ungewald of Germany, Amazon Watch of the United States, Repsol Mata of Catalonia, ODG, Greenpeace, Friends of the Earth, Carovana Internazionale de Solidarità of Italy have likewise been critical of the project.)

The ENCE cellulose factory in Uruguay

In the Uruguayan city of Fray Bentos located on the eastern bank of the Uruguay River and adjacent to the Argentine province of Entre Rios, the Uruguayan government has authorised the Finnish company Botnia and the Spanish company ENCE to construct two cellulose-production plants. This has produced a diplomatic conflict between Argentina and Uruguay given the opposition by the residents of the Argentine towns of Gualeguaychu and Colon located on the opposite bank of the river to the impact the pollution involved would have on their health and. livelihoods. As this represented a violation of the World Bank’s Environmental and Social Safeguard Policies, as confirmed by the World Bank compliance advisor ombudsman Meg Taylor and as the investment was negotiated, this violates the Uruguay River Treaty and consequently the World Bank’s International Waters Safeguards. Nevertheless, BBVA gave its support to providing ENCE with the financing it needed for its 50% of the project, assessed at 600 million dollars.

The project is currently on hold even though another ENCE cellulose plant is planned for Conchillas, a rural settlement in the Department of Colonia, at the point where the Uruguay and Parana Rivers converge to form the Rio del Plata estuary. This project will thus most likely go ahead with the same structure as the initial.

Sources (most recently consulted on 7 April 2007):