European governments are also implicated in financing corporate corruption.
Published in Red Pepper.
We know the damage Enron has done to the American economy. So why is it still eligible to receive U.S. taxpayer money? Instead of wallowing in bankruptcy, Enron continues to do business internationally. And believe it or not, the scandal-ridden and discredited corporation continues to pursue public funding for its global operations.
Years after public health officials banned the use of DDT in the United States, they allowed pesticide producers to continue selling the poison for agriculture overseas. And while hazardous lead additives were phased out of America’s domestic gasoline decades ago, US-based chemical companies have long profited from promoting their use in the global South.
So maybe it shouldn’t be surprising to learn about another of America’s toxic exports: Enron.
Instead of wallowing in bankruptcy, Enron continues to do business internationally. In the past, its global operations have been funded lavishly by public institutions—banks residing not only in the United States, but throughout Europe as well. And believe it or not, the scandal-ridden and discredited corporation continues to pursue public funding for its global operations.
The ongoing reports about Enron’s collapse have led many people to believe that the corporation is for all practical purposes defunct. Not so. Enron’s decision to file for Chapter 11 bankruptcy protection caused it to forfeit its energy-trading operations in America and forced the corporation to sell some of its assets. But a large number of its overseas ventures remain intact. Even as it faces shareholder lawsuits and Congressional inquiries in the United States, Enron plans to emerge from bankruptcy carrying forth its global energy services.
Enron, through numerous consortia and subsidiaries, continues to manipulate energy markets in countries throughout the world. Its present assets in Latin America alone include stakes in gas and electricity companies in Brazil and Venezuela, pipelines in Colombia and Bolivia, and power plants in Panama, Guatemala, and Puerto Rico. In many of these countries, officials have been assuring that the problems that the Enron Corporation has in the United States will not affect their local operations. In fact, as of May, Enron was actively bidding to acquire $41 million worth of formerly-public utilities in Nicaragua.
Generous infusions of public money, brokered through international financial institutions, have helped to build the corporation’s global empire. A new report by the Institute for Policy Studies in Washington, D.C., shows that since 1992, Enron-related projects have received more than $4 billion in U.S. government financing. And America is not alone in bankrolling the exploitation. Other public sources—like the World Bank, the Asian Development Bank, and the European Investment Bank—contributed an additional $3 billion.
If Enron is America’s disowned wunderkind, the corporation also succeeded in charming European financiers. The European Investment Bank, the financial institution of the E.U., helped to advance several significant Enron deals. These include a massive Bolivia-Brazil pipeline that encroaches upon ecologically sensitive areas like the world’s largest wetland (the Pantanal), the Gran Chaco subtropical dry forest, and the Mata Atlantica Rainforest. The pipeline and associated access roads also threaten the rights of previously-isolated, indigenous communities. To make matters worse, those who bear the brunt of the project’s negative impacts see few of its benefits. Industrial markets, not households, consume the vast majority of the pipeline’s gas. An estimated 20 million people in Brazil, mostly in rural areas, live without access to basic electricity, according to Brazilian authorities.
The United Kingdom, Germany, Italy, France, and Belgium all contributed to Enron through their public financial agencies. The CDC Group, the foreign investment arm of the British government stands as the largest contributor to Enron projects for non-US agencies. Formerly known as the Commonwealth Development Corporation, the CDC Group not only provided loans to Enron in Latin America, it served as an investment partner in many ventures. Enron managed to lead consortia in purchasing the Puerto Quetzal power plant in Guatemala, the Corinto power plant in Nicaragua, and the Haina power company in the Dominican Republic owing to the fact that the UK stepped up to finance shares of 25% or more.
By any standard, $7 billion is a lot of money. But now Enron wants more. In June, seven months after Enron’s bankruptcy, the World Bank approved a $49 million grant toward the construction of an Enron/British Petroleum thermal power plant in India. This new project went through despite that fact that Enron’s infamous Dabhol power plant, the largest ever constructed in the country, generated massive protests and now sits idle because of disputes between Enron and the state government.
Moreover, the Inter-American Development Bank (IDB), an agency that receives contributions from the United States and from most European countries, including Great Britain, is considering a $125 million loan for a Bolivian gas pipeline expansion that Enron is pursuing through a group called Transredes. Along with Shell Bolivia, the other key stakeholder in this consortium, Enron stands to profit in Bolivia by using public funds to further its objectionable practices.
Like with its operations in the United States, Enron Global Services has a long history of pushing industry deregulation and avoiding oversight. The Bolivian government recently began investigating irregularities in the process by which Enron initially gained entry into the country’s energy markets. Environmental, human rights, and indigenous peoples’ organizations such as the Coordinadora de Pueblos Etnicos de Santa Cruz (Bolivia) decry the fact that the proposed enlargement of the Transredes pipeline would cut through ever larger sections of ecologically sensitive areas, as well as the protected lands of Bolivia’s indigenous populations. They point to a previous disaster in which the company’s Sica Sica-Arica oil pipeline ruptured in Januaray 2000, spewing thousands of barrels of refined crude into the Desaguadero River before officials got around to making repairs.
Why would public institutions continue to help bankroll such sordid deals? In the name of “free trade,” government-funded organizations like the IDB and the World Bank have spent over two decades promoting privatization of energy and power sectors. Since the emergence of the neoliberal “Washington Consensus” beginning in the 1980s, they have forced countries that want development assistance to implement harsh “structural adjustment” measures and deregulate industries. At the same time, multinational corporations play poor governments against one other for much-needed foreign investment.
As a result, public utilities have increasingly fallen into private hands and corporations like Enron conduct their business with little or no public accountability. Ordinary people suffer as companies limit supplies and raise prices, spreading misery among those who can’t afford to pay more for once-public services like electricity, water, and health care. This also produces social unrest. Enron’s imposition of price hikes has resulted in blackouts that eventually led to riots in Guatemala and the Dominican Republic, among other countries.
As Enron is still eligible to receive assistance from international financial institutions, citizen action is required to stop the flow of government funds to the corporation. Activists in the United States are working to pressure their Members of Congress into prohibiting future loans for Enron-related projects before even considering reauthorization of funds for financiers like the IDB. Outrage in Europe could spark parallel efforts. This would help to put a stop to destructive and irresponsible deals like the Bolivian pipeline expansion.
Instating bans against providing more public money for Enron’s international exploits would serve as a good first step, but more is needed to stop similar abuses. Civil society groups in Europe (including Cornerhouse and Friends of the Earth in the UK) have joined in a wide-ranging coalition demanding that members of the Organization for Economic Cooperation and Development (OECD) adopt common social and environmental standards for their respective public finance institutions. Although the OECD previously committed to reaching an agreement by the end of 2001, the trade ministers fully ignored the issue during their Ministerial Council Meeting in May. Opposition to binding environmental and social standards came from EU countries. Ironically, this leaves the United States with the strictest guidelines among OECD members.
The heights of impropriety exposed in the Enron scandal mandate that the rules governing global trade and investment be altered to protect the common interest. Governments must reject the drive by international financial institutions like the IDB and the World Bank to privatize utilities and to promote deregulation—policies that invite corruption and fuel injustice. And if popular indignation in the North accomplishes little else, it should enforce this common-sense principle: That the last thing our governments should continuing exporting to the developing world is Enron.