Fresh doubts over the controversial Camisea gas pipeline project are threatening disbursements of IDB funds to back the second phase of the longstanding Peruvian project. Following renewed pressure from independent technical auditors as well as environmental groups opposed to the project, the development bank has said it will not provide new funds until the audit is complete. Since the pipeline was inaugurated 18 months ago, it has suffered five breaks with gas leaks near indigenous settlements and in biodiverse regions. The IDB funded $75 million of the costs of building the pipeline, which brings gas from Peru’s southern Amazon jungle to the coast and northward to Lima.
“We are very concerned, there are problems and we are working to correct those problems,” Antonio Vives, acting manager of the bank’s sustainable development department told Emerging Markets.
The bank is considering a request for funding for a $400 million gas liquification plant on the coast at Paracas for exporting gas to Mexico and the United States. But IDB president Luis Alberto Moreno has also struck a cautious note, saying that any new funds will hinge on the results of the audit.
Last month an independent technical audit of the pipeline found that much of the pipe was corroded before it was laid, intensifying concerns that more breaks and leaks can occur in coming months.
The controversy underscores the challenges facing infrastructure financing in Latin America at precisely the time when the IDB and other multilateral banks, national governments and private investors are gearing up for a renewed push for funding the region’s infrastructure.
Environmental watchdog organizations have been critical of Camisea from the time the bank considered funding the pipeline. “We are now in discussions with the IDB to press the bank to make sure the independent audit of the pipeline is truly independent, suspend operations at Camisea until the audit is complete,” Atossa Soltani, executive director of Amazon Watch, told Emerging Markets. “We call on the bank to reflect and refuse financing of the second phase (liquification plant) until the problems of the first phase are addressed.”