Costa Rica and the Río Pacuare During Times of Free Trade and Regional Integration

University of Nevada, Reno

Hydropower Capital: Costa Rica and the Río Pacuare During Times of Free Trade and Regional Integration

A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science in Geography

Denielle M. Perry

Dr. Kate Berry/Thesis Advisor

May, 2010

THE GRADUATE SCHOOL

We recommend that the thesis prepared under our supervision by

DENIELLE M. PERRY

entitled

Hydropower Capital: Costa Rica and the Río Pacuare during Times of Free Trade and Regional Integration

be accepted in partial fulfillment of the requirements for the degree of

MASTER OF SCIENCE

Dr. Kate Berry, Advisor

Dr. Victoria Randlett, Committee Member

Dr. Louis Forline, Graduate School Representative

Marsha H. Read, Ph. D., Associate Dean, Graduate School

May, 2010

Abstract

In response to neoliberal economic pressures since the late 1980s, protectionist policies of Central American countries have been reworked into an agenda that promotes free trade and regional integration. The Dominican Republic-Central America Free Trade Agreement (CAFTA) and the Plan Puebla-Panama (PPP) are complimentary trade and infrastructure integration initiatives that exemplify this neoliberal shift. Hemispheric concerns over climate change and energy security have translated into increased demand for “renewable” resources, moving the construction of new hydropower facilities to the forefront of planning for a regionally-integrated electricity system. In Costa Rica hydrological resources are considered to be the country’s greatest natural resource. The country’s “hydropower capital” has been regulated by the state for over half a century; however, new legislature is increasingly liberalizing private entry into the sector. Coupled with provisions of the CAFTA treaty, these new laws complicate the decision- making arena for development versus conservation.

Through an investigation of proposed development on the Río Pacuare this study provides a political economic and political geographical analysis of both the environment in which hydropower project development decisions are being made and the emergence of resistance movements. For over two decades opposition has kept the state-run electric company’s Pacuare dam development plans at bay. Nonetheless, realignments of national and regional political economic forces give rise to new pressures to pursue hydropower projects on the Río Pacuare. This thesis considers the historic circumstances, regional impetus and national pressures in the energy sector that influence proposed hydropower development on the river. Additionally, countervailing pressures to protect the cultures and environment of the Pacuare are examined. Further initiatives to both develop and resist hydropower are considered as a reflection of political geographic conditions in which international, regional, national and local scales are linked.

In memory of Captain Bryan Tomasetti “Do what makes your heart sing”

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Acknowledgments

Gracias to all of the people of Costa Rica who, for nine years, took me in to their lives as one of their own and who, along with the Río Pacuare, have inspired this work.

Thank you Eugenio Guido and members of Amigos del Río Pacuare for all that you are and all that you do. To Phil, Poca and Angel, thank you for being my guides to the waters of the Pacuare and for being my Tico family. To the Cabecar people of the Pacuare, thank you for trusting me to do this work.

Endless gratitude to my advisor, Dr. Kate Berry, for her patient tutoring while I learned the ropes, her benevolence while I tread water and her encouragement as I braved the many rapids of this project. To Dr. Louis Forline who inspired me with his academic stand against the system and guided me on theory. To Dr. Victoria Randlett for her expertise in Political Economy and her talks of everything but, thank you for keeping it real. Thank you to Dr. Starrs and Dr. Hausladen for the time and expertise gratis.

Additional thanks go out to the remaining faculty of the UNR Department of Geography and Sherry Bauman for helping to fill in the gaps. To my fellow grad school colleagues, you made it worth living; special thanks to: Kayla, Katie and Mariela. Additional thanks to Dr. Stephen Cunha for inspiring a career in Geography and Francisco (Cisco) Guevara for opening the door to a world of rivers.

Ultimately, without my family none of this would be possible. The most heartfelt thank you to my Mother for encouraging my adventurous spirit and setting me free to make my dreams come true, to my Father for nurturing my intellect and relationship with books, and to my grandparents for connecting me with Mother Earth. Thank you all for your patience and support on this journey. iv

Table of Contents

Abstract i

Dedication ii

Acknowledgement iii

Table of Contents iv

List of Tables v

List of Figures vi

List of Acronyms vii

1. Introduction 1

2. Background on the Political Economy of 20th Century Latin America 8

3. Implementing CAFTA’s Success: the PPP & SIEPAC infrastructure development 21

4. Costa Rica: the hydropower capital of Central America 37

5. The Rio Pacuare Case: Discourse on Hydropower Development 69

6. Conclusion 103

7. Appendix A 110

8. Appendix B 116

9. Bibliography 117

List of Tables

Table 2.1 The1994 Washington Consensus on Reform 16

Table 2.2 Selected multilateral trade agreements in Latin America 18

Table 4.1 Family ties to political positions in the Arias administration 62

List of Figures

Figure 2.1 Export economies relied on Coffee, Cocoa and Bananas 10 Figure 2.2 Depiction of Theodore Roosevelt and the Big Stick Policy 11 Figure 2.3 Protest of economic disparities and international lending institutions 17 Figure 3.1: This map highlights the Nicaragua Route and Panama Canal in 1864 22 Figure 3.2 CAFTA signators countries: US, DR, GT, ES, HO, NI, CR, PA 25 Figure 3.3 SIEPAC trajectory minus extended Panama portion 31 Figure 3.4 Rates of Generation to Consumption in Central America 34 Figure 3.5 2006 Installed Capacities for Electricity Generation in SIEPAC countries 36 Figure 4.1 Four cordilleras and ample rain create 34 watersheds 46 Figure 4.2 Costa Rica Energy Sector & Regional Economic Policy Trends Timeline 48 Figure 5.1 The Río Reventazón and Río Pacuare and impacted communities 72 Figure 5.2 Río Pacuare Dam complex 73 Figure 5.3 Dos Montañas Canyon and PH Siquirres site 76 Figure 5.4 PH Siquirres projected reservoir 77 Figure 5.5 This bridge is the main point of entry to the Nimari Reserve 81 Figure 5.6 School in the Nimari community center 82 Figure 5.7 Collecting traditional remedies 83 Figure 5.8 Rafting advertisements to arriving tourists at the airport 85 Figure 5.9 The Angostura Dam on the Río Reventazón 88 Figure 5.10 River flow in Río Reventazón pre-Angostura Dam 89 Figure 5.11 Post dam stream flow in Río Reventazón 89 Figure5.12 Timetable of Permitting process with SETENA and ICE for PH Pacuare 96 Figure 5.13 Ballots for the historic plebiscite 97 Figure 5.14 Renewed resistance campaign “The people already said No to the Dam” 100 Figure 5.15 University of Costa Rica students protest Pacuare dam 101

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List of Acronyms

ACOPE Asociación Costarricense de Productores de Energía (Costa Rican Association of Energy Producers) ADRP Amigos del Río Pacuare (Friends of the Pacuare River) ARESEP Autoridad Reguladora de los Servicios Públicos (Public Service Regulating Authority) BCIE Banco Centroamericano de Integración Económica (Central American Economic Integration Bank) CACM Central American Common Market CAFTA Central America Free Trade Agreement CNFL Compañía Nacional de Fuerza y Luz (National Power and Light Company) EBASCO Electric Bond and Share Company ECLAC Economic Commission for Latin America & the Caribbean EIA Environmental Impact Study FDI Federal Direct Investment FECON Federación Costarricense de Conservación del Medioambiente (Costa Rican Environmental Conservation Federation) FTA Free Trade Agreement IADB Inter American Development Bank ICE Instituto Costarricense de Electricidad (Costa Rican Electricity Institute) ICT Instituto Costarricense de Turismo (Costa Rican Tourism Intitute) IRN International Rivers Network MINAE Ministerio del Ambiente y Energía (Minster of the Environment and Energy) NAFTA North America Free Trade Agreement PH Proyecto Hidroeléctrico (Hydroelectric Project) PM Proyecto Mesoamérica (Mesoamerica Project (formerly PPP)) PPP Plan Puebla Panamá PROAL Asociacion de Proyectos Alternativos para el Desarrollo Social (Association of Alternative Projects for Social Development) REDLAR Red Latinoamericano Contra Represas (Latin American Network Against Dams) SETENA Secretaria Técnica del Nacional Ambiente (Technical Secretary of the National Environment) SIEPAC Sistema Integrada de Electricidad para América Central (Central American Integrated Electricity System) SNE Secretaria Nacional de Electricidad (National Secretary of Electricity) TSE Tribunal Supremo de Elecciones (Supreme Electoral Tribunal) UCCAEP Unión Costarricense de Cámaras y Asociaciones del Sector Empresarial Privado (Costa Rican Union of Private Business Sector Bureaus & Associations) 1

Chapter 1: Introduction

Deep in the heart of the Talamanca Mountains of Costa Rica, the Río Pacuare emerges as a vital artery cascading through the tropical forest on its course to empty into the Caribbean Sea. This river sustains numerous indigenous Cabecar communities of the

Reserva Indígena Alto Chirripó-Cabecar Nimari and provides a physical boundary from mainstream society. The watershed supports diverse wildlife and extensive stands of primary forest in one of the most biodiverse countries on the planet (InBio, 2010).

Punctuated by plunging waterfalls, virgin rainforest, and tumbled basalt boulders, the river is known as one of the five most beautiful in the world, a reputation that has maintained a booming ecotourism industry of whitewater sports (ICT, 2009). Due to the hydropower potential that the river possesses, an extensive dam complex was planned by the national electric company, el Instituto Costarricense de la Electricidad (ICE). The proposed dams and power-producing facilities would flood hundreds of acres of rainforest as well as the riverside Cabecar settlement, Nimari Ñac and the “Tico” village of Bajo Pacuare. Large sections of world-class whitewater rapids would be drowned or dried up by the proposed operation which could spoil the lucrative tourist economy. For over two decades movements to protect the river have kept ICE‟s plans at bay, however, regional economic development initiatives and growing energy demands give rise to new and different pressures to pursue the project.

The Dominican Republic-Central America Free Trade Agreement (CAFTA) with the United States is set to increase trade with member countries throughout the region. In addition, the Plan Puebla-Panama (PPP) infrastructure development scheme was designed in order to facilitate the success of the CAFTA treaty with increased energy production as 2 a top priority. Electricity generated and transmitted on an integrated electricity grid will be used to power manufacturing facilities across the region and for export to consumers in North America. With concerns over climate change and energy security, the demand for “renewable” resources has escalated, placing the construction of new hydropower facilities at the forefront of hemispheric planning and treaty initiatives.

Meanwhile, Costa Rica is both the largest producer and consumer of hydropower in Central America and its hydrological resources are considered to be premier to the country. National laws, state agencies, and ICE have regulated access to waterways and hydropower facilities for over half a century. Notwithstanding, Costa Rica‟s new legislation and articles within the CAFTA treaty, make development concessions for hydropower resources more readily accessible to firms other than ICE. As a result of these changes, the decision-making arena of conservation versus development is now more complex. Costa Rica‟s Río Pacuare provides a case in point to examine the complexities of scale as political and economic factors, along with resistance movements, influence project development decisions.

Research Questions and Approach

This thesis proposes to consider the following three questions:

1. What are the historic circumstances, regional impetus and national pressures in the energy sector that influence proposed public hydropower development on the Río

Pacuare?

2 What are the countervailing pressures to protect the cultures and environment of the

Pacuare? 3

3. How do both sorts of initiatives, those which would develop hydropower and those acting to prevent its development, reflect political geographic conditions in which international, regional, national and local scales are linked?

To explore possible solutions to these questions two areas are investigated: 1) the modern political economy of Central America and Costa Rica‟s energy sector and 2) discourse on hydropower development as it pertains to the Río Pacuare. The first vein of research begs another series of questions. What global and regional economic and political policies have influenced Central America‟s development trends? What role do

CAFTA and the PPP play in the current decision to increase power production in Central

America and Costa Rica? How does hydropower fit into the regional integration initiatives and Costa Rica‟s energy plan?

The second research area leads to another set of queries. What is ICE‟s project history on the Río Pacuare? Who currently uses the river, in what capacity, and what values are placed on it? What are the potential socioeconomic and environmental impacts of dam development on this river? What types of resistance to the dam projects exist and how has this changed as national and regional policies have evolved? The key to understanding these questions is through several methods of research: an examination of literature about historical and contemporary regional political economic themes, archival research on the Río Pacuare and ICE‟s project history, fieldwork, and electronic research.

Central America may be experiencing an epoch of regional integration, yet it has not always benefit from freedom or cooperation among neighboring states. Central

America‟s historical geography underscores a history of colonial rule and the development of fragile export economies in the region. Central American states evolved 4 through a series of despots, a pattern of dependency and depression that led to a protectionist stance on international trade. Primary sources outlining the historical geographies of the Central American states provide a timeline of change in government and economic policies (Cardoso & Helwege, 2000; Chomsky, 2003; Frieden, Pastor Jr. &

Tomz 2000; Perez-Brignoli, 1989; Reid, 2007; Stern, 1992; Topik, 2003).

In recent decades neoliberal reforms have led the countries to discard early twentieth century protectionist and Import Substitution Industrialization (ISI) policies to embrace, in large part, free trade agreements. Most recent to the string of multilateral free trade agreements in the region, the CAFTA treaty was ratified in 2004. Publications focusing on modern political economy within the Central American region and Latin

America as a whole provided insights into the trends behind the current CAFTA treaty.

Interpretations of CAFTA articles were based on literature investigating the 1994

NAFTA treaty as the two treaties have similar objectives and language (Haggard, 2000;

Hussain, 2006; Jaramillo & Lederman, 2006; Kuntz Ficker, 2005; Labán & Sturzenegger,

1994; Lindo, 2006; Lora, 2007; Rodrik, 1994; Williamson, 1994; Williamson, 2000).

In conjunction with the neoliberal development agenda of free trade are the privatization and integration of service sectors, such as electricity. These reforms are applied through the creation of the Central America Integrated Electricity System

(SIEPAC) component of the PPP which was designed to support the trade agenda of

CAFTA while liberalizing the energy sector to become a market economy. Studies of energy sector and market integration schemes in Latin America were used to understand the logic behind this component to the PPP (De Oliveira, 2006; Haggard, 2000; Hira,

2003; Jaramillo &Lederman, 2006; Lopez-Calva &Lustig, 2004; Mattli, 1999; Perrault, 5

2006; Zapata, 2001). Privatization of other sectors, such as water and transportation, were not included in the analysis. Official documents from the CAFTA and PPP administrations provided details specific to these two development projects.

Hydropower comprises a sizable component of the existing electricity sector throughout the PPP states and new dam projects are currently being developed concurrent to the agenda, although they have been removed from PPP literature. Resources on both the economics and impacts of hydropower throughout the region provide an understanding of historical and contemporary industry development and resistance movements in this study (Clough, 2009; Hira, 2003; IHA, IEA, &Cha, 2000; Lindo,

2006; Moreno, 2003; Stenzel, 2006).

Costa Rica‟s relative development success stands out as an anomaly in the Central

American equation. Nonetheless, Costa Rica is also experiencing a significant neoliberal shift in line with the region. The country‟s regional role as the hydropower capital and the state energy institution, ICE, are set to be influenced by these greater regional influences. In addition, the Río Pacuare is slated for hydropower development projects that would be linked to the SIEPAC infrastructure. In response to these plans and the greater national and regional policy shifts, a counter resistance movement as taken shape.

To better understand the interface of national energy policy changes, growing resistance and strategies of the greater regional neoliberal agenda, three trips to Costa Rica provided data and insights to the historic and contemporary regional political geography and economy of the country and the Río Pacuare.

The first trip focused on data collection in the Turrialba area through a boating and hiking trip in the Río Pacuare and its watershed communities. GPS data was 6 collected for later analysis. Archival documents on both ICE‟s project history and that of resistance initiatives were acquired from meetings with company employees and conservation advocates. Official paper and digital form topographic maps from the Costa

Rican Geographic Institute were acquired for use in conjunction with the GPS data. The second trip was made to attend the National anti-dam forum that was held in the communities of Nimari-Ñac and Bajo Pacuare, two key locations that are threatened by the potential dam construction. Interviews with community members, academics and activists provided insight into the local and national situation of hydropower development from the conservationist standpoint. On the third occasion a series of informal interviews were conducted with ICE officials, tourism operators, politicians, indigenous community members, and additional activists. On all three occasions photographic documentation was conducted. Trips to communities and rivers with existing hydropower facilities were also taken during two of the three trips to evaluate free and dammed rivers and their impacts on the local economy.

While much of the information used in this study was readily available, there were certain limitations to the study. At no time was communication with the President of

ICE, Pedro Pablo Quiros, possible. Multiple attempts to correspond via email and contact through telephone calls went unanswered. As a result, all information about ICE‟s position on the Pacuare Dam project has been acquired through newspaper article archives, agency documents, interviews with people who have been in personal contact with the Director or correspondence exchanged between Mr. Quiros and other parties.

Another limiting factor is the lack of information specifically linking dam projects to the

PPP plans and funding sources. In addition, while information about investment for the 7 integration project can be acquired from many sources, the sums are not always congruent.

This thesis is divided into six chapters. After this initial chapter, Chapter 2:

“Background on the Political Economy of 20th Century Central America” addresses the historical geography and economies of the region from the time of colonization through the present day trends of free trade and regional integration. Chapter 3: “Implementing

CAFTA‟s Success: The PPP and SIEPAC Infrastructure Development” expands on the current regional economic climate of trade and infrastructure integration. Power sector integration as part of the greater economic development scheme is examined along with an introduction to hydropower as the main component to increased production. Chapter

4: “Costa Rica: the hydropower capital of Central America” identifies the country‟s unique situation and the strong history of state control over energy policy. Issues specific to the implementation of regional policies and further hydropower development are discussed in detail. Chapter 5: “The Río Pacuare Case: Discourse on Hydropower

Development” examines hydropower project development history on the river along with resistance movements that have mobilized against policy changes and project development. Chapter 6: “Conclusions” expounds on the scale of factors that influence decision-making concerning dam development in Costa Rica and how they pertain to the

Río Pacuare. Additionally ICE‟s role in the shifting economic environment and themes for further research are presented in this concluding chapter.

Chapter 2: Background on the Political Economy of 20th Century Latin America

Colonial Encounters through the Turn of the 20th Century

Latin America is defined by cultural and historical factors that unify this otherwise vast region diverse in ethnic identities and geography. Beginning with a history of colonization by Iberian peninsulares, the lands and great civilizations of indigenous peoples, spanning from modern Mexico and the Caribbean to South America‟s Tierra del

Fuego, were subject to foreign policies driven by what Stern (1992) refers to as Spain‟s claim to mission, sovereignty, and riches, or what is commonly known as the creed of

God, glory and greed.

In the dawn of the Sixteenth century, the crown‟s quest for treasure and the expansion of empire raised a legion of royally appointed conquistadors and eager colonists to gain control of and exploit the multitude of natural and human resources available across the newly discovered lands (Stern, 1992). Catholic religious domination brought by the Spanish and Portuguese, who each contributed their respective lingua franca, created a semblance of cultural cohesion amongst the settlements of colonists and native converts that strategically spanned the challenging topography of rugged mountains, arid deserts and tropical coastlines (Perez-Brignoli, 1989).

While language and religion served as cultural bonds across the colonies, the political institutions and mercantilist policies imposed from the courts of Spain, and to a lesser degree Portugal, would be those that shaped the fate of Latin American society, politics and economics for more than three hundred years until the early nineteenth century move for independence (Reid, 2007; Frieden, Pastor Jr. & Tomz, 2000). Once 9 freed from the mandates of distant monarchies, the newly formed states had little understanding of self governance. Oligarchies and despots capitalized on this void perpetuating the legacy of profound disparity in wealth distribution through monopolies on business and trade (Reid, 2007; Perez-Brignoli, 1989).

Fertile lands, especially flat lowlands continued to be expropriated from indigenous populations to expand mining and agricultural production. The landless peasants who had been forced, often violently, to relocate to terrain inadequate for their subsistence lifestyles were obligated to work for the land baron hacendados, creating a dynamic of labor inequality and disdain that has yet to fade away in Latin America

(Perez-Brignoli, 1989; Reid, 2007; Stern, 1992; Topik, 2003). Later during the nineteenth century, liberal reforms in resource access, land distribution and free trade helped build export economies centered on mineral wealth and crops such as the coffee, cocoa and bananas featured in Figure 2.1 (Topik, 2003; Perez-Brignoli, 1989; Reid, 2007). This, however, did not improve the poor labor conditions perpetuated by the legacy of forced

Indian labor and slavery1. Landowners were not inclined to pay higher wages and instead maintained coercive practices towards the work force. This stunted technological innovation and the development of national markets (Perez-Brignoli, 1989). Meanwhile, the Industrial Revolution in the United States and Europe brought improvements in transportation technology, such as railroads and steamships, resulting in increased international trade. Latin American goods reached global markets on a grand scale in what some refer to as the first period of globalization (Reid, 2007; Topik, 2003). As the

1 Populations of African and Asian slaves were also forcefully introduced to the region. 10 imperial powers of Europe and North America were advancing, Latin American labor inequalities were cementing regional stagnation and subordination.

Figure 2.1 Export economies relied on Coffee, Cocoa and Bananas

As the great extension of the Spanish Empire dissolved into a collection of fledgling republics and trade economies, the United States (US) was assuming hegemonic dominance in the hemisphere. Established in 1823, the Monroe Doctrine was designed in theory to protect the evolving states south of the border from further attempts at colonization from European powers (Perez-Brignoli, 1989; Reid, 2007). In essence, however, the doctrine may be viewed as a move by the US to secure its own strategic political and economic interests in the region (Chomsky, 2003; Perez-Brignoli, 1989).

The Big Stick policy established by Theodore Roosevelt around 1901 was a continuation of this agenda through military interventions, territorial concessions and protectorates 11

(Perez-Brignoli, 1989). US corporate interests abroad, such as the banana industry, took precedence over Latin American state sovereignty in foreign policy. The United States displayed little hesitance to enter a country to oust imperial powers or speculative interests from foreign soils so they could gain and or maintain control of resources. The story was repeated from Cuba to Panama to Venezuela throughout the twentieth-century in a series of policies adopted by the United States government perpetuating this role of dominion over its neighboring states (Perez-Brignoli, 1989; Reid, 2007).

Figure 2.2 Depiction of Theodore Roosevelt and the Big Stick Policy

Source: utdallas.edu

Out to the In: Export Economies and Inward-Looking Growth

Although the newly established countries celebrated a period of prosperity in the late nineteenth and early twentieth-century from their niche on the global market, there 12 was no large capital investment made by the states, only capital accumulation in the hands of property owners and merchants. What investments that were made in transportation and industrial facilities came from currency borrowed from British and US investors eager to expand their own investments and presence in the region (Frieden,

Pastor Jr. & Tomz, 2000; Perez-Brignoli, 1989). The lack of diversification or investment in other sectors and new technologies left the export-oriented economies of the American countries susceptible to fluctuations in world markets. The first sign of this vulnerability took place with the world economic crisis in coffee prices between 1897 and 1908 which affected production in the larger countries, like Brazil and Mexico, as well as smaller countries in Central America (Perez-Brignoli, 1989; Topik, 2003).

The ensuing crises of the First World War, the 1929 stock market crash and world depression, and later World War II led much of the region to adopt protectionist economic policies (Frieden, Pastor Jr. and Tomz, 2000; Perez-Brignoli, 1989; Reid, 2007;

Topik, 2003). With limited access to foreign exchange due to world economic and political crises, countries of Latin America were essentially forced to turn away from free trade and pursue instead, to varying degrees, Desarrollo para adentro (inward looking development) (Perez-Brignoli, 1989; Reid, 2007; Cardoso & Helwege, 2000). This action came at the behest of the United Nations Economic Commission for Latin America

(ECLAC) (Dornbusch, 1992; Reid, 2007; Cardoso & Helwege, 2000). During this shift,

Import Substitution Industrialization (ISI), lasting from the 1930s to 1980s was adopted by many national governments involving policies of high tariffs on most imports and offering soft loans and subsidies to encourage domestic industry that would utilize the region‟s own resources. According to Manzetti these policies did not exclude 13 intraregional trade and actually encouraged the integration of regional markets in Latin

America to shelter products from foreign competition (1993). States took control of banking, electricity and petroleum among other industries they considered to be significant to a functioning society while also assuming control of other important ventures that were failing due to the crises (Reid, 2007; Perez-Brignoli, 1989; Topik,

2003; Cardoso & Helwege, 2000). This led to rapid industrialization and a shift in political powers as miner operators and large landowners lost their foothold while the working classes, industrialists and burgeoning state sector began to dominate the political economies from north to south (Reid, 2007; Frieden, Pastor Jr. & Tomz, 2000).

Dependent Development and US Involvement

Capital investments made by US firms in banana plantations, railroads and mining created a dynamic of indebtedness that allowed for the control of customs revenues by the US government as well as military intervention to protect corporate interests from nationalization (Perez-Brignoli, 1989; Reid, 2007). Second World War efforts made the security of Latin American strategic resources, such as rubber and steel, a priority for the

United States and further influenced industrial investment leading to ever increasing foreign dominated monopolies in the region and alliances between the governments. This has been coined as „dependent development‟ in that the periphery states of Latin America were developing, albeit dependent on investments of foreign (US) capital. In exchange, core countries like the US had access to cheap resources and labor which they exploited while enjoying the benefit of collecting on debts from the developing nations. Because states received foreign capital to increase industry, they had little room to argue against 14 the capitalist demands that wages and workers‟ privileges be controlled. A long, brutal period of dictatorial government regimes ensued from this capitalist relationship between the US and Latin America (Reid, 2007; Perez-Brignoli, 1989; Chomsky, 2003).

While the strategies of ISI and protectionism were derived to encourage new industry and shield existing industries from foreign competition, it is argued that the real beneficiaries of ISI were industrialists who hoarded gains in productivity instead of spreading the material wealth onto society through lower prices. Industries did not keep pace with the advancing technologies of the world and they were inherently inefficient, not to mention dependent on imports of intermediate inputs. Because production for value added export was not behind industry initiatives, they did not achieve increased growth; instead, governments were burdened with burgeoning bureaucracies that depleted state funds (Cardoso & Helwege, 2000). The disparity of gains by multinational corporations behind the tariff barriers, while exploiting the abundance of cheap peasant labor, also marks the list of critiques associated with this period (Cardoso & Helwege,

2000; Reid, 2007).

Neoliberal Reforms and the Washington Consensus

The protectionist measures of ISI have been viewed as a “catastrophic mistake” for the economic development of Latin America as this shift away from export-oriented trade came at a time when the world economy was about to enter into a major period of international trade (Reid, 2007). After thirty years of inward-oriented policies, financial crisis initiated a wave of reforms that swept over the region and began to wash away the 15 high tariffs and other trade barriers. This paradigm shift of neoliberal reforms, however, came at different intervals and varied enormously from country to country.

Although protectionist by nature, the indebtedness that Latin American countries created through ISI and borrowing to fuel immense bureaucratic structures once again made them susceptible to the wiles of the international market, this time to interest rates

(Lora, 2007). The Mexican financial crisis of 1982, consequence of foreign debt, spurred the rest of Latin American economies to spiral down the economic crisis hole. Sources of finance were restricted in countries suffering from economic calamity, necessitating structural adjustments which were costly and therefore postponed. Instead, a decade of high inflation ensued (Labán & Sturzenegger, 1994; Lora, 2007; Rodrik, 1994).

Macroeconomic stabilization to extinguish the rampant inflation and initiating adjustments such as trade liberalization, privatization, deregulation and a general market oriented objective became the priority of most governments across Latin America

(Rodrik, 1994; Lora, 2007; Sturzenegger &Tommasi, 1998). This gave rise to a set of policy recommendations commonly referred to as the Washington Consensus (Reid,

2007; Rodrik, 1994; Sturzenegger & Tommasi, 1998; Frieden, Pastor Jr. & Tomz, 2000;

Lora, 2007; Williamson, 1994).

Economist John Williamson originally coined the phrase in 1990 “to refer to the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries as of 1989” (Williamson, 2000). The ten suggestions that he summarized (see table 1.1) can be broken down into three priority groups: 1.control of fiscal deficits to tame inflation and create macroeconomic stability;

2. discarding of protectionist policies in exchange for free trade, competition, and 16 investment; 3. reform of resource allocation and wealth generation from state control to market orientation (Reid, 2007).

Table 2.1 The 1994 Washington Consensus on Reform 1. Fiscal Discipline 2. Reorientation of Public Expenditure toward Building Human Capital and Infrastructure 3. Tax Reform: Broaden Base and Cut Marginal Rates 4. Financial Liberalization: End Interest-Rate Controls, etc. 5. Exchange Rates: Unified and Competitive

6. Trade Liberalization: Reduce Tariffs and Eliminate NTBs 7. Foreign Direct Investment: Welcome

8. Privatizations: Do

9. Deregulations: Stop Only for Environmental, Safety or Prudential (Banking) Reasons

10. Property Rights: Secure

Source: Williamson (1994)

The policies were adopted, to some degree, by the majority of Latin American countries after being conceptualized as a package for economic reform (Rodrik, 1994; Kuntz

Ficker, 2005). International lending agencies, such as the World Bank and International

Monetary Fund, welcomed the reforms and made them stipulations for further loans to the developing countries, especially in Mesoamerica (Reid, 2007).

Great debate persists on whether or not the solutions were actually implied by policy makers in Washington or conceptualized by the countries of Latin America. What is clear is that criticisms abound on the perceived failures that the Consensus brought to the region.

It is difficult even for the creator of the term to deny that the phrase "Washington Consensus" is a damaged brand name (Naím, 2002). Audiences the world over seem to believe that this signifies a set of neoliberal policies that have been imposed on hapless countries by the Washington-based international financial institutions and have led them to crisis and misery. There are people who cannot utter the term without foaming at the mouth (Williamson, 2002).

The term, Washington Consensus, became interchangeable with privatization as governments moved to divest from their state-run enterprises. The goal in selling national utilities and industries was to increase efficiency and reduce spending in public finance.

This, however, was not how privatization functioned in actuality. Instead, sales, generally to multinational corporations, were far from transparent and were prolific with corruption. Utility rates were raised by the new operators and what were once state monopolies turned private (Hira, 2003). Governments did little to encourage competition and they failed in most cases to establish regulations for natural monopolies like electricity, water and telecommunications (Perrault, 2006; Reid, 2007; De Oliveira,

2006). Above all, the largest critique of this period of reform is the lack of commitment to equity. Instead of diminishing poverty, few benefited while the numbers of poor and unemployed skyrocketed across the region (Reid, 2007).

Figure 2.3 Protest of economic disparities and international lending institutions

Source: www.narmada.org

Economic Development through Free Trade and Regional Integration

Prior to the Washington Consensus, Mexico and Central America had the highest trade barriers in the world. By the turn of the 21st century this had completely reversed as

Latin America and especially Central America were the most open to development (Reid,

2007). The most dramatic reforms took place in trade policies, liberalizing „free trade‟ through multilateral agreements and regional integration schemes. Free trade is seen almost unanimously by neoliberal economists as superior to protectionism due to the theoretical principle of comparative advantage (Rodrik, 1994). Dubbed as the “new regionalism,” this inclination was meant to reorient market growth to be open and outward, encourage international competitiveness and draw foreign investment through international treaties (Reid, 2007; Devlin & Giordano, 2004). Integration, in theory, will draw foreign investment into the large markets of Latin America while protecting those investments through institutional guarantees (Mattli, 1999). Although there had been prior attempts at regional integration, it was not until the overarching move away from protectionism that treaties began to take hold. From NAFTA (North American Free Trade

Agreement) to MERCOSUR (Common Market of the South) and the tentative FTAA

(Free Trade Area of the Americas), the 1990s brought a proliferation of multilateral trade agreements to Latin America (See Table 1.2).

Table 2.2 Selected Latin American multilateral trade agreements 1960 CACM (Central American Common Market) 1969 Andean Community 1991 MERCOSUR (Southern Common Market) 1992 NAFTA (North American Free Trade Agreement) 1994 Group of Three (CO, MX, VE) 2000 Mexico-Northern Triangle (EL, GU, HO) FTAA (Free Trade Area of the Americas) in negotiations Source: (Salazar-Xirinachs J. M., 2003) 19

Integrated Infrastructure’s Role in Trade

Economic diversification requires increased infrastructure according to Reid

(2007). Inherently, free trade requires that the seemingly inefficient systems and substandard technologies of the previously closed societies be updated and recalibrated to withstand the demands of the new market economy (Zapata, 2001). If infrastructure is insufficient to provide for the movement of products and labor, then productivity will not increase and trade will not be effective (Jaramillo & Lederman, 2006). The connection of cheap labor pools to world markets is thought to encourage growth and investment

(Estevadeordal et al, 2004). Therefore, in addition to liberalizing markets through free trade agreements, countries also seek to offer improved infrastructure as a way to lure in foreign capital investment. Energy, roads and telecommunication systems are all indispensable infrastructure for the functioning of manufacturing and trade between the signatory nations involved in agreements (Haggard, 2000; Jaramillo & Lederman, 2006).

While improving and amplifying infrastructure is considered a crucial measure for the attraction of extraregional investment to trade blocks, the integration of infrastructure serves intraregional goals of economic liberalization. Among the perceived benefits of integration are the increase in cost efficiency, service coverage and quality of service. Reductions in production costs as well as expanding market size are also included in the discourse for integration (Hira, 2003).

Energy above all other infrastrucuture sectors is considered, within the neoliberal discourse, to be fundamental as it is crucial to contemporary economies. The cost of electricity affects all economic production and is translated into prices of consumer and 20 industrial products (Hira, 2003). Without energy infrastructure the demand for other infrastructure would be greatly reduced, perhaps to nothing.

The turn of the twenty-first century has seen an increase in Latin American economic integration, especially in Central America. Concurrently, regional energy sector amplification is set to meet market demands. In the following chapter the recent

CAFTA (Dominican Republic - Central American Free Trade Agreement) will be discussed along with two supporting integration initiatives, the PPP and SIEPAC. The role of energy in integration and development will be expanded upon.

Chapter 3: Implementing CAFTA’s Success:

the PPP and SIEPAC Infrastructure Development

Inroads to Integration: Securing Independence to Securing the Region

As described in Chapter 2, Central America has a long history of attempts at economic integration and free trade. From their humble beginnings under Spanish colonial rule in the Kingdom of Guatemala, the relatively small countries of the isthmus engaged in mercantilist trade with the mother country. Raw goods were sent back to

Spain to be processed and returned to the colonies for sale at a profit. This system was exploitative at the colonists‟ expense. In 1776, trade was liberalized between the colonies allowing for intraregional commerce. This liberalization, however, only served to strengthen the monopolistic powers of Spain; there was little economic growth within the colonies (Perez-Brignoli, 1989). In 1823 the colonies proclaimed independence from

Spain and subsequently, in 1824, formed the Federation of Central America that lasted a discordant thirteen years fraught with civil war. In 1839 the Federation finally disintigrated. Between 1847 and 1848 Guatemala, Honduras, Belize, El Salvador,

Nicaragua, Costa Rica, and Panama emerged from the rubble of failed unity.

The United States, in the midst of a gold rush and westward expansion, took special interest in the newly independent region due to its strategic significance for trade and travel through the Nicaragua Route and the Panama Canal (See Figure 3.1). Central

America was dominated by agricultural exports oriented toward the North American market. Coffee and bananas made up the bulk of the region‟s commodities unlike the larger, mining based economies of Mexico and several South American countries. 22

Unstable political environments made large capital investment unappealing and economic development stagnated well into the twentieth century. Economies depended heavily on continued exports to the US (Reid, 2007; Perez-Brignoli, 1989).

Figure 3.1 This map highlights the Nicaragua Route and Panama Canal in 1864

Source: Author Collection

The Central American Common Market (CACM), formed in 1961, was the first regional trade agreement in Latin America and included Guatemala, El Salvador,

Honduras and Nicaragua with Costa Rica entering three years later. This agreement shaped a free trade zone for the member states as well as provided financial incentives for innovation in the industrial sector. The United States funneled funds to the Social 23

Progress Trust Fund through the Inter-American Development Bank (IADB) and the

Banco Centroamericano de Integración Económica (BCIE) for infrastructure development (Hussain, 2006). Although some gains were made in intraregional trade this attempt proved unsuccessful due to political turmoil in the region during the 1980s as well as inefficient macroeconomic policies. The 1990s brought about new attempts at trade with the revival of the CACM and numerous bilateral compacts with Mexico, the

United States and South American countries. Trade among the CACM member states increased from 21 to 38 percent between 1990 and 2004, showing relative progress in trade liberalization. Unfortunately, the impacts have done little to reduce the poverty rates among Central American nations, according to World Bank reports. This information is striking as neoliberal economic theory advocates trade liberalization as the key to long term poverty reduction (Winters & Neil McCulloch, 2004). Due to the inconsistent results in growth, Central American states have put new focus on reforming policies that would allow for the privatization of services and opening up to foreign direct investment

(FDI) (Hussain, 2006). Recent regional initiatives undertaken for this purpose are

CAFTA and the Proyecto Mesoamerica, formerly the PPP, which are touted as a means to further trade diversification and facilitation (Jaramillo & Lederman, 2006).

The first section of this chapter identifies the creation, components and participants of CAFTA as well as the purposes for which it was designed. The legal implications of articles within the treaty are discussed in regard to conservation and development. The second part discusses the inseperability of the PPP/PM as a complimentary agenda in development plans for the functioning of CAFTA. The third section presents an indepth view of the SIEPAC integrated grid. Both production and 24 transportation are examined while elaborating the hydropower component to the facilitation of energy export.

Integrating Economies: Central America-Dominican Republic FTA (CAFTA)

Following suit with neoliberal policy recommendations for economic development, the countries of Central America entered into a multilateral agreement with the United States on the 5th of August 2004. Crafted after just one year of negotiations, which were conducted largely behind closed doors with little inclusion of societal groups

(Hussain, 2006), the United States‟ signature on the treaty took five years with the House of Representatives passing it by a margin of only two votes (Stenzel, 2006). The

Dominican Republic, Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica are all signators for the Central American-Dominican Republic Free Trade Agreement, known as CAFTA (See Figure 3.2). The intention of this treaty is to increase market access for goods and investment by lowering trade barriers and amending regulations for services between the member countries. Agricultural goods, textiles and apparel goods are priorities for CAFTA access to markets (Beck, 2004; Jaramillo & Lederman,

2006; Stenzel, 2006). The agreement is set to ensure and expand Central American access to US markets and vice versa.

Proponents of the free trade agreement (FTA) consider the pact as the missing spark for increased economic activity and growth in the region (Jaramillo & Lederman,

2006). Supporters believe the “trickle down” benefits will reach citizens through the expansion of industry in the region boosting demand for US goods and reducing poverty

(Stenzel, 2006). Opponents claim that CAFTA is set to further the interests of US 25 multinational corporations and investors in the region by assuring that they will face few regulatory restrictions to their operations (Moreno, 2003; Beck, 2004).

Figure 3.2 CAFTA signator countries: US, DR, GT, ES, HO, NI, CR, PA

Source: (Author, 2010)

This is viewed as a continuation of Monroe Doctrine policies and although the CAFTA is being touted as a means to further economic development for the Central American states it may be furthering US interests to facilitate access to Central American economies. The following statement by former Secretary of State Colin Powell supports this position;

“Free markets and free trade are the key priorities of our national security strategy,”

Powell stated going on to mention that “control by U.S. businesses over a territory that ranges from the North Pole to Antarctica, with free access, without any obstacle or 26 difficulty for our products, services, technology and capital throughout the hemisphere” is the objective of the United States (Moreno, 2003). This would mean the realization of the Free Trade Area of the Americas (FTAA) which would create a united hemispheric trade block for the thrity-four nations (Moreno, 2003; Beck, 2004; Stenzel, 2006).

Although this thesis will not detail the FTAA, it is important to note that the scope of intentions for CAFTA on behalf of the United States reaches beyond the immmediate treaty between the member states.

Risks and Resistance: Articles of Corruption within the CAFTA Framework

Although literature on CAFTA proceedings is limited due to the nature of its recent inception, interpretations of the articles and predictions about the impacts of

CAFTA have been made based on similarity in language between this treaty and

NAFTA. Comparisons of NAFTA provisions made by economist Maria Trejos and legal expert Victoria Lindo with those in CAFTA cause alarm for critics who perceive a focus on corporate profits over human rights and sustainability (Trejos, 2007; Lindo, 2006;

Moreno, 2003; Beck, 2004). Anticipated reprecussions include a decline in family living conditions due to increased unemployment from failed national businesses, commoditization of public services and subsequent increased prices, degradation of the environment, increased migration and displacement of vulnerable communities and peoples (Moreno, 2003).

The environment is of special concern to many CAFTA opponents as natural resources are made available to international firms who have secured the “rights” to these resources through the treaty. Although there are provisions set up for national 27 environmental protection within the CAFTA framework, critics claim that the convoluted language and legalities of CAFTA outweigh national, state and local laws making true protection infeasible (Beck, 2004).

CAFTA Article 10.7: Expropriation and Compensation states that “No Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization (“expropriation”), except: (a) for a public purpose; (b) in a non-discriminatory manner.” A legal interpretation by Victoria

Lindo of the article explains that “equivalent to expropriation” refers to any action taken by a national government that a firm deems as a limiting measure to their investment.

What is more, it permits the firm to demand compensation for any laws or regulations that impose on real or potential profits (Beck, 2004; Trejos, 2007; Lindo, 2006). In essence this provision is designed to provide a secure environment for shareholders so they will have confidence in their investments abroad. Nonetheless, environmental advocates claim that it strengthens multinational control over natural resources by weakening government authority over foreign investment in their countries (Beck, 2004;

Stenzel, 2006; Trejos, 2007; Lindo, 2006).

Article 17.1: Enforcement of Environmental Laws also could affect the environment. It states that “A Party shall not fail to effectively enforce its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement.” Fines may be applied by the Secretariat of CAFTA in the case that states fail to impose their laws. This appears to be a beneficial stipulation set forth to deter countries from allowing harmful development and allowing citizens an avenue to address violations, however, 28 enforcement is considered to be weak. The maximum annual fine is set at US $15 million while the potential remuneration for “expropriation and compensation” is seemingly limitless (Jaramillo & Lederman, 2006). The developing economies involved in CAFTA are not financially powerful enough to pay for damage claims in lawsuits that may ensue from prohibiting development in the name of environmental protection. Therefore, several analysts believe that states may be obligated to allow development that they would otherwise prohibit due to the treaty loopholes (Beck, 2004; Lindo, 2006; Trejos,

2007).

Liberalizing the Service Sector to Serve Private Interests

According to neoliberal economic theory, international trade can increase development significantly if other factors support the changing economy‟s ability to adjust to a new regime. If infrastructure is inadequate to support the export of goods or the access of labor to market areas, then trade potential may be tied up and hinder development. Therefore, achieving the benefits of CAFTA will depend on instituting a complimentary policy agenda of trade facilitation through the expansion of services and among other things, regulatory reforms (Jaramillo & Lederman, 2006). Domestic policy and regulation reforms within member states will center on increasing competition in the service sectors such as telecommunications, financial services, and most importantly for this thesis, the energy sector (Jaramillo & Lederman, 2006).

Until recently, private participation in service sectors, such as energy production and distribution as well as transportation, was limited by laws within the member states.

Monopolistic control that was largely public is now shifting to private. As the trend to 29 privatize is sweeping the Central American region, still cumbersome protectionist measures by governments cause challenges for investors (CAESS, 2008). Strategists of the CAFTA believe that state regulations must be relaxed in order to promote the timely entry of new firms to the region and to facilitate new industry. The granting of new concessions has been hampered in some cases by multiple registration procedures over extensive periods of time. Under the guidelines set forth by the CAFTA agenda, these procedures would be reduced to a single step when possible (Jaramillo & Lederman,

2006).

This move to market opening, deregulation and privatization is what Jose Merino del Río of Costa Rica calls the “unholy trinity of market fundamentalism” (2003). What were once public sector services are now being taken over through privatization measures by multinational companies whose logic on provision is based on markets and profits.

Services that were considered essential under public management are now exclusive under free trade agreements and with the partial and often covert privatization of public services, such as water and power provision (Moreno, 2003). Privatization within the electricity sector would benefit the corporations that acquired concessions or assets at low cost and then establish private monoploies or duopolies in production and distribution.

Complimenting the Agenda: PPP/PM and SIEPAC

CAFTA depends on national institutions to adapt treaty policies and undertake a complimentary agenda that will facilitate the increase of efficiency and competitiveness within the region. This project based complimentary agenda is known as the Proyecto 30

Mesoamerica (PM), formerly known as the Plan Puebla Panama (PPP). On September 5,

2000, Former President Fox of Mexico proposed the PPP to the countries of the Central

American isthmus (Hussain, 2006; Stenzel, 2006). In December of 2001 Mexico,

Guatemala, Belize, Honduras, El Salvador, Nicaragua, Panama and Costa Rica signed the pact with Colombia joining in 2004 (EIA, 2007; Stenzel, 2006). Unlike the trade-centered approach in CAFTA, the initial PPP plans served eight purposes with the two highest priorities set on highway construction and establishing the Central American Electricity

Interconnection System (SIEPAC). The initiative designed to keep industry and products from migrating away from North Americancontrol (Hussain, 2006) justifies the interconnection of free trade agreements and regional integration schemes (Jaramillo &

Lederman, 2006). The following section discusses the integrated electricity grid.

Funding the Facilities: The Money behind the Market

Funding for PPP from Fox alone was originally set at $420 million in 2001 but that rapidly increased to $697 million by 2002. Taxpayers from across the participating countries will contribute, however, funds are limited. According to Hussain, the projects that comprise the initiative depend too heavily on multilateral funding and the private sector (2006). The Inter-American Development Bank (IADB) is the primary funding source for the initiative and has agreed to loan $20 billion over the course of 25 years

(Hussain, 2006). Of that, $320 million is designated specifically to SIEPAC with Spain providing $70 million of that sum through a fund administered through the IADB.

Together with the Central American Bank of Economic Integration (BCIE), the IADB established a $5 billion credit line to fund the main components of the project. The 31

World Bank, European Union, JBIC, USAID, and the Andean Development Corporation

(CAF) are also financing the ambitious project (BIC, 2007; IADB, 2006; USAID, 2006;

Stenzel, 2006).

The grid, as depicted in Figure 3.3, would be comprised of 1130 miles or 1830 km of 230 KW transmission lines to connect newly constructed dams and natural-gas fields to new factory development zones through 16 substations (IADB, 2006). The initial cost for these lines was slated at $409 million under SIEPEC and set for coordination by

Guatemala. The Empresa Propietaria de la Red (EPR) was established for the construction, ownership and operation of the transmission line. The EPR is a partnership comprised of energy companies in each of the member states: Costa Rica‟s ICE and

CNFL, El Salvador‟s CEL and ETESAL, Guatemala‟s INDE, Honduran ENEE,

Nicaragua‟s ENTRESA, Panamanian ETESA, Spain‟s ENDESA and ISA of Colombia

(IADB, 2006).

Figure 3.3 SIEPAC trajectory minus extended Panama portion

Source: (EPR, 2008) 32

Estimates total the creation of 1,100 temporary construction jobs across the region. Guatemala began construction of the section connecting the country to Mexico,

El Salvador and Honduras in 2006. The Mexican affiliate of an Italian-Argentine engineering, steel and energy company, Techint, is responsible for this segment of construction (IADB, 2006). Meanwhile, Instalaciones Inabensa, a Spanish subsidiary of the energy group Abengoa is in charge of construction in Costa Rica, Nicaragua and

Panama (EIA, 2007; IADB, 2006).

The Comisión Regional de Interconexión Eléctrica or Regional Electric

Interconnection Commission (CRIE) was established as the regulating agency for

SIEPAC. This supranational entity is tasked with ensuring transparency and proper functioning of the market, promoting competition and managing both transmission and generation of power on the grid (USAID, 2006; EIA, 2007). The electricity is set to be sold on the Mercado Electrico Regional (MER), a regional electricity market (EIA,

2007). The IADB granted an additional $12.5 million to aid in the design of the market‟s measures for operation, regulation and a regional market operator (IADB, 2006). The

SIEPAC is slated to connect to the Initiative for Integration of Regional Infrastructure in

South America (IIRSA) and the Trans-Texas Corridor into the United States which is part of the larger North America Super Corridor (NASCO) (NASCO, 2009). The director of the Unidad Ejecutora (Executive Unit) stated that the projects will supply “an endless chain of energy” spanning the hemisphere (Stenzel, 2006). This would provide for the infrastructure and regulatory framework necessary to make the FTAA a reality (BIC,

2007; Stenzel, 2006). These ambitious plans are set to impact an estimated 65 million 33 people of 100 different linguistic groups across eight countries (Hussain, 2006; BIC,

2007).

PPP received great opposition from grassroots groups from its inception. This is due in large part to the secretive nature of negotiations, the threat of continued US hegemony, and potential for negative impacts on indigenous groups (BIC, 2007; Hussain,

2006). As long as development is sustainable and equitable then there should be no problem, however, that is inherently counter to market principles. While the project is devoted to economic development, little emphasis is set on social or environmental sustainability, in other words, it is not sustainable development (Stenzel, 2006). SIEPAC opponents maintain that the integration scheme will bring about the privatization and sale of the last public assets, such as geothermal and hydroelectric plants and that the electricity sector would then in fact be market-oriented (Moreno, 2003).

Current demand and production in Central America

Central America‟s installed electricity generating capacity in 2005 was 8.5 gigawatts (GW) (EIA, 2007). Developing countries are projected to increase energy consumption annually at a rate of 3 percent until 2020. Central America is currently experiencing a growing demand of 4.5 percent annually and the trend is expected to continue (CAESS, 2008). In 2005, the region generated 34.2 billion kilowatt-hours

(Bkwh) of which 29.5 Bkwh were consumed (EIA, 2007). The SIEPAC expansion will increase the total for energy transmission from 30 MW to 300 MW and according to the

IADB, through cooperation by the member nations demand should be met and power outages decreased (IADB, 2006). 34

In 2007 Costa Rica was both the greatest consumer and generator of electricity in the region using 8.1 billion kilowatt-hours (Bkwh) while creating 8.8 Bkwh. Guatemala was the second largest consumer at 7.11 Bkwh of the 8.42 produced. Panama consumed

5.16 Bkwh of 6.32 generated. El Salvador‟s Bkwh usage was 4.76 of 5.55 generated and

Honduras used only 4.69 of the 6.05 Bkwh produced. Nicaragua falls far below that consuming only 2.56 Bkwh of the 3.28 generated and Belize is the smallest consumer at

0.19 Bkwh which is relatively close to their maximum generation of 0.21 (EIA, 2009).

Figure 3.4 illustrates this pattern for 2007.

Figure 3.4 2007 rates of generation to consumption in Central America

Belize

Nicaragua

Honduras

El Salvador Consumption Generation

Panama

Guatemala

Costa Rica

0 2 4 6 8 10

Source: (EIA, 2009)

Hydro-powerful: Rivers of Energy

The majority of electricity in Central America is produced by hydropower, a trend that has dominated the region historically (Clough, 2009). Hydroelectric power facilities produced fifty-one percent of the region‟s supply in 2005. In 2006, all energy produced by hydropower was consumed. The remaining demand is largely met by thermal power generated from imported fossil fuels (EIA, 2007).The quantities of hydroelectricity produced in the region are set to rise dramatically due to instability in the world‟s oil supply, the move towards renewable and alternative energy sources, the integration of the electricity grid and the commoditization of power. Hydropower facilities on major rivers will provide energy for domestic/home uses; however, most of the power produced will be sold to supply energy for industry both within the region and to the United States on the integrated grid (Stenzel, 2006). The most frequently cited dam project related to the

PPP literature is the Usumacinta River and its many tributaries located in the culturally diverse borderlands between Mexico and Guatemala (Stenzel, 2006).

Benefits of hydropower over other energy sources include the ease with which it can produce peak load energy, low operating costs after the initial investment, long plant life, efficient energy conversion, the concurrent provision of other water uses such as irrigation water supply, recreation facilitation, flood control and navigational improvements (IHA, IEA, & CHA, 2000). Conversely, critics of hydropower cite that instability in water regimes due to climate change is making hydropower a less reliable source of energy and that the negative impacts of project construction and operation make hydropower development neither a non-renewable nor a sustainable resource

(Lindo, 2006; FECON, 2002; Duran C., 2009). Nonetheless, hydropower plays an 36 important role in macroeconomics for the countries in which it provides more than fifty percent of the electricity supply (IHA et al., 2000). In Central America, Costa Rica is both the leading consumer and producer of electricity with the majority of that coming from hydropower, thereby making it the hydropower capital of the region. The following chapter will explore the unique situation that Costa Rica is poised in as the hydropower capital of the isthmus.

Figure 3.5 2006 Installed Capacities for Electricity Generation in SIEPAC countries

Hydropower Hydrocarbon Other

68 68 67 62

53 51 52 47 43

37 36 32 32

12 11 6

1 0 0 0

Central Guatemala El Salvador Honduras Nicaragua Costa Rica Panama America

Source: Installed Capacity Statistics (ECLAC, 2006)

Chapter 4: Costa Rica the Hydropower Capital of Central America

Costa Rica: From Rags to Riches

Located on the isthmus of Central America, nestled between Nicaragua to the north and Panama to the south, Costa Rica has been considered as a Shangri-La amongst its neighbors (Chamberlain, 2007), the Switzerland of Latin America (Vanden, 2002), the

Cinderella of Spanish Colonies (Chamberlain, 2007). These images of “utopia” and fairytale endings stem from the country‟s emergence from an impoverished, insignificant

Spanish colony to a peaceful social democracy and economic leader amongst its tumultuous neighbors (Chamberlain, 2007; Perez-Brignoli, 1989; Reid, 2007). As neoliberal reforms have been implemented in the last two decades, these images have become mired with controversy over oligarchic control in government administration as well as conspiracies involving resource development and distribution, particularly in the energy sector. Through the examination of Costa Rica‟s climate of conflict stemming from issues in the construction of large hydropower projects and privatization efforts in the energy sector, this chapter expands the political economic assessment of neoliberal shift. The first section of this chapter highlights the formation of the social-welfare democratic state. The second part gives an indepth analysis of the political economic climate of energy through policy change. The third section expounds on the discourse of the current arena in energy sector policy and planning.

Unlike the histories of neighboring countries in the Spanish colonial Kingdom of

Guatemala, the inability to subjugate the native populations into a large work force, the absence of mineral wealth and distance from the colonial political center were all what could be considered a blessing in disguise, leading to Costa Rica‟s overall political and 38 economic stability (Chamberlain, 2007; Stone, 1988). Instead of large haciendas and mines, Costa Ricans, informally known as “Ticos”, created an egalitarian society of small family subsitence farming plots with little interest or access to commerce among colonial territories (Chamberlain, 2007; Monge, 1976; Perez-Brignoli, 1989). The agrarian lifestyle translated into the few exports that did leave the country during the colonial period; first as cacao and then tobacco. This experience taught farmers and business men about the agricultural trade business and once independence was gained, their attentions were turned toward coffee exports to England. Cafetal ventures proved successful for the nation and further cemented the establishment of a general socioeconomic accord in

Costa Rica‟s agrarian society. During the 1830s transportation improved to meet the demands of the expanding coffee trade and the government modernized as well (Perez-

Brignoli, 1989). The next decades saw an increase of settlement in the country‟s central valley and the expansion of crop exports.

Administrations were liberal in comparison to neighboring countries and saw the advent of public schooling and freedom of the press as early as 1847 under President

Madriz. Even during authoritarian rule between 1870 and 1882 under General Guardia the country established a constitution that was in effect until 1949, abolished capital punishment and welcomed foreign investment into an extensive modernization agenda.

Railways and ports were expanded for the agroexport economy, namely coffee

(Chamberlain, 2007). The small and medium farm remained the norm while the most successful shaped a ruling class that monopolized coffee processing and financial resources from credit and production financing to exporting. Thus, a social dynamic all benefiting from coffee was created between the businesses and the farmers and the 39 interdependence helped to fortify the nation-state (Perez-Brignoli, 1989; Stone, 1988;

Chamberlain, 2007).

Chamberlain points out, however, that although less corrupt than its neighbors,

Costa Rica did suffer from an oligarchic political party system that was based on the recently risen coffee elite‟s endeavor to maintain political control rather than on an actual national agenda (2007). Anthrpologist, Samuel Stone, explains that this led to a social- political endogamy that eventually expanded beyond the coffee business into other trades,industries and politics (1988). Nonetheless, Perez-Brignoli explains that coffee led to sustained economic growth and a strengthened social order, albeit under increased subordination to foreign capital and the dynamics of foreign markets (1989). During the last decade of the nineteenth century, a completed railroad to the Atlantic brought an increase of foreign investment that subsequently translated into a large national debt from the US and England and the expansion of the agroexport industry to include bananas (Chamberlain, 2007; Perez-Brignoli, 1989). Trade shifted from a European market to a largely US market (Chamberlain, 2007).

Bananas brought investment, mainly by a conglomerate of firms that would become the United Fruit Company and Standard Fruit and Steamship Company

(Vanden, 2002). Large land concessions on the Caribbean slope were planted with bananas and workers were shipped in from Jamaica to labor in the plantations as no laborers could be spared from the coffee industry to do the work (Stone, 1988). Corporate towns sprung up to support the workers‟needs with schools, housing and general stores.

As discussed in Chapter 2, the dependence on the single or double crop agroexport economy did not, however, give rise to capitalist expansion in the remaining economic 40 sectors of the nation. Instead, these mutlimillion dollar estates were nearly sovereign and quite removed from the mainstream Costa Rican society of the Central Valley (Perez-

Brignoli, 1989). Little technology and or advances in labor productivity were achieved and the state economy relied entirely on the world market. This proved to be worrisome during global economic crisis and world wars as demand for exports reduced.

Nonetheless, as neighboring countries with more pronounced inequality were falling under dictatorships, installed in large part by US intervention, democracy with regular elections and political participation remained nearly a constant of the working class Costa Rican society (Chamberlain, 2007; Perez-Brignoli, 1989). Straying from this norm, the administration‟s attempt to thwart elections in 1948 led Costa Rica to a revolution led by Jose Figueres. This would eventually shape the nation‟s future and solidify its regional role as both economically and politically superior to its neighbors

(Llosa, 2005). The fight to create a lasting democracy also led to the abolition of the military and the establishment of a social economy and strong civil society (Vanden,

2002). Efforts to mitigate economic and social problems led to the creation of a state education and health care system as well as autonomous public corporations and institutions such as administration of public works and the nationalization of the banking system. Vanden claims that Costa Rica‟s social democratic programs improved the standard of living of the citizenry and rivaled many developed countries while creating and maintaining one of the best infrastructure systems in all of Latin America (Vanden,

2002).

Power Driven Development: Energy Then and Now

Costa Rica‟s energy history with electricity began in 1884 when the Costa Rica

Electric Company provided power to 25 street lamps in San Jose, making it the second city to be lit in the Americas after New York. First legislation designed to regulate and nationalize water as a hydraulic force was made in 1910 by President Ricardo Jimenez

Oreamuno through limited concessions in Law No. 14 (Rodriguez A., 2000). This drew interest from foreign investors, particularly the American Foreign Power and Light

Company, a subsidiary of the US company, the Electric Bond and Share Company

(EBASCO) which quickly became a virtual monopoly over all other electrical services in the country through three companies that they controlled: the Costa Rica Electric Light

Company and Traction Company, la Compañía Nacional de Electricidad, and la

Compañía Nacional Hidroeléctrica (Rodriguez A., 2000; Young & Co., Infrastructure in

Latin America: Recent evolution and key challenges: Costa Rica, 2005). In 1928, the

Liga Cívica (Civic League) formed due to preoccupations about the monopolization of the electricity sector and the control of hydrological resources by foreign private interests from the US which were both deemed paramount to the socio-economic development of the nation. This led to the creation of Law No. 77 concerning the nationalization of hydrological forces and the establishment of the National Electricity Service (SNE) as the first service sector regulation agency that could tax generators, control tariffs and build projects. The monopoly that the American Foreign Power and Light Company had was challenged by this assertion of nationalism over the resources that they had freely profited from prior to the law (Rodriguez A., 2000). The following decade was wrought 42 with challenges over tariffs, service provision and concessions between the public and private sector, a situation that has yet to cease in Costa Rica.

Seeking resolution to the country‟s energy problems, President Rafael Angel

Calderon Guardia asked US President Franklin D. Roosevelt to send an energy expert to

Costa Rica to assess the situation. Julius Krugg from the Tennessee Valley Authority arrived on the job and his analysis presented a long list of recommendations and commentaries on what he perceived to be a grave situation. Among his suggestions was the consolidation of the three private companies of EBASCO into one entity. The

Compañía Nacional de Fuerza y Luz (CNFL) was created from the merger (Rodriguez

A., 2000). CNFL remained the main electricity company in the country until ICE‟s inception (ICE, 1988; Chamberlain, 2007).

Krugg, a strong believer in state-run sectors, further suggested that the current laws and regulating authority, as well as financing for project development were inadequate to deal with the burgeoning demands of the energy sector. In response, Law

No. 258 was passed granting the SNE with fiscal oversight of electric companies, authority over tariff regulation and the ability to implement penalties for the smuggling of energy or unauthorized utilization of hydrologic resources for the generation of electricity. The Water Law of 1942, No. 276, further established water and its many bodies of containment, both surface and groundwater, as public goods and therefore property of the state (Rodriguez A., 2000; Miranda, Dieperink, & Glasbergen, 2007) .

The law also created a framework for water resources and the state‟s right to authorize, regulate, control and administer all waters, headwaters, lake basins, lagoons, estuaries, groundwater, surface water as well as all materials that accumulate in the waterways and 43 basins through the SNE (Aguilar-Schramm, Jimenez-Rojas, & Cruz-Alvarez, 2001;

Rodriguez A., 2000). In addition, the law permitted the creation of additional organizations that would direct water use, conservation, and regulation (Miranda et al.,

2007).

One the most ambitious results of revolutionary Figueres‟ social initiatives was the creation of the Instituto Costarricense de Electricidad (ICE) under decree of Law No.

449 in 1949. The two chief purposes of the institution according to the law are:

1. To solve the country‟s problems of power scarcity, to reliably meet demand, and to encourage the development of new industries as well as expanding electricity coverage in rural areas. Construct new hydropower plants using all technical, legal and financial means necessary. To pursue economically justifiable projects.

2. To promote industrial development and increased national production using electricity. To research and exploit the country‟s [natural] resources of wealth (Chamberlain, 2007; Rodriguez A., 2000).

As ICE evolved, its tasks came to include the generation, transmission and distribution of electricity as well as the construction and maintenance of all relative infrastructures (ICE, 1988). All of which Chamberlain points out was for the economic development of Costa Rica (2007). The institution was set to be not for profit and in turn, offer all of its services at cost. This, in theory, would ensure the access to energy for the wellbeing of the entire population. ICE‟s financing was to be generated through the profits from the provision of services as well as from loans from international development agencies and foreign aid (ICE, 1988). According to a report by ICE, the institution was designed to be autonomous and at liberty to make decisions in the interests of the entity (1988). Autonomy was short lived. 44

In an ECLAC report Carlos Sojo describes a gradual diminishing autonomy in

ICE and all other Costa Rican autonomous institutions and an increase in government influence over decisions (2004). In 1962 a law was passed calling for the inclusion of a

State Minister in the board of directors. In 1968 autonomy was further limited to administration alone. Meanwhile, in 1968 CNFL was virtually taken over by ICE by means of Law No. 4197 which granted 93.74 percent of the shares to ICE and 6.26 percent to Costa Rican investors (ICE, 1988). This merger of the two power entities formed a vertically integrated, natural monopoly of energy production and supply across the nation (Young & Co., 2005; Chamberlain, 2007; ICE, 1988). This appears to be the first point at which private investors held interest in the entity. Shortly after in 1970 another law designed a board of directors that would consist of a majority appointed by the national executive administration. Furthermore, in 1974 the Executive President of institutions would be appointed by an Executive counsel and would be entitled with powers superior to those of the General Manager (Sojo, 2004). This calls into question the institution‟s ability to make nonpartisan decisions. Over the past three decades, several ICE directors and Costa Rican presidents have been involved in scandals directly relating to the operations of the entity, this will be further discussed.

Hydro-plentiful: Harnessing Hydro-power to Developed the Nation

As noted in the second set of functions in Law No. 449, it was the duty of ICE “to promote the enhanced understanding and exploitation of the country‟s resources of wealth” in the name of economic development. This meant exploring and studying, among other resources, the hydropower potential of the country. Costa Rica‟s 45 geographical situation on the only inter-oceanic and inter-continental region in the world, together with its steep terrain reaching up to 3,819 meters, provides a mosaic of microclimates that support one of the most bio-diverse countries on the planet (InBio,

2010; CRG, 2009). The topographical features produce a tropical climate with heavy rainfall that collects in thousands of springs, creeks and rivers to form 34 watersheds in a territory of fifty thousand square kilometers, roughly the size of West Virginia (CIA,

2010) (See Figure 4.1). With an annual average rainfall of 130 inches (11 feet), water is in apparent abundance and has been viewed as an “inexhaustible” and “free” natural resource (Miranda et al, 2007). Abundant water coupled with the steep terrain that provides the vertical gain required for large dam projects create an ideal situation for hydropower production. Costa Rica‟s hydropower potential is actually considered to be the country‟s greatest natural resource (USDOS, 2008).

The generation of electricity utilizing the force of the abundant water resources grants the country a near independence from the need to import foreign resources such as nuclear elements or petroleum for thermal energy production. Hydropower has often been considered to be a “clean energy” in comparison to hydrocarbon resources making it an attractive alternative to other standard power generating options. From the first waterwheel that brought light to those twenty-five street lamps in 1884, the country expanded the energy sector to twenty-eight large hydroelectricity generating facilities found in the country as of 2010. These facilities are owned and operated by ICE and

CNFL, which were the only entities entitled to build hydroelectric facilities in the country until 1990 (ICE 1988; Rodriguez A., 2000).

Figure 4.1 Four cordilleras and ample rain create 34 watersheds

Source: (Author, 2010)

First Attempts at Privatization and liberalization of Hydropower development

Following the global economic crisis of the 1980s that eventually gave way to the

“Washington Consensus” policy reform advice as discussed in Chapter 2, and nearing the end of the Cold War that had once again given Costa Rica a strategic geopolitical importance to the US, the country was encouraged to undertake neoliberal reforms to enter into the globalization process (Sojo, 2004; Vanden, 2002). USAID and other lending institutions recommended that Costa Rica abandon its protectionist, social welfare state in exchange for a neoliberal state that included less state intervention, 47 especially in respect to the free flow of goods and capital, and the privatization of public services. This would mean opening the energy sector, among others, to investment from transnational capital and corporations and the inflow of their products (Vanden, 2002).

Oscar Arias Sanchez took the presidency for his first term in 1986 on a campaign platform built on restructuring the economy (Vanden, 2002). Discussions of ICE privatization began shortly after (Sojo, 2004). According to reports by Costa Rica‟s

Minster of National Planning and Political Economy, private investment in the energy sector was necessary due to the diminishing presence of external funding from multilateral banking institutions for major project development (MIDEPLAN, 2009).

Opposition to the privatization efforts cited that unlike other inefficient bureaucratic agencies in the region, Costa Rica‟s ICE was still functioning at a successful rate and serving the public as it was constitutionally decreed to do as a not for profit entity

(Chamberlain, 2007). Notwithstanding ICE‟s argued success, fourteen “non-strategic” components of the company were outsourced to the private sector the following year; however, full privatization of the institution was not attempted. ICE was still to remain in charge of the planning, development, and operation of all large infrastructure projects

(Salas-Picado, 1995).

Liberalization and further partial privatization, however, did come in the form of new legislature for energy production in September of 1990. The purpose of Law No.

7200 was to allow the production and sale of energy to ICE from private, limited capacity hydroelectric power plants, known as cogenerators (Chamberlain, 2007; Schramm et al,

2001; Young & Co., 2005). 48

During the time period of Law No. 7200, negotiations were underway for the creation of SIEPAC, the regionally integrated electricity grid discussed in Chapter 3. This entity was conceived during the first phase of structural adjustments in the region in 1987 by the governments of the isthmus and Spain. Studies showed that it would lead to lower costs, improved coverage and attract private investment in production. In 1995, the countries agreed to continue with the plan, later bundled into the PPP, just at the time private production became an option in Costa Rica (Ruiz-Caro, 2006).

Figure 4.2 Costa Rica Energy Sector & Regional Economic Policy Trends Timeline

Source: (Chamberlain, 2007; Rodriguez A., 2000)

Steps to Achieve Concession: precautions and parameters

In order to obtain a private concession2, a rigorous certification process was required. First the company had to present its request to ICE for review and to acquire a declaration of eligibility. Discourse from privatization proponents would eventually describe this as an impediment to development and the continuation of what they deemed an ineffective monopoly of the energy sector (Staff Writer, 2008). Once the certificate was obtained from ICE, the Ministry of the Environment and Energy (MINAE) was authorized the power to grant legislative concessions for the utilization of municipal river water, however, they were not further able to grant or deny concessions for the development of hydrologic forces or hydroelectricity. This ability was held by the newly formed Public Service Regulating Authority (ARESEP) which replaced the SNE in 1996.

ARESEP was granted the power to authorize the production of hydroelectricity and to regulate tariffs. In addition, Article 21 of the Harmonious Law of the Environment (Ley

Orgánica del Ambiente), codified in 1995, stipulates that an environmental impact assessment (EIA) must be conducted for the generation and transmission of electricity, among other activities (Aguilar et al, 2001). Endorsement for development of private power generating facilities depended on the Secretary of the Environment‟s, (SETENA), approval of an EIA. SETENA is the technical environment department within MINAE

(Aguilar-Schramm et al., 2001; Rodriguez A., 2000; Young & Co., 2005).

The Law was designed to promote conservation and sustainable use of the environment as a public interest and developed criteria to ensure the success of these concepts with the goal of guaranteeing the quality and quantity of water. The criteria

2 Concessions are the term used in Costa Rica for permits 50 include: to protect, conserve and when possible restore aquatic ecosystems and the elements that contribute to the hydrological cycle and to protect the ecosystems that permit the regulation of the hydrologic regime maintaining equilibrium of the water system by protecting each of the watershed‟s components. Essentially these criteria are to be applied to any authorization of concessions to develop or alter any component of the hydraulic regime.

An interesting set of regulations in regard to dam construction set forth by the

Costa Rican government combine to create a situation that seems contradictory to achieving optimal energy production. There are no stipulations limiting the number of hydropower projects that can be built within a watershed, however, there is a limit to the amount of electricity that each cogenerating plant can produce (Lindo, 2006). This seems counterproductive if the ultimate goal of hydropower production is to generate large quantities of electricity at low cost with minimal damage to the environment.

Clearly the Ley Orgánica reflects a shift in the perception of the importance of looking at the environment as an integrated system. However, members of the

Federación Costarricense para la Conservación del Ambiente (FECON) Energy

Research Group report that the EIA does little in the way of defining the environmental viability of a project, instead it outlines the impacts and mitigation strategies necessary for the individual project and does not take into consideration the effect of multiple projects in a watershed. These arguments are included in discourse on the development of both large scale hydropower projects and cogenerating facilities (Duran C., 2009;

FECON, 2002). Several of Costa Rica‟s watersheds have multiple dam projects on one channel, the Río Reventazón for example, currently has four large dams and another is in 51 the beginning phases of construction (ICE, 2007) while the Río San Carlos has 29 hydropower producing facilities (Duran C., 2009).

Inflated Rates: Corruption in corporate concessions

Initially the capacity of these cogenerating facilities was set at 20 MW and their total supply to ICE could equal fifteen percent of the nation‟s energy supply.

Concessions were to last for up to fifteen years at which time the operation would have to submit a request for renewal (Duran, 2009). In addition, only thirty-five percent of all shares could be owned by foreigners, Costa Rica nationals were to retain the remaing sixty-five percent (Young & Co., 2005). While these figures seem reasonable within the context of meeting energy demands, the discourse from opposition centered on tariff changes.

Electricity was set to be purchased by ICE at elevated rates over that which the institute was capable of generating its basic services for the public as a not-for-profit- entity. Many private cogenerators had contracts for purchase by ICE at the avoided cost of thermal energy, a price increase of up to nine times. FECON reports that the cost of the privately generated power costs up to three times the amount that ICE is able to produce electricity (FECON, 2002).What is more, ICE was obliged by law to purchase all electricity produced by co-generators whether it was needed or not. Energy produced in a twenty-four hour period at non-peak times was still a mandatory purchase for ICE

(Segnini, 2000). In 1995, under the administration of Jose Maria Figueres (1994-1998), son of revolutionary President Jose Figueres, Law No. 7508 was codified increasing private production limits to thrity percent of the national total, concessions to twenty 52 years, and foreign shares to sixty-five percent (MIDEPLAN, 2009; Segnini, 2000). It can be argued that the increase in foreign shares increases the potential for capital flight therefore diminishing the potential for national economic development through these private facilities.

In 2000, La Nacion, Costa Rica‟s daily newspaper, published an article explaining the costs of private energy purchases. According to their report, eighty-nine percent of private companies charge 21.63 colones per KWH while the remaining eleven percent charge 16.37 colones per KWH. Meanwhile, ICE was capable of producing a KWH for

5.45 colones. In addition, La Nacion, highlighted that ICE sold energy at a rate of 12.37 colones per KWH, a thirty-four percent loss from what the institution purchased electricity from the private firms. The paper also reported that between 1999 and 2000, the Arenal Reservoir released 77,600 MW worth of water from the dam while ICE was obliged to purchase the same amount from the cogenerators at a cost of 1.416 million colones, roughly US $5,664,000 (Segnini, 2000). Based on tariff prices, the cost to ICE could have been as low as US $1,866,000. This price increase translated into higher consumer electric bills and into a contentious subject with the public.

In 2000, ICE‟s President, Rafael Sequeira, admitted that these costs were exceptionally high but stated that until the concessions expired, there was nothing that could be done to change them. He also explained that when the original concessions were made, the cost projections did not predict such large tariff increases. The director of

ACOPE, the Costa Rican private energy production association, insisted that twenty-four hour purchase was the only way that the cogenerators could comply with their financial obligations to investors which totalled around $400 million dollars for the nineteen plants 53 with round-the-clock production, nevertheless, ten other private plants existed with clauses limiting production to peak hours, exempting ICE from nighttime purchases

(Segnini, 2000). The select twenty-four hour purchase brings to question the legitimacy of ACOPE‟s claims, especially since later contracts did not have this purchase plan.

According to Sociologist Osvaldo Duran, these laws, contracts and tariffs are illegal based on the constitutional decree that created ICE (2009). What is more, Duran expounds upon claims that ICE directors, who as previously discussed are appointed by the government, were in collusion with the private interests. According to witnesses in communities around the Arenal reservoir, which was the largest power generating facility in the nation at that time, ICE emptied the reservoir without generating electricity to create the perception of necessity for more private facilities while legistation was being debated (Duran, 2009). This would be reported again in 2007 at the time of a nationwide blackout and pressures to increase dam development.

Costa Rican Opposition & Transition to CAFTA: Implications for the pubic sector

For negotiators, Costa Rica‟s membership to the trade compact, known as TLC in

Spanish, was most significant as the country is the richest in the region and therefore the most attractive to US investors (Stenzel, 2006). Claims that the country will benefit more than any other stem from the presence of a highly educated workforce and less dependence on agricultural exports (Kane, 2006). Due to the state education system,

Costa Rica reports a nearly 97% literacy rate and has a highly skilled labor pool ideal for manufacturing jobs that are expected to enter the country with CAFTA, much like the

$300 million INTEL plant that is already well established in the country (Exchange, 54

2009; Vanden, 2002). Opposition points out that Costa Rica has more to lose for those exact reasons arguing that CAFTA means decreases in wages, jobs and social services

(Moreno, 2003).

Costa Rican President Abel Pacheco signed the CAFTA treaty in 2004, despite cooled talks caused by demands made by US negotiators for the privatization of Costa

Rica‟s state run national insurance company, INS, and the telecommunications sector of

ICE (Kane, 2006). However, unlike in neighboring countries, the trade agreement was not immediately ratified by congress. Instead, legislative actions were stalled, a measure that was supported by a large percentage of the national population (AWID, 2007).

Before ratification, thirteen new laws relating to these concessions and others concerning intellectual property rights had to be passed, a process that proved difficult in the much divided congress (Trejos, 2007; Coalition, 2006; Fernandez, 2007). Marjorie Gamboa, professor at Costa Rica‟s National University, states that “the problem [with these concessions] is that the owners are mostly politicians, former presidents and influential families who have attempted to privatize secretly, internally, in silence” (Kane, 2006).

State records link the families of both Oscar Arias and Jose Maria Figueres, two presidents who made instrumental changes to legislature involving cogeneration development, Laws No. 7200 and 7508, to investments in power generating facilities that benefit from the new laws (Chamberlain, 2007; Duran, 2009). This brings into question the legitimacy of the actual need for private generation and conflicts of interests in policy decisions.

In 2002, when the government discussed reevaluating tariff rates on cogenerating plants, the Overseas Private Investment Corporation, the guarantee company of the 55

Figueres family‟s two hydroplants, made it clear to the government that they would take legal action in the case that tariffs were modified. In 2001 and 2002, these plants earned the families $32,595,330 (Duran, 2009). Whatsmore, Figueres, who now resides in

Spain, refused to return to Costa Rica to face charges on a bribary scandal he was invloved in during the privatization of ICE‟s telecommunications sector (Alves &

Johnson, 2004; Chamberlain, 2007). While the two incidences are not directly linked, the image of Figueres using political power to achieve financial gains through neoliberal reforms is clear. This situation further calls to question the legitimacy of claims that privatate sector participation in the energy sector was engineered to compensate for ICE‟s reduced capacity for production.

Further discourse from CAFTA opposition included concerns that ratification would compromise the unique state model of a social democracy that Costa Rica has maintained for several decades. Perceived threats stemmed from a neoliberal platform of privatization, deregulation and unrestricted market access for foreign corporations, all which the country has largely managed to avoid (Kane, 2006). As discussed in Chapter 3, concerns mounted over suspicions that effects would be similar to those experienced in

Mexico resulting from NAFTA, a comparable treaty with similar language (Trejos,

2007).

Return to Power: Arias family means business

As debates and stalling persisted, national elections were taking place. The two main candidates were Otton Solis who campaigned on a platform that called for further negotiations on CAFTA and Oscar Arias vying for his second term in office was pro- 56

CAFTA (Sonray, 2008). Due to a narrow margin in voting results with 0.5 percent of votes in Arias‟ favor, a manual recount was arranged by the National Elections Tribunal

(TSE) to verify the actual winner. 18,169 votes made the difference and Arias took the presidency again in 2006, Laura Chinchilla became the Vice President (Clarin, 2006).

Once Arias took office,the TSE was called into action again, this time to organize a referendum at the behest of a petition requested by a former congressman (Thomas,

2007). The referendum held on October 7th 2007, the first in the history of the nation, would decide the fate of the new laws stalled in congress and ratification of CAFTA. A

“Vote No” movement ensued quickly gaining fervor as discourse mounted over perceived fraud, threats to sovereignty, and government legitimacy (AWID, 2007;

Bindman, 2008; Coalition, 2006; Fernandez, 2007; Kane, 2006).

Roughly two weeks before the referendum, a memo dated July 29th and addressed to the president and his brother, the Minister of the President, Rodrigo Arias, was leaked to the public. The letter was written by the second Vice President Kevin Casas and

Congressman Fernando Sanchez, Arias‟ cousin. The letter, now known commonly as the

“Memorandum of Fear” outlined a plan for a campaign that would scare the country into voting “Yes” (AWID, 2007; Duran, 2009; El Libro Oculto de los Arias, 2009). Tactics included threatening mayors and politicians, launching a massive “Yes” media campaign, covering their backs with the TSE, and stimulating “four kinds of fear” (Casas &

Sanchez, 2007). President Arias admits receiving the letter, however, he has been criticized for not taking action against the writers for their seemingly illegal actions. The

President distanced himself from the letter and denies instituting its course of action, notwithstanding, critics claim that upon investigation, the tactics were indeed employed 57

(AWID, 2007; El Libro Oculto de los Arias, 2009; Morales-Mateluna, 2007). Casas resigned from the office of second VP on September 22, 2007, under pressure from the outraged public (Thomas, 2007; Morales-Mateluna, 2007). The following excerpts from the memorandum highlight the tactics that were suggested and perportedly excercised by the “Vote Yes” campaign. See Appendix A for the entire memorandum.

The mayor who does not win his municipality Oct.7th will not receive a nickel from the government in the next three years. The same reasoning can be applied to other public officers who can be made responsible for specific districts. In that case, we must remind them of their personal aspirations: winning the referendum is key to their continuing as public officers or to becoming mayors or congresspeople.

As elected officials, these political positions are filled as a means to represent the people. This tactic inherently undermines the process of electoral democracy if politicians are instead being forced to sway their constituents.

Fear of losing jobs. … using intensively the testimonies of very simple people in precarious situations who could lose their jobs or have already lost them due to the non-approval of CAFTA. This is crucial to reinforce the idea that this is not a fight between rich and poor.

Critics maintain that CAFTA will actually bring about the loss of jobs as national industries and institutions are dismantled with increased foreign competition

(Moreno, 2003; Trejos, 2007).

Fear of the attack on our democratic institutions. It is crucial to turn the “Yes” into an equivalent of democracy, the rule of law and institutions and the “No” into an equivalent of violence and betrayal of democracy.

This use of fear to protect the electoral democracy and institutions actually jeopardizes the real potential for preservation of those ideals or the potential for wealth distribution because privatization of resources and institutions such as 58 hydropower and the energy sector will hinder the participation of citizens with the transfer to market rules under CAFTA.

Fear of foreign interference in the NO. At every opportunity we must emphasize the connection between the “No” and Fidel, Chávez and Ortega in rather strident terms. It is possible that this type of campaigning might disturb some people but it is almost certain that it will have a considerable impact among the most “simple” population where we have the most problems.

The implication of this fear tactic is that abstinence from this particular free trade agreement will lead to dictatorial regimes in Costa Rica, however, on the contrary it helps to solidify the alternative argument that the country is subject to US and oligarchic hegemony.

Fear of the effect of a triumph of the NO on the government. Many people have not made the link that a “No” in the referendum would leave the Government in a very precarious position, mostly ineffective and the country in a situation of being ungovernable. We must make that link (Casas & Sanchez, 2007).

Ironically, polls report that confidence in the government dropped significantly during the Arias administration (Villalobos, 2010).

The tactics of this letter call into question the legitimacy of the democratic process in which the referendum was supposed to play a crucial role in discerning the publics wishes. Days prior to voting day, polls taken by UNIMER Company showed that the “No” campaign was ahead by twelve points, consequently the 51.6 to 48.4 result in favor of CAFTA came as a shock to many Ticos (AWID, 2007).

The “Vote Yes” campaign worked. What is more, financing for the campaign came from those that would benefit the most from CAFTA, including contributions from cogenertating companies that were relying on the ratification of the treaty for the export of their energy (Duran, 2009). 59

Political Scientist Professor Harry Vanden considers that the real threat to democracy does not come from political violence or military coups in Costa Rica but from the media and image control by some wealthy, elitist sectors and the US

(2002). Interference from the US was blatant. First, US Ambassador Langdale requested that the US Trade Representative, Susan Schwab, write a letter suggesting that it was unlikely the US would renegotiate CAFTA or a new treaty with the country if they did not pass CAFTA. The letter also contained a list of preferences that Costa Rica already enjoys through trade with the US, implying that those would be jeapordized with a “No” vote. This letter was circulated throughout the media.

Langdale also visited Costa Rican companies to warn them of the consequences of a

“No” vote and also made statements about what was “good” for Costa Rica through opinion columns and press interviews. Funds from the US are also speculated to have been funneled into the campaign. Moreover, the White House made comments supporting the threats in Schwab‟s letter the night before the referendum (Morales-

Mateluna, 2007; Bindman, 2008). This direct interference in Costa Rica‟s democratic process is indicative of the hegemonic power that the US attempts to maintain over signatory countries.

Media control from the Arias administration proportedly included expenditures totalling over 3 million dollars on the Vote “yes” campaign, including saturating all forms of press with propoganda and printing stickers, banners and t- shirts. Informative talks led by government officials at large employers and the appearance of President Arias on national television, both of which used taxpayer money, and not to mention unconstitutional, were allowed by the TSE. Employers 60 bussed their workers in from outlying areas and were allegedly monitoring the votes to make sure that they were in favor of the treaty. Opponents assert that the TSE is partial to the Arias agenda arguing that allowing such activities demonstrates their bias (Bindman, 2008; Morales-Mateluna, 2007; AWID, 2007). According to

Vanden‟s theory, the Vote SI campaign is an example of how electoral democracy is challenged by the media and oligarchy of Costa Rica.

Fine Line for Campaign Financing

While Arias was campaigning for the future of trade through CAFTA, critiques of his campaign included allegations that his supporters were attempting to secure their future as energy exporters. TSE reports show that among the financers for Oscar

Arias‟presidential campaign are several of the private generating companies whose contributions totaled at least 206,876,329 colones or roughly $416,250 in US currency, nearly fifteen percent of his entire campaign budget. Further contributions are speculated to have been received from other private generating interests (Francia, 2009). This information was publicized in 2009 while proposed legislation for a new law that would extend the benefits of Law No. 7200 and No. 7508 was in debate.

First presented in 2007 by the Minister of the Environment and Energy, Roberto

Dobles (appointed by President Arias who is his second cousin) the law would consolidate existing regulations for accord with both national and regional needs.

According to the Minister, the national energy sector was devoid of a comprehensive law, instead the various pieces of extant legislation were created during disparate time periods and with various intentions. Today in Costa Rica there are at least 17 government 61 agencies that have some role in the decision making process over water resource use.

Existing as independent agencies within a bureaucratic framework, the regulating organizations have distinct agendas and collaboration is often antagonistic (Pena-Chacon,

Undated). Although antagonistic, the system serves as a form of checks and balances on development projects. Nevertheless, according to neoliberal theory, such multilayered regulatory systems cause inefficient services in a state sector and suggest reform in order to simplify and expedite the development process under their platform (Jaramillo &

Lederman, 2006; Williamson, 1994).

The new law would open up the electric sector for competition and sales on SIEPAC

(Morris-Gray, 2007). Dobles was in charge of the negotiations for the energy bill until he renounced his office in March of 2009 due to a corruption scandal involving mining concessions to family members, which is illegal in Costa Rica (El Libro Oculto de los

Arias, 2009; Baxter-Neal, 2009).

Campaign contributions reported by the TSE included sums from Mesoamerica

Investments, a transnational corporation, through Molinos de Viento Arenal SA.

Mesoamerica Investments is also linked to the Don Pedro SA hydropower project.

Azucarera El Viejo SA, Corporacion Guanazucar SA, Cafetelera Sanchez Benavides SA,

Corporacion Jerona de San Jose SA, and Quebrada Azul SA, all of which are cogenerating industries, were also reported to have contributed to the campaign (Francia,

2009). According to the TSE, only contributions made by Costa Rican citizens are legal in campaign financing. This begs questions once again of the legitimacy of the democratic process if illegal contributions were made by corporations with foreign 62 investors and therefore any action taken on legislation that would directly benefit these interests.

Congressman Fernando Sanchez stated in an interview that he did not believe there was a connection between cogenerators and the Arias campaign. He further mentioned in an interview that campaign contributions from cogenerators would not influence the decision of the legislative assembly. “I don‟t see why; it shouldn‟t” he said.

However, his cousin, Oscar Arias is connected to a cogenerating facility, Ingenios

Taboga SA, that has exported energy to Nicaragua since 1998. His brother, the Minister of the President, Rodrigo Arias, has been a shareholder in the company for more than fifteen years along with his other cousin, Congressman Fernando Sanchez, the co-author of the memorandum (Francia, 2009).

Table 4.1 Family ties to political positions in the Arias administration Oscar Arias Sanchez President Ingenios Taboga (IT) shareholder Rodrigo Arias Minister of the President IT shareholder, “Memorandum (Brother) of Fear” Fernando Sanchez Congressman IT shareholder Resigned (Cousin) “Memorandum of Fear” Roberto Dobles Minister of the Energy bill negotiator, mining Resigned (Cousin) Environent (MINAE) concession scandal

Reports from the TSE show that Oscar and Rodrigo Arias contributed $195,171

US to the campaign while other shareholders in the Ingenios Taboga made contributions by way of other businesses or through personal contributions (Francia, 2009). Whether or not these contributions were made legitimately has not exactly been called into question, however, their intentions have. Between the President, Minister of the Environment and 63

Energy, the Congressman, and the Minister of the President, the Arias-Sanchez family appears to have a strong hold over the political powers that benefit their economic interests.

Deflated Democracy and Inconsistencies in Concessions

In 2000, Costa Rica‟s Comptroller called for private generation to stop and for a trial to investigate the potential fraud of Laws No. 7200 and 7508. Despite this, the trial never occurred. Two years later, in 2002, attempts to make changes to tariffs were met in the legislature with confusion on who was actually in charge of regulating said tariffs and nothing ever came of the matter (Duran C., 2009). Perhaps this was the result of threats received from the Figueres family investment interests. That same year 2002, the

Attorney General of Costa Rica, Farid Beirut, brought to light in a joint committee with congress, the inconsistencies within Law No. 7200. He stated his reluctance to call them fraudulant, however, he did say they were erroneous. He claimed that if ICE had not been obligated to buy the energy from cogeneration plants, the institute would have been able to produce it from within and at a reduced cost (Francia, 2009; FECON, 2002).

Essentially the budget restraints placed on ICE from these private contracts were causing the institution to become inefficient, hence generating the “need” for more private concessions.

From 2002 until 2006 no definitive action was taken to resolve issues with the concessions process, make appropriate changes to tariffs that were bringing about seemingly catastrophic damages to the fiscal capacity of ICE, or to address the legalities of these matters. In 2007, ICE reported that cogenerators sold sixteen percent of the 64 state‟s energy and the payment consumed nearly eighteen (17.9) percent of the institution‟s income, approximately US $77,959,537. Meanwhile, the energy budget was cut by nearly half to approximately US $394,213,872 (Duran C., 2009). Law No. 7200 allowed energy sales at the “avoided cost” of thermal energy production. The price gap between thermal and hydropower is large and is what allows for these cogenerators to make what critics call excessive amounts of money on their relatively small contribution to the national power sector, totalling $1.5 billion dollars across 26 years, according to studies by FECON (FECON, 2002; Francia, 2009).

Before the bill for the new law to grant concessions for the use of water in the generation of hydropower was presented to the legislature, many concessions had already expired and others were set to expire within the following months. Opponents of the private concessions thought that they would see an end to what they perceived to be the systematic misappropriation of their natural and economic resources. Private generators, however, having seemingly escaped any legal or fiscal repercussions sought new legislation that would allow for more concessions and open the electricity market for sale on the regional electricity grid, SIEPAC. In addition, the law would place MINAE with the concessions authority. According to Congressman Jose Merino, the renewal of these concessions would gaurantee earnings for the cogenerators which Mauricio Alvarez of

FECON reports had caused a fiscal draining over the years that has affected the installed capacity of ICE and its investment potential; Dr. Osvaldo Duran reiterates these same concerns and adds that based on MINAE‟s connections to private interests and the oligarchy granting them power over concessions would put ICE and the environment at 65 risk (Francia, 2009; FECON, 2002; Duran C., 2009). The new law proposal was immediately met with opposition.

Draining Reservoirs and Energy Crisis: Exporting a deficit

Gustavo Castro Soto of CIEPEC, a community research center for politics and economics, explains that promoters of privatization for water and dams such as governments and transnational corporations, generate fear and false alarm about the energy crisis. Claims that without privatization there will be blackouts, economic crisis, higher energy costs and poor service are disseminated throughout the media (Castro S.,

2005). This is what critics claim happened as further moves to liberalize regulations and privatize the energy sector through the proposed law were set in motion.

In April 2007, while the new law was being negotiated in the assembly, power outages occurred across Costa Rica. According to an article dated April 20th in La

Nacion, ICE‟s spokesperson stated that droughts from the El Niño oscillation during winter caused lowered reservoir levels and reduced generating capacity at the country‟s main hydropower plants: Angostura, Cachi, and Arenal. Coincidentally, resident witnesses in the vicinity of the reservoirs allegedly reported that the reservoirs had been drained without producing electricity, hence leading to the electricity shortage (Duran C.,

2009).

Although attempts to substitute hydropower with energy generated at three thermal plants were made, they proved unsuccessful as all three plants broke down at the crucial time. ICE administered only domestic outages while the pubic and industrial sectors maintained power. In the same article an energy crisis was announced. Claims made by 66 the President of ICE, Pedro Pablo Quiros, were published stating that since the end of

2006 the need to use thermal plants had become essential to the Costa Rican energy sector, something that had previously been reserved for the dry summer months (Loaiza,

Oviedo, & Fonseca, 2007). Conceivably, the many years of priority placed on paying cogenerators instead of investing in new or upgraded infrastrucutre, ICE was being faced with the consequences and the Costa Rican people were paying the price. Critics of cogeneration claim that the outages were intentionally orchestrated from within to give the company a bad image so that the institute could be privatized (Ramirez F., 2007).

This would support the theory that ICE officials were in collusion with political and private interests.

Four days later an article in La Prensa Libre highlighted the energy crisis as related to ICE and the need to double the nation‟s generating capacity to 3200 MW by 2021.

ICE‟s energy director, Jose Joaquin Azofeifa, stated that all obstacles to development should be avoided and that every financing option should be solicited; banks, institutions and private companies (Morris-Gray, 2007). As mentioned earlier, in 2007, the development budget for ICE was actually reduced by half. What‟s interesting about this article is that a list of future projects was outlined and included among them was, the PH

Pacuare, a project that had been the center of controversy in Costa Rica for nearly two decades .

In October of 2007, CAFTA was ratified and the debates on the new law continued in congress. On October 25th of 2007 just two weeks after the CAFTA referendum, the

ICE Board of Directors discussed the development of large dam projects for the sale of electricity on the grid. Duran reports them saying “these large projects like Reventazón 67 and Diquís, from the moment in which they enter into operation, will produce important surplus in the system. Through these projects, it will be possible to make a forceful incursion into the Central American market making contracts for energy sales for average terms, with which the profitability of these projects will benefit enormously”

(Duran C., 2009). However, less than two months later an article in the Tico Times, in response to questions about energy export, cited a representative of ICE saying “At the rate we‟re growing, we‟ll be lucky to supply our own energy needs, never mind having enough surplus to export on a regular basis” (Sherwood, 2007). The inconsistencies between public and private statements made by ICE representatives add to the discourse on actual development priorities, putting in question the legitimacy of claims of the need for additional projects.

In August of 2008, while negotiations on the new concessions law were still in heated debate, the UCCAEP, Costa Rica‟s private sector union, made claims that the reservoir levels in Cachi were low and that they feared blackouts (Staff Writer, 2008).

This is atypical as usually an official spokesperson from ICE makes press releases concerning the energy situation. The union also stated that they wanted any “system” capable of providing energy to be allowed to enter into the national power grid, whether public or private. Eight months later, after nearly two years of seeking resolution, Law

No. 8723 was codified on April 14, 2009, allowing the concession of water for the generation of hydroelectricity.

As Costa Rica seeks to expand its hydroelectric capacity over the next decade to meet growing demands for power and to mitigate the impacts of climate change on the current installed capacity, cogenerating concessions for hydropower generation are being 68 renewed and increased to help meet the country‟s energy needs yet simultaneously new legislation is being created both nationally and regionally that would allow for this energy to be exported to neighboring countries. This scenario presents an enigma in the state energy sector and magnifies the conflicted interests between the private and national sectors as well as the conservation arena.

Now the country is faced with development issues of both large controversial hydropower dam projects in vulnerable cultural regions, namely the Boruca and Pacuare, and the renewed and more vigorous concessions for cogenerating plants that seemingly deplete ICE‟s development potential. The following chapter will examine the case of the

Río Pacuare and its project history through the expansion of the national energy sector and through the transition of Costa Rica from a social democracy to a neoliberal state.

Chapter 5: The Río Pacuare Case: Discourse on Hydropower development

and mobilizing opposition

Geography of a Cultural Icon

The Río Pacuare emerges from the Eastern slope of Costa Rica‟s Talamanca

Mountain range in the Province of Cartago and flows northeast through the Province of

Limon to the Caribbean Sea. Located on the windward side of the cordillera, year-round orographic precipitation in a watershed covering 885 square kilometers charges the river with a significant annual stream flow of between forty and sixty cubic meters per second

(ICE, 1997; Mata-Jimenez, 1995). The headwaters of the Pacuare are located north of

Chirripó National Park in the Cuericí Peaks that reach 3,100 meters above sea level

(Mata-Jimenez, 1995). Meandering a total of 108 km (67 miles), to its mouth, the Río

Pacuare delta forms the southern boundary of the island Barra Parismina, forty kilometers north of Puerto Limon. The Río Pacuare watershed is bordered by the Reventazón watershed to the north and the Chirripó watershed to the south (Mata-Jimenez, 1995).

The coastal beaches between these three river deltas provide sea-turtle nesting habitat

(ICE, 1997).

While coursing a relatively short distance over land, the river flows through several ecological zones; from rainforest to very humid to low mountain and pre- mountain tropical lowlands. Large stands of primary rainforest with more than one- hundred species of trees and shrubs are present all throughout the southeastern and southwestern areas of the watershed. The channel begins in a steep “V” shaped canyon with fast, technical rapids that support a thriving ecotourism whitewater industry. As the river leaves the canyon, it slows to deep, meandering, flat waters. Due to lack of 70 anthropogenic influences within the upper reaches of the watershed, the river has both low turbidity and contamination contributing to high water quality that supports flourishing populations of benthic flora and fauna as well as an estimated thirty-two species of fish. (ICE, 1997).

The northwestern and northeastern slopes of the watershed are comprised of private landholdings that consist of cattle ranches and small farm crops of coffee and sugar cane (ICE, 1997). As the river reaches the coastal plain, crops transition to the large, industrial banana plantations that were presented in chapter four. Small communities are spread throughout the upper reaches of the watershed while Siquirres is the largest population center located at the river‟s transition zone from canyon to lowland waterway. From this point until the delta at the sound end of Parismina, settlements include plantation colonies and small villages. Two indigenous reserves, Reserva

Indígena Awari and the Reserva Indígena Alto Chirripó Nimari are located within the watershed.

According to ICE official reports, the physical attributes of this river together with the low population density within the watershed combine to make the Río Pacuare an optimal location for the development of hydroelectric projects (ICE, 1997). As Costa

Rica seeks to secure its position as the most developed country in the region through implementation of neoliberal policies, both public and private hydroelectric projects to meet growing national and regional energy demands are at the forefront of national development plans. Meanwhile, discourse on these development initiatives includes opposition to private participation in the national energy sector and critiques of hydropower development from conservation advocates and indigenous groups. Dam 71 development plans on the Río Pacuare provide a case through which this discourse can be examined.

This chapter first presents the Río Pacuare and ICE‟s dam development project history in the watershed. The river‟s significant cultural and economic functions including the indigenous reserves and the rafting and sea turtle tourism industries will be discussed in the following section. The concluding segment demonstrates discourse on conservation movements and political-economic concerns that manifested over the course of dam development initiatives on the river. The Río Reventazón project history, as it pertains to the Río Pacuare, will also be taken into consideration throughout this chapter

(See Image 5.1).

Resource Reconnaissance and the Río Pacuare Complex

In accord with ICE‟s mission described in Chapter 4, the institution has been studying the Río Pacuare since 1958. Their initial investigations into the potential for power production began by installing rain gauges and flow measuring devices throughout the watercourse to determine if the streamflow was sufficient to power generators throughout the year. Apparently the studies revealed sufficient flows and the institution proceeded in 1965 with the first design and analysis called “Possible Hydroelectric

Developments on the Río Pacuare.” In 1972 the idea to combine the water from the Río

Pacuare and the neighboring Río Reventazón was elaborated in a master plan,

Aprovechamiento Hidroeléctrico Combinado de los ríos Reventazón y Pacuare

(Combined Hydroelectric Use of the Ríos Reventazón and Pacuare).

Figure 5.1 The Río Reventazón and Río Pacuare and impacted communities

Source: (Author, 2010)

Two years later, the first geological, topographic, and hydrological studies were conducted with the help of the Japanese Development Firm, JICA. This study, Cadenas de Desarrollo, Cuencas del Reventazón y Pacuare (Chains of Development, the watersheds of Reventazón and Pacuare) led to another phase of Prefactibilidad

(Prefeasibility) studies from 1984 to 1989. Subsequent technical, economic, and environmental studies took place after this and concluded in 1998 (Mora-Castro, 1990;

ICE, 1997). Attempts at project development stem from these initial investigations.

Results from studies revealed two sites on the Río Pacuare that were deemed ideal for the construction of hydroelectric projects that would include dams, reservoirs, power houses, tunnels, roads, transmission lines and other necessary infrastructure; the Proyecto

Hidroeléctrico Pacuare (PH Pacuare) and the Proyecto Hidroeléctrico Siquirres (PH

Siquirres). These two projects would be included in a series of four designed to utilize the waters of both the Río Reventazón and the Río Pacuare for the generation of hydropower

(ICE, 1997) (See Figure 5.2).

Figure 5.2 Río Pacuare Dam complex

Source: Author 74

According to ICE plans, the first dam project proposed for development on the

Pacuare would be the PH Pacuare. Located three kilometers downstream of the village of

Bajo Pacuare, the project would be third in the series following the PH Angostura and the

PH Guayabo on the Río Reventazón. The PH Pacuare dam would rise 150 meters above the river and create a reservoir with over six square kilometers (6.25 Km) of coverage and contain approximately 285 million cubic hectometers of water. Studies indicated that the elevation of the reservoir would be between 480 and 540 meters above sea level (ICE,

1997).

The power generating facilities, one of two potential design options, would be located downstream from the dam at the Quebrada Alcantarilla tributary, with an elevation of either 243 or 260 meters above sea level. A tunnel five meters in diameter and seven and a half kilometers long would be excavated through the mountains to deliver the water from the reservoir at a rate of seventy cubic meters per second to the power house where turbines would generate electricity before returning the water to the river. With an elevation change of approximately 260 meters, this design would provide the vertical head gain necessary to generate the maximum potential of hydropower. The turbines that ICE had planned to use for this generating station would be two vertical

Francis units of 86 MW which combined could produce an installed capacity of 167 MW.

Transmission of electricity from the generating station to the grid would take place over a three kilometer line linked to the substation at the PH Guayabo in the Reventazón river basin (ICE, 1997; SETENA, 1998).

Reported impacts of this particular project include the flooding of arable lands and primary rainforest along with the village of Bajo Pacuare. The indigenous village, 75

Nimari Ñac, of the Nimari Indigenous Reserve located eight kilometers upstream of the dam site would be inundated by the reservoir. Lands in the Awari reserve would also be impacted by the power house construction. In addition, a section of riverbed ten kilometers long would essentially remain dry affecting the ecology and economies supported by the river.

The second site, located twenty-five miles downstream of the PH Pacuare would be named after the city of Siquirres which is located three kilometers downstream from the dam site. The PH Siquirres project was designed to take advantage of the natural structure of the scenic Dos Montañas Canyon. According to Dr. Sergio Mora, lead geologist of ICE in 1990, the canyon is the best place in the country to build a dam.

Because the canyon is extremely narrow and deep, reaching a depth of 200 meters, ICE considered the PH Siquirres to be an economically viable project. The dam would be high yet cover little horizontal area therefore requiring minimal investment of construction materials (Dudenhoefer, 1990).

The Siquirres Dam would be the fourth part of the monumental complex involving the influx of water from Reventazón watershed. Through a tunnel, water would be transferred from the PH Guayabo on the adjacent river through the ridge that separates the two watersheds into the Río Pacuare at a location two kilometers below the power house of the PH Pacuare. The influx of water was designed to augment the quantity of water storage in the Siquirres reservoir. With a height of 180 meters, the reservoir created from the Siquirres dam would hold the combined waters and cover twelve square kilometers. This would ensure sufficient storage capacity during the dry season allowing for optimal annual energy production. The powerhouse located downstream would then 76 generate 412 MWs of electricity (Dudenhoefer, 1990; ICE, 1997; Mora-Castro, 1990). At the time of these studies, this was nearly half the installed capacity of the entire country

(Mora-Castro, 1990). The design of this expansive project was believed by ICE to be the most cost efficient development project in comparison to thermal generating alternatives for Costa Rica‟s national energy expansion plan (ICE, 1997). This dam, however, would wall off the entire watershed and create an impassible boundary between the upstream and downstream segments for boats and migrating species. Indigenous farmlands would be flooded along with seven square kilometers of primary and secondary rainforest.

Figure 5.3 Dos Montañas Canyon and PH Siquirres site.

Source: (Author, 2009)

Figure 5.4 PH Siquirres projected reservoir

Source: Author

Currents of Opposition Rise

Opposition to the PH Siquirres began as early as the 1980s when an organization called Amigos del Pacuare (Friends of the Pacuare) pressured President Luis Alberto

Monge to create the Zona Protectora Pacuare (Pacuare Protected Zone). By way of an

Executive decree, on January 10, 1986 the protection zone was established (Dudenhoefer,

1990). On May 8, 2006, Oscar Arias assumed the presidency. As discussed in Chapter 3, the following year SIEPAC was conceptualized as structural adjustments were being implemented across the region. The declaration to protect the Pacuare did not curb ICE‟s plans to develop their projects within the watershed. 78

In 1990, as legislature for the liberalization of the power sector (Law No. 7200) was being considered in San Jose, the institute announced that geological testing would begin on April 23 in the Dos Montañas Canyon as part of feasibility studies. This news sparked the formation of a new group, the Comité Pro Defensa del Río Pacuare

(CPDRP). The day studies were to begin, approximately seventy people united at ICE‟s camp to protest the work in progress. Forty of those gathered were whitewater guides and environmentalists, the other thirty were Cabecars that had come to defend their territory.

Cabecars cited the need to keep the river healthy and clean and their lack of need for electricity. What is more, the Cabecars stated that they had neither given permission to

ICE to construct a dam in their territory nor had they been informed by the institution that their farmlands would be inundated by the reservoir (Dudenhoefer, 1990).

Meanwhile, dam proponents alluded that opposition had mounted for the commercial rafting economic interests only and that the benefits of the dam would outweigh any environmental or tourism losses. In addition, ICE officials stated that they were conducting the appropriate environmental, social and economic impact studies and that the reservoir would cover less than two percent of the watershed; “What environmental impact could this have?” stated the head of public relations from the institute. However, opponents argued that those studies should be conducted through a third party. The attorney for the CPDRP stated that “ICE sees the indigenous problem as the number of houses, meaning how many they will have to relocate when they build the dam. They don‟t understand that the ranchos (houses) of the indigenous are where they cook and sleep. The forest is the home of the Indian.” Moreover, the lawyer stated that the river has qualities that could not be quantified by the number of rafts that passed 79 through it each month, that it was a great international attraction that brought visitors to the country and the destruction of the river together with the forests would be the end of tourism in the country (Dudenhoefer, 1990).

For nearly three weeks the presence of opposition and a protective intervention filed against ICE and the Dirección General Forestal halted progress on studies in the PH

Siquirres study site. On May 11th 1990 an agreement was signed between ICE and the

CPDRP that would allow ICE to continue with their studies as long as project development included a commission designed to mitigate impacts. Opponents maintain that the accord did little for the side of the river and those opposed to the dam projects.

ICE did, however, seek outside entities to conduct independent impact studies.

Movements to protect the river continued and international attention to the issue was gained in September of 1991. An eleven day festival sponsored by Project Raft was organized to bring 350 rafters from twenty-two countries together for a “Friendship

Float” and paddling competitions on the Pacuare River. Among the many paddlers gathered from around the world were teams from both the United States and the Soviet

Union, as it was at that time. Participants from the rival countries were put into rafts together along with other participants from around the globe. Glen Newman from Oregon helped organize the event and says that “rafting offers one of the best environments for cultural exchange with teamwork destroying all social and economic barriers.” At the end of the “Friendship Float,” the participants banded together to protest at the proposed Dos

Montañas dam site as ICE workers were continuing with feasibility studies (Berkshire &

Jewett, 1991). 80

Not long after this event studies in the area ceased. Although no official literature is available regarding ICE‟s decision to abandon the PH Siquirres, the general assertion by resistance members on the development history for this dam is that seismic risk and porous rock structure in the canyon walls were grounds for dismissing the project. On

April 22, 1991, a 7.7 magnitude earthquake occurred in the Limon Province, a short distance from the Dos Montañas dam site, causing extensive damage to ten percent of the country. This earthquake purportedly gave rise to questions within ICE as to the viability of a structurally sound project in this location (Guido, 2009). ICE‟s development plans shifted to the PH Angostura and the PH Pacuare. As these projects progressed, resistance to the PH Pacuare increased over the next decade and discourse would come to include impacts on Cabecar culture and communities within the watershed, the negative implications for tourist economies supported by the river and the potential threats to endangered species.

The Cabecar People: Culture of Water

While proponents for development of the PH Pacuare state that it is the most economically viable project to meet the country‟s growing energy demands (Agüero R.,

2006), the project would negatively influence the Cabecar Indians that live in the watershed. The Cabecars make up the largest group of Costa Rica‟s indigenous people.

For over 5000 years they have existed in Costa Rica and link their culture and myths of origin to the waters of the nation‟s rivers. The Reserva Indígena Alto Chirripó Nimari is located within upper reaches of the Pacuare watershed while the Reserva Indígena Awari 81 is located downstream. Both of these reserves serve as sanctuary from mainstream society and allow for cultural renewal (Montoya, 2006; Alvarez M., 2006).

The upstream Nimari Reserve was established in 1976 as an autonomous region for the native people. Approximately 8500 ethnic Cabecars live in the reserve. The remoteness of their villages greatly reduces outside influence on their traditional way of life. While a clinic, school and church exist in the Village of Nimari Ñac, infrastructure provided by national institutions, the Cabecar people maintain their native language and medicinal practices. This village located at the confluence of the Río Pacuare and the Río

Peje is also the location of the only national transportation infrastructure reaching into the indigenous reserve. Figure 5.5 depicts the cable footbridge that crosses the Río Pacuare at this point allowing access to and from the reserve. The Cabecars use it to transport their products to trade or market in the adjacent Tico village of Bajo Pacuare and other native villages. It is also used for personal travel to communities throughout the watershed.

Figure 5.5 This bridge is the main point of entry to the Nimari Reserve

Source: (Duran, 2009) 82

The construction of the PH Pacuare would submerge the fertile, low-lying flood plains where the community center of Nimari Ñac and several indigenous homesteads are located. Discourse from opponents of the project include the difficulties of relocating the community center along with homes and farms to higher terrain which is more difficult for cultivating and farther from national infrastructure. Their subsistence lifestyle of trade, according to Sociologist Osvaldo Duran, would be impaired with the inundation of the large territory and cause isolation among the communities (Guido & Durán, 2002).

Increased danger and difficulty of crossing a large body of water as opposed to a footbridge is also of concern to the affected population (Guido, 2009).

Figure 5.6 School in the Nimari community center

Source: (Duran, 2009)

The quality waters that ICE noted as a reason to pursue hydropower development on the Río Pacuare, known as Jacui in the Cabecar language, provide the indigenous people potable water to drink and cook with, as well as water for bathing and clothes washing. Young Cabecars utilize the river for recreation and courting future partners

(Montoya, 2006; Alvarez M., 2006). Healing remedies and food sources come from the 83 stands of primary and secondary rainforest that cover the watershed as seen in Figure 5.5.

According to Geographer Mauricio Alvarez, ancestral knowledge of the diverse biology has been essential for their survival. This knowledge has been transmitted from generation to generation and is the product of millennia of investigation. One of the most utilized practices is the gathering of wild fruits, medicines, fibers and artisanal seeds, mushrooms and other nutrients from the wild ecosystems (Alvarez M., 2006). Impact studies conducted by ICE reported that the river provides subsistence fisheries that supplement up to twenty-five percent of their protein intake (Alvarez M., 2006; Montoya,

2006; ICE, 1997).

Figure 5.7 Collecting traditional Cabecar remedies

Source: (Author, 2008)

Opponents expound upon losses from the flooding of arable lands as well as the forests from which the Cabecar people practice their traditional lifestyle of hunting and gathering with interspersed cultivation as justifications for leaving the river intact (Duran

C., 2009). During interviews evaluating potential socioeconomic impacts of dam construction, the indigenous response to the questionnaire indicated that they were happy with their surroundings and did not want the river to be dammed. Stating that the healthy environment provides a space for their families to be united, solid and maintain customs.

The Cabecars also mentioned the absence of alcoholism and delinquency as reasons to prohibit damming the river. They expressed satisfaction with their basic needs being met, needs such as nutrition, clothing, shelter, recreation, health and education (MeRida b.,

1996). Duran and Guido state that for many companies and institutions, the wealth of rivers like the Pacuare is only measured in the quantity of energy and money that can be produced by its water converted to hydropower (Guido & Durán, 2002). It can be argued that with the loss of traditional knowledge and the rainforests that the world could potentially lose a wealth of culture and benefits, including medicinal herbs to cure illnesses.

Whitewater Means Rafting: Tourism and Turrialba

The caliber of rapids in varied sections of difficulty along with the remote rainforest scenery has distinguished the Río Pacuare as one of the “top five rivers in the world” for whitewater sports enthusiasts. In a country where eco-tourism composes the largest industry, whitewater tourism alone draws a large percentage of the country‟s annual visitors and provides employment to tens of businesses and guides dedicated to 85 the sport. The Costa Rican Tourism Institute (ICT) website has an entire page dedicated to rafting where the Pacuare is described as “the country's longest and most spectacular river trip …” (ICT, 2009). Tourists arriving at the Juan Santa Maria Airport in San Jose are also presented the option of rafting and kayaking on the Pacuare through video advertisements in the immigration lines as seen in Figure 5.8. In addition, competitions on the Pacuare continue to be a venue for uniting teams from around the globe. In

September of 2006, the Pan-American Whitewater Championships were held on the section of river situated between the proposed power house of the PH Pacuare and the town of Siquirres, bringing teams from across the Americas to compete (Rodriguez C.,

2006).

Figure 5.8 Rafting advertisements to arriving tourists at the airport.

Source: (Author, 2009)

During an independent economic impact study in 1990 titled Recreation vs.

Power: a case study of the Reventazón and Pacuare Rivers, thirty two percent of rafting customers interviewed stated that their primary purpose for visiting the country was for rafting. At that time the net income from these tourists equaled $7.1 million dollars 86

(1990). Over the past twenty years, both rafting and kayaking have increased in popularity drawing even more tourists to the country. According to data compiled by the

ICT in 2006 1,725,261 million tourists arrived in Costa Rica generating $1.629 billion dollars of foreign revenue while the traditional export crops of bananas, coffee, pineapple, and pharmaceuticals combined totaled $877.8 million, practically half the revenues of tourism. Of those tourists that visited the country, ICE estimates that 125,350 participated in whitewater rafting sports (ICT, 2006). Based on the number of tourist arrivals and the reported revenue generated the calculated average tourist expenditure was $944.30. This in turn suggests that whitewater centered tourism generated approximately $118,368,005. The average one day raft trip costs $100.00 per person on the Pacuare, the total revenues just in the actual activity, not including transportation, lodging, food and other services equals $12,535,000 based in these figures. This does not take into account whitewater kayaking tourists or the clientele that utilizes companies that are not registered with the tourism institution. The increased popularity of rafting tourism demonstrates what dam opponents consider sustainable development as opposed to the development of dams which curtails the industry.

The Río Pacuare and Río Reventazón were accountable for eighty percent of the whitewater tourism generated in 1990. The city of Turrialba, the second largest in

Cartago Province, situated in the Río Reventazón watershed and neighboring the Río

Pacuare communities is commonly referred to as the whitewater capital of Costa Rica. In close proximity to the city and providing easily accessible sections of river with varied levels of difficulty, the Río Reventazón was what whitewater sports enthusiasts considered a true whitewater Mecca. Seven whitewater rafting and kayaking companies 87 are reported to have been in operation at that time and their bases were located either in

Turrialba or Angostura. In addition, international Olympic and professional kayak and raft teams spent winter months in this tropical mountain town training. Their presence, along with that of the local companies, supported a booming tourist economy of hostelries, restaurants, transportation and other service sectors (Guido, 2009; Ramos &

Perry, 2001; Verdes, 2001).

The first project of the four proposed by ICE for the two rivers, the PH

Angostura, named for the tiny village on the river near its location, is but six kilometers away from Turrialba. Construction of the PH Angostura was completed in 2000 when it became the largest hydropower facility in the country with an installed capacity of 180

MW. Three Voest 70 MW Francis turbines and Mitsubishi generators convert the water‟s energy into hydropower at the power house located downstream (ICE, 2003).

With the construction of the Angostura dam and power generating facilities, the most easily accessible sections of whitewater were either submerged or left dry. Teams stopped coming to Costa Rica and the large rafting operations moved out of the vicinity taking the tourism service sector jobs with them (Verdes, 2001).The remaining whitewater industry moved its focus to the Río Pacuare from the Reventazón but presents added operating costs due to access issues (Guido, 2009; Gallo, 2009).

With the construction of the Angostura dam and power generating facilities, the most easily accessible sections of whitewater were either submerged or left dry. Teams stopped coming to Costa Rica and the large rafting operations moved out of the vicinity taking the tourism service sector jobs with them (Verdes, 2001).The remaining 88 whitewater industry moved its focus to the Río Pacuare from the Reventazón but presents added operating costs due to access issues (Guido, 2009; Gallo, 2009).

Figure 5.9 The Angostura Dam on the Río Reventazón

Source: (Duran, 2009)

Due to the diversion of water from the reservoir to a powerhouse located downstream, much like the design of the PH Pacuare, a ten kilometer section of riverbed below the Angostura dam receives very little water which, according to critiques, has led to the disappearance of two species of fish, the Bobo and Tepemechín, along with impacts on other species of flora and fauna.

Figure 5.10 River flow in Río Reventazón pre-Angostura Dam

Source: (Duran, undated)

Figure 5.11 Post construction stream flow in Río Reventazón

Source: (Duran, 2009)

According to members of the environmental group Guardianes Verdes, in order to gain community support for the project ICE presented the reservoir as future tourist attraction that would compensate for the loss of rafting. Instead community members claim that the manmade lake turned into a cesspool that collects the wastewater and trash from

Turrialba and other communities in the watershed. This gained the reservoir the colloquial name “Lake Turricaca” (Ramos, 2005; Verdes, 2001). There is currently no major tourist economy supported by the reservoir.

It is clear that there are conflicting interests between the national institutions. The function of the Costa Rican Tourism Institute is to draw tourists for the continued support of the country‟s largest industry of which one of the key attractions is the rivers and whitewater tourism built around them. Meanwhile, the electricity institute is obligated to meet energy demands by expanding the sector with renewable resources. Ironically the increased demand in energy consumption is attributed in large part to the growing tourism sector (ICE, 2007).

Furthermore, microclimatic changes purportedly caused by the reservoir include increased fog and dew which has a negative impact on local crops (Verdes, 2001). Due to the accumulation of sediment in the reservoir, ICE must drain the reservoir entirely, usually twice per year, to remove the matter (Calvo Domingo, 2009). In so doing, the water released is saturated with sediment and becomes anoxic. The river bed below the dam fills once again to transport all of the organic and nonorganic materials from the reservoir to the Caribbean Sea, which Parismina fishermen report devastates fishery populations. Further critiques of the PH Angostura and future dam development 91 initiatives include the numerous economic and ecological impacts of this dam, lack of planning on the part of the ICE in the environmental sector as well as criticism of hydropower dependence for the country‟s energy needs (Verdes, 2001). In response, ICE has since developed a watershed management plan for the Reventazón to mitigate the environmental impacts of the existing dams and to reduce sedimentation rates for the prolonged lifespan of the projects (ICE, 2010). However, while they are concerned for the impacts on fisheries and tourism, officials from the ICE maintain that the electricity produced has far greater positive impacts than these perceived negative socio- environmental impacts (Calvo Domingo, 2009).

Plume Depletion: Turtles Lost at Sea

The Caribbean coast of Costa Rica also provides nesting ground for three species of sea turtles, the Leatherback, the Green and the Hawksbill. The largest of the three species, the Leatherback is critically endangered due to habitat destruction, fishing, pollution and poaching among other threats (CCC, 2008). Beaches between the mouth of the Río Pacuare and Río Reventazón are the ancestral nesting grounds of these endangered creatures. Each year, the female turtles celestially navigate their way back to the coastline of their birthplace. During the day, geographic features such as mountains and rivers provide navigational tools for the expectant mothers. Locating the exact nesting site depends on their ability to read the fluvial properties and spatial sequencing of river plumes (CCC, 2008).

The village of Parismina and the nearby Tortuguero National Park have developed a tourist economy around the annual migration of these animals, bringing people in to witness both the nesting and the hatching of baby turtles. According to reports for the World Wildlife Fund, in 2002 26,292 tourists visited the region and spent an estimated $6,714,483 (Troeng & Drews, 2004). This is a significant amount of sustainable business income directly benefiting hotel owners, tour operators, guides, and restaurants among other services, as well as perpetuating the need to conserve these precious creatures.

The Río Pacuare produces a medium-sized plume located in between the small plume of the Matina River and what was once the large plume of the Río Reventazón which enables the turtles to locate their destination year after year. Environmental economic impact studies report that if the Pacuare were dammed, the fluvial patterns would change drastically, diminishing sedimentation rates due to its accumulation in the reservoir and flow variations due to peak demand generation which would result in the disorientation of the turtles (MeRida a., 1996). As a result the creatures return to the sea without laying their eggs and often will not return in future years to attempt another nesting season. This could lead to their extinction (MeRida a., 1996; Ramos, 2005; CCC,

2008). The potential loss of turtles due to habitat change could in all likelihood lead to a dramatic reduction of tourism in the region, bringing economic hardship on the locals that depend on the industry. Critics of both the Pacuare and Angostura dam projects claim the decimated fisheries caused by the sporadic releases of anoxic waters in the Reventazón have already caused economic hardship in the coastal region and that the changed 93 sediment and trash accumulated on the beaches is impacting turtle breeding habits (Guido

& Duran, 2005; ASTOP, 2009). This situation demonstrates another conflict between the sustainable tourism industry and the energy sector.

Escalating Movements: To Dam or Not to Dam

As the country was feeling the affects of increased tariffs on electricity due to the new private portion of the national energy sector, the grassroots organization, Amigos Del

Río Pacuare (ADRP) (Friends of the Pacuare River), was formed by concerned Turrialba citizens in May of 2001. After experiencing the impacts from the Angostura dam, Law

No. 7200 and with ICE‟s continued plans to construct the Pacuare dam complex, river guides, Cabecars, business proprietors and local environmentalists from the group

Guardianes Verdes initiated another movement to overturn the disputed legislation and to create a national park to permanently protect the Pacuare (Ramos & Perry, 2001; Guido

& Duran, 2005). In addition, they called for the promotion and implementation of alternative energy sources in lieu of hydropower development as well as increased and legitimate public participation in defining which rivers should be excluded from dam development (Guido & Durán, 2002).

Involvement with umbrella organizations such as Costa Rica‟s National

Conservation Federation (FECON) and the Association of Alternative Projects for Social

Development (PROAL), along with California‟s International Rivers Network (IRN) and the Latin American Network Against Dams and for Rivers (REDLAR) brought the local movement to national and regional scale (Guido & Duran, 2005; IRN, 2003). With their support, ADRP instituted an ongoing outreach campaign that involved educating affected 94 communities on the implications of dam development through community meetings and national forums. This was transpiring as resistance to CAFTA, signed by Pacheco in

2004, was mounting across the nation.

Meanwhile, in October of 2004 the district of Turrialba designated the Río

Pacuare as its figurehead for the upcoming Festival of Lights celebration, a position that was traditionally reserved for an honored citizen. This move, according to Mayor Carlos

Oruca in a letter addressed to conservation advocates, was considered crazy by some residents yet appropriate for what had become a major issue in the community. The designation was significant in the eyes of conservation advocates as it demonstrated support for the movement. In the same letter the Mayor called for all residents of the

Turrialba district of voting age to take part in a plebiscite to decide on development plans

(Orucu, 2005). The plebiscite was designed as a constitutional right to promote Costa

Rican civic participation in state policy, including environmental matters (FUNPADEM,

2005). Plebiscites proved successful in stopping hydroelectric projects in Sarapiqui in

2000 and Guácimo in 2001 (EcoPortal, 2005).

As plans for the plebiscite were taking shape SETENA was reviewing the EIA that ICE had presented in 1997 for the PH Pacuare and all other pertinent transactions.

After evaluating the document, technical secretary of the environment declared the PH

Pacuare unsound stating amongst their concerns insufficient information on potential socio-environmental impacts on communities with connections to the river such as

Turrialba, Siquirres, the Nimari Indigenous Reserve, and the Caribbean coastal villages.

Other grounds included the lack of EIA consideration of discharge variation affects downstream of the dam site. In addition, the document did not consider the position of 95 community members in Nimari Reserve. This is in violation of Costa Rica‟s accord with the United Nations International Labor Organization Convention 169, which requires consultations with indigenous communities when a development project is set to affect their territory (ILO, 2003; Guido & Durán, 2002).The final justification for project dismissal was the detection of a legal error in proceedings of a resolution from 1998 that pertained to an appeal by ICE for an extension on report data. Apparently the Secretary of

SETENA at the time, Martin Chinchilla, resolved the appeal without SETENA‟s planning commission. According to the Ley Orgánica outlined in Chapter 4, all resolutions within SETENA must be considered by the entire commission (Loaiza, 2005).

This department within MINAE has since been the topic of criticism for perceived corruption.

In what critics say was preemptive political strategy, on August 9th 2005, the

Executive President of ICE, Pablo Cob Saborío Eng, issued a public statement announcing that the power company had “reconsidered the viability of the project

[Pacuare] and arrived at the conclusion that we should analyze other options.” He further stated “the responsible decision” of the electric company “should be complimented with the commitment of the communities, like those of the environmental and ecological organizations, to protect this [the Pacuare River] national treasure” (Cob-Saborio, 2005).

At that time, the Minister of the Environment and Energy (MINAE), Carlos Manuel

Rodríguez, announced plans for the creation of a national park, which was in accordance with dam opponent goals. In a letter addressed to plebiscite organizers, he stated that

MINAE was in the process of finalizing cartographic details and that he expected results by November of 2005. According to the Minster, President Abel Pacheco was planning to 96 attend a ceremony decreeing the national park at the river edge (Rodriguez C. M., 2005).

Nothing ever came of this initiative.

Figure 5.12 Timetable of Permitting process and resistance to PH Pacuare

Source: (Obregon Q., 2003; Loaiza, 2005; Madrigal-Castro, 2004; Expediente No. 118-97, 2004)

In continuation with plans, the plebiscite facilitated by the TSE was held in

Turrialba on August 28 2005. Citizens from the voting district came together for the first time in history to vote on a regional issue. The ballot question seen in Figure 5.13 read,

“Are you in agreement that the Municipality of Turrialba grant construction permits to build hydroelectric plants on the Pacuare River?” The results ended in a landslide ninety- seven percent vote of “No!” by 8,156 voters (Rodriguez R. , 2005; Solano, 2005). News 97 of the victory was reported in national newspapers and on websites from Panama to

Mexico to California and has since been used as an example for how a grassroots movement can use legal recourse for conservation (IRN, 2003; Guido, 2009; REDLAR,

2005; Agüero R., 2006; Rodriguez C. M., 2005; Solano, 2005).

Figure 5.13 Ballots for the historic plebiscite

Source: (Duran, 2009)

Arias Rise Leads to Conservation Demise

In May of 2006, Oscar Arias ascended to the presidency for a second term. As discussed in Chapter 4, his candidacy platform was Pro-CAFTA. To opponents of PH

Pacuare development, this meant pro-dam and pro-privatization. When, in the same month, the board of Directors at ICE announced that they were reevaluating the 98 possibility of pursuing the PH Pacuare, members of ADRP were not surprised. The

Executive President of ICE, Jorge Gutierrez explained that the institute needed to double the generation capacity every 13 years to meet rising demands. He continued by saying that development decisions needed to be for renewable sources. Meanwhile discourse from the opposing camp cited the billions of dollars that the project would generate as impetus for the development, not the demand for national electricity. In addition, clandestine decision-making and disregard for the plebiscite decision were among critical discourse (Sandi, 2006). Shortly after, however, the institute stated an intention to seek gradual acceptance of the project without pushing the issue (Agüero R., 2006). This willingness to include the public in decision making demonstrates increased awareness on the Institute‟s behalf, perhaps for the sake of improving its image while facing potential privatization under the impending CAFTA ratification. Nonetheless, questions of legitimate need are raised as it contradicts prior claims that ICE would seek protection for the river. It also poses the question of agenda dependent development under the Arias administration.

In 2007 and 2008, the Pacuare issue made it to the headlines of the national newspapers on more than one occasion; so would controversial power outages, the

CAFTA Referendum, and new legislation for cogenerating plants. Discourse between camps mounted. On February 21, 2008 the issue was brought up in the legislative assemble of Costa Rica where Representative Orlando Manuel Hernandez Murillo expressed his concerns that both ICE and the president of Costa Rica, Oscar Arias, were disregarding the decision of the public in pursuit of hydroelectric exploitation on the Río

Pacuare (Asamblea, 2008). Opposition to the neoliberal policy reforms campaigned for 99 the rejection of CAFTA on the basis that it would lead to further privatization, unchecked dam development and usurpation of natural resource sovereignty.

After the marginal vote in favor of CAFTA on October 7 2008, the institution historically empowered with hydropower development decisions wavered on the Pacuare debate, perhaps due to divisions within the board of directors, while the newly empowered private sector was extending its voice in the public arena. Prior to CAFTA the private co-generating sector was portrayed as a national interest for their contribution to ICE therefore, they were also represented through the institution. With their candidate

Arias in power, new rights granted under CAFTA and the promise of a new concessions law on the horizon, the astute energy producers were now asserting their voice with confidence.

Private co-generators went public with their opinion of Pacuare advocating construction on the river and discounting the legitimacy of the plebiscite (Duran C.,

2009). In an editorial addressed to the nation on November 6 of 2008, the Director of

ACOPE, the Association of Private Enterprise, stated that “less than 9000 people presumed the right to decide for the rest of us; something like 9000 over 4 million! The river belongs to everyone and what becomes of it can‟t be decided by four cats that live at least 20 Km from a river that is in the middle of the jungle” (ACOPE, 2008). Meanwhile, opposition maintained their conviction to protect the river (Solano, 2008). Remarkably, while widespread criticism exists on the legality of tactics and contributions during both the Arias and referendum campaign, record of Turrialba plebiscite criticism is limited to

ACOPE members (Duran C., 2009; AWID, 2007; Kane, 2006).

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Figure 5.14 Renewed resistance campaign “The people already said No to the Dam”

Source: (Duran, 2009)

On March 14, 2009, the International Day of Action for Rivers, a march was taking place in the streets of San Jose where the words "Free Río Pacuare" were spelled by university students (See Image 5.14). What had previously been a movement involving directly affected populations and conservation groups had now spread to include the academy which in turn would bring exposure of the issue to the bourgeoisie sector of San Jose.

Exactly one month later, despite efforts to squash the bill, Law No. 8723 providing a framework for concessions to utilize water for hydropower generation was codified by the Arias administration. Under this law generation limits increased to 40

MW and allowed for new and renewed concessions for up to twenty-five years (Guido,

2009; Asamblea, 2009; Duran C., 2009). While no great changes were made from the

Law 7200 to this one, the enactment of this law after such heated debates demonstrates the position of the legislative assembly toward the expansion of private participation in the energy sector. Meanwhile, another bill for a general electricity law was also being considered that would expand the dimensions far beyond these stipulations. This bill, that as of April 2010 was in the final stages of negotiations, would remove all generating 101 capacity limits by the private sector allowing for the construction of large dams, such as the PH Pacuare.

Figure 5.15 University of Costa Rica students protest Pacuare dam

Source: (Rada, 2009)

Meanwhile, the PH Pacuare is still listed in ICE‟s most recent expansion plan; yet, it is listed as an option, not as a certain (ICE, 2007). On November 1 2009, ICE

President, Pedro Pablo Quiros Cortes met with Pacuare conservation advocate leaders;

Rafael Gallo, founder of rafting company Ríos Tropicales, along with Eugenio Guido, director of ADRP and Turrialba hotel proprietor and former politician, Walter Coto

Molina. These leaders of PH Pacuare resistance were all involved in discussions on the future of the project. As a result, on November 18, 2009, ICE‟s formal semi-suspension of PH Pacuare was confirmed in a letter addressed to Walter Coto M. The letter

(Appendix B) stated that the institute would not build any projects within the next twenty 102 years from that time, until 2029. According to the president, this decision was due to the consideration of seismic risk factor (Quiros C., 2009). Perhaps these new considerations were due to the 6.2 magnitude earthquake on January 8, 2009, that caused an 8-10 meter wall of water to escape from the Cariblanco Dam on the Río Sarapiqui causing mass destruction to the downstream section of the river and adjacent properties (Gatjens,

2009). Perhaps this would be the second time that the Pacuare would “saved” by natural forces.

While news of the project postponement was welcomed by Pacuare advocates, discourse on decision efficacy from conservation advocates was of a skeptical nature.

Due to ICE‟s vacillating stance on development decisions, some critics feel this is just an attempt to placate opposition so that the institute can gain project approval over time.

Others feel that once the new power generating law is codified there will be no stopping a private co-generator from resuming where ICE leaves off (Guido, 2009). Meanwhile, the tourism industry in Turrialba is recovering with its new focus on the Río Pacuare. Several new small to medium whitewater outfitter companies opened in the past ten years increasing tourist traffic in the service sector of the city.

As the current political economic shift in policy appears to be following the neoliberal reform suggestions of the Washington Consensus, it is not clear what will be become of the Río Pacuare development plans. Nevertheless, it is clear that as the country is restructuring its institutions to fit into the newly integrated regional framework, the river movement has gained increased significance on an international scale. These shifts in policy and resistance from the local and national to the regional will be addressed in the concluding Chapter 6. 103

Chapter 6: Conclusions

Development and Resistance

Over the course of Costa Rica‟s history, the country has asserted itself as a regional leader in political stability, development and energy production. The ability to thrive in an otherwise unstable geopolitical environment has in large part been due to the creation of a strong welfare state and a state-run energy sector. Utilizing the vast hydrological resources as the foundation for energy supply has allowed for a near constant growth within the sector and benefited national industry. This reality, however, has been challenged throughout time by international economic and political pressures that in turn influence national policy. At the same time proposed hydropower developments have spurred the formation of resistance movements. This concluding chapter addresses the implications of greater development initiatives, both national and regional on hydropower development. Additionally, concluding analysis considers how development initiatives have influenced the scales of both policy decisions and movements of resistance around hydropower. Veins of future research will also be presented to conclude this thesis.

While a regional leader, Costa Rica has nonetheless been subject to the development policies of international financial institutions and hemispheric economic policy. This study illustrates regional and global influences on policies made at the national level. Hira (2003) believes this sort of situation may be attributable to the debt acquired by developing nations, which limits the ability of states to make independent decisions about free trade and influences their macroeconomic policies. Hira (2003) 104 further suggests that state autonomy sometimes appears to be nonexistent. As shown in this study, international development policies affect the national decision-making arena for hydropower development in Costa Rica.

Meanwhile, as state energy policy has sought to meet growing demands, both nationally and regionally, local forces in the Río Pacuare have asserted a position of resistance to development initiatives. This assertion has forced the state to reconsider policy and serve as a mediator between the global/regional forces and the local/national.

As opposition employed constitutionally prescribed measures for public participation in decision-making, such as the plebiscite described in Chapter 5, the state must weigh the obligation to fulfill this right with implications on the energy sector and regional compliance concerns. In turn, as regional pressures for economic policy reform are met with resistance from the Costa Rican public, the state must negotiate their role as decision maker across scale; the CAFTA referendum discussed in Chapter 4 was intended to satisfy this negotiation.

Moreover, supranational influences on development and governance policy in turn create grounds for the expansion of resistance movements to move beyond the local and state to the regional and global. The resistance forms in response to threats to autonomy and sovereignty over resources. As discussed in Chapter 5, the resistance movement on the Pacuare began locally in riverside communities and as CAFTA and dam development pressures increased, resistance spread into other communities as well as countries. Grassroots opposition groups united with national and regional NGOs that possessed greater financial and technological resources to disseminate the resistance 105 movement throughout the affected areas and even the globe. This is seen through the websites of NGOs such as FECON, REDLAR, and the IRN discussed in Chapter 5.

Resistance to Market Reform

Soon after electricity‟s invention, markets developed around the generation and distribution of this new resource. In Costa Rica, potential profits encouraged foreign capital to seize the opportunity to exploit the hydropower resources as early as the turn of the twentieth-century. This was also the first time that resistance movements formed around energy sector development, ultimately prompting the state to arbitrate between the interests of the American Foreign Power and Light Company and national resource autonomy and exploitation. As discussed in Chapter 4, the Liga Civica movement led to the SNE which later brought about the nationalization of the power sector and strict regulation over hydropower resources.

Today in Costa Rica reduced control as the cumulative result of decades of international political and economic influences on the state have loosened its grip on the energy sector. As an autonomous institution, ICE managed to efficiently generate and distribute power to nearly the entire population of Costa Rica for decades. Unlike the national energy sectors of other Latin American countries, ICE has been considered a model of efficiency in all aspects of utility management and service. In addition, the energy sector is considered to be profitable (Young, 2005). Notwithstanding, as the global economic climate of the 1980s experienced crisis which led to the onset of neoliberal reforms, the state and institution liberalized their hold on hydropower resources and power generating mechanisms. In contrast with the neoliberal suggestion 106 that liberalization leads to greater efficiency and coverage, efficiency declined (Duran C.,

2009). The result has been strong resistance to further privatization and integration initiatives since the turn of the twenty-first century.

As CAFTA was being negotiated in recent years, resistance focused on further losses in resource sovereignty and state autonomy as well as the potential for negative environmental impacts. What is more, the legitimacy of the state‟s role as mediator between the global and the national was called into question. While the state presumably has the capacity to represent the will of the people in the global arena, perpetuating oligarchic control seemingly diminishes the legitimacy of the democratic processes established by the constitution. As shown in chapter 4, tactics employed during the referendum attempted to sway voters to ratify CAFTA; tactics such as those suggested in the “memorandum of fear” as well as economic pressures by the US administration. As the state bends to regional pressures, the transparency of decision-making appears to be diminishing. New laws that would facilitate private concessions for hydropower have been repeatedly denounced in grassroots movements and through political resistance.

Despite calls by neoliberal reform advocates to fully privatization state utilities, resistance in Costa Rica has made it much more difficult for ICE to do so. Yet it is possible that, due to the political nature of ICE‟s administration as well as with the increased entry and competition of private firms in the energy sector, what may transpire is the gradual dissolution of the agency. In this climate, ICE has the potential to become more of a regulatory institution and less of a service provider. Conversations with ICE officials suggest that the entry of private firms within a river system may impede the optimum functioning of extant infrastructure. It is possible that this may encourage 107 cooperation between the generating entities particularly if ICE steps up its role. This could potentially ensure ICE‟s continued existence as a state entity. However, the fate of the agency remains to be seen. What is clear at this point is that due to pressures, transparency has become an issue within the institution and this has translated to murky decision-making over project proposals.

Challenges on the Río Pacuare

Inconsistencies on Pacuare development decisions create an atmosphere of uncertainty about why and how decisions are being made and by whom. While demands for “renewable” energy have increased, it still remains unclear whether development decisions are being considered to meet national or regional demands. Development proponents claim that the country is suffering from diminishing capacity in meeting increasing national needs, yet the nature of new development initiatives and resistance discourse suggests that further development is being established to meet regional, even hemispheric demands. Such development discourse and the resulting policies suggest that new hydropower development will conceivably be set to satisfy both national and regional demand, even as development proponents targeted project approval maintaining that energy production was designed to meet national demands. Moreover, ICE officials have purportedly discussed selling the energy on SIEPAC (Duran C., 2009).

Development decisions on the PH Pacuare are caught up in the arena between resistance and political economic pressures. This has resulted in the amplification of resistance from local and national scales to the regional and international. In other words, as Costa Rica has regionally integrated through CAFTA and SIEPAC, the resistance 108 movement has also regionally integrated. The story of opposition to dam development on the Pacuare has disseminated throughout the country and Mesoamerica to reach the global resistance community by means of regional organizations which have formed to confront the integration and subsequent development schemes. This continues to be seen in the case of the Pacuare as communities in the watershed are set to host the 2011

Mesoamerican Forum Against Dams (Guido, 2009). The World Rafting Championships race is planned for the Río Pacuare during the same year raising international attention for the river once more (IRF, 2010; Tropicales, 2009).

What Remains to be Seen: Future research potential

Whether or not the PH Pacuare will actually be developed remains to be seen. In examining the case of this river, however, the scale of governance and decision-making for hydropower development is raised as the country and region move to integrate the electricity sector and economy.

Given the primary drive for energy development as a precursor to other forms of economic development, it seems that energy decisions have consequences for other policy reforms. Therefore, increased hydropower production in particular, and energy generation more generally, is a precursor to further development and may be a prime determinant in what, when and where other forms of infrastructure develop. In pursuit of this reasoning, future research on what types of resource development projects stem from the provision of power seem relevant.

CAFTA is set to increase manufacturing in the region, while the PPP infrastructure development has been designed to facilitate the access of resources to 109 markets. Further research could examine the uses for which new energy production facilities are designated. It would also be significant to consider what types of facilities will be powered by new hydropower projects and whether, where, and why resistance expands beyond energy policy to include other resource development initiatives.

Furthermore, as new legislature is considered under the administration of President Laura

Chinchilla, additional investigation on the evolution of energy policy in Costa Rica will be significant. Finally, as the Pacuare case continues further studies could evaluate the evolving status of the river and follow the interplay between forces for conservation versus those for development, looking at both the river and nation. How will the resistance movement evolve with the increased entry of private firms in decision-making arena? Can a national park be created to protect the river from future development? These are among the questions for future research that stem from this study.

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Appendix A

MEMORANDUM To: The President of the Republic, Minister of the Presidency From: Kevin Casas[1], Fernando Sánchez [2] Date: July 29, 2007 Subject: Urgent actions to activate CAFTA‟s YES campaign ______Dear don Oscar and don Rodrigo: After a long conversation on Friday the 27th, following a debate about CAFTA in San Isidro de Heredia, an activity that turned out to be very revealing, we have decided to send you this memo which points out some actions that we feel would be convenient, to activate as soon as possible the pro CAFTA campaign. Evidently, these are not the only actions that should be taken, but we think they are important. 1. Establish a strategy committee for the YES campaign

This is probably the most urgent of all. At this moment there is no clear orientation of what we have to do in order to win, how to do it and who to do it with. But, even worse, there is no mechanism established to take those decisions. What we have, and only sort of have, is only an operational structure and only a tactical response, but no strategy. This gap has been filled with the decisions (or absence of them) taken by the communications group, which is clearly not enough. It is essential that the President of the Republic and the Minister of the Presidency participate in this committee. 1. Build a social coalition in favour of CAFTA

We transcribe here what one of us wrote almost 3 years ago in a memorandum addressed to Marco Vinicio Ruiz: “the debate will not be won by the government alone or by the businessmen by themselves, but it can be won by a coalition”. One of the grave mistakes made by the sectors who favour CAFTA has been to delegate its defence to the negotiators of the agreement and, in general, to the government. Even before the recent scandals that have diminished trust in the political establishments, the levels of credibility of the government were very low and probably insufficient to give legitimacy to such a controversial project. At this time nobody believes a word said by the government or the politicians and for this reason, it would be lunacy to delegate in them the defence of the treaty. To form a coalition and to make the defence of the treaty a collective job is crucial not only to overcome this lack of legitimacy, but also to avoid that the discussion shows the same imbalance that was broadly visible during the “combo” conflict in the year 2000, when the organization of the opposition had no more counterweight than the lonely voice of the government. It is vital to demonstrate that in the discussion about CAFTA there are two major groups of interest, and that this implies that the favourable sectors – who‟s interests are not diffused and are as intense [1] Vice-president and Minister of Planning [2] Congress-member and cousin of President Arias 111

as those of the opposition- must be organized and articulated. This is essential in order that the discussion about CAFTA does not show the same results as the “combo”. The importance of this point cannot be evaded. The campaign about CAFTA is becoming what we should have never allowed it to become: a struggle between rich and poor, and between the government and the people. The coalition against us is formidable: universities, the church, unions, environmental groups, etc. And, on the other side, in favour of CAFTA, there is only the government, and some of the big entrepreneurs. There is no way to win like this. It is very urgent to include in the campaign, at least, the small entrepreneurs, the work unions, and whatever we can from the cooperative movements. And when we say they should be included in the campaign we simply mean that the faces of their leaders should “appear ” everywhere. Obviously, if these leaders can also effectively control part of these social movements, it would be better. It is true that, in the work unions in particular, there is no strong national leadership. If this is the case, they will have to be created now. We have to give a presence in the media to some of the faces from the work unions, and that in itself will make them leaders. Who was Eugenio Trejos in our country six months ago? It is the media that has made him a national leader. 1. Negotiate a recess in Congress

The campaign urgently needs our presence in all the communities of the country. Decreeing a recess in Congress is the key which will enable us to bring our congressmen –who are greater in number than those of the opposition and who face no limitations with regard to campaigning - to the communities, to organize the “on foot” campaign. It is evident that this may have a cost on the progress of the legislative agenda, but at this moment that is a third order problem. The first is, evidently, to win the referendum. In any case, at this moment the legislative agenda is not advancing due to lack of a quorum. That leaves us in the worse case scenario: the press is holding PLN responsible for the lack of a quorum, while the opposition (and even many of our “allies”) are not seen as responsible and are in campaign. Besides, the continuation of negotiations in Congress expose us to constant blackmailing from our legislative “allies”, which end up reflecting on the YES campaign. 1. Formalize an alliance with the Municipal Mayors, particularly those from PLN

This is decisive and for reasons similar to those above: we need to have a presence in the entire country. There is a letter signed by 72 Mayors that is not, at all, insignificant. In it, they offer their support to CAFTA asking, as it is entirely to be expected, some things in exchange. The content of the letter has some elements which may be put aside, others that are entirely negotiable and others that are quite positive for the government (for example, the explicit support they offer with regard to tax reform). It is vital to answer this letter properly, answer it soon, and answer it during an important public act. But there is something else which must be done, particularly with the 59 Mayors of the PLN. We have to hold them responsible for the campaign in each canton and make clear to them, with all coarseness, a very simple idea: the Mayor that doesn’t win his canton will not get a penny from the government in the next 3 years. The 112

same reasoning can apply to the councillors, who can be made responsible for specific districts. In this last case, we have to remind them of their personal aspirations: their possibilities of continuing to be councillors or becoming Mayors or Congressmen lie in the winning or loosing of the referendum. Not only because in the next election the outcome of the PLN will be very much affected by the result of the referendum, but because this election will allow the higher authorities of the PLN to determine who has leadership and who doesn‟t. Many of the local leaders are not getting into the campaign so they don’t “burn” themselves before the next election. The reasoning has to be exactly the opposite: the one who doesn’t entirely cooperate, “burns”. What is at the base of this is a deeper and more important issue: it is urgent to extend the circle of the people who are “willing to bet their lives” on this referendum. At this moment there is amongst our allies –both inside and out of the PLN- a general attitude of indolence, as if they feel that the only one that will be affected by defeat would be the President. It is vital that they understand that they will be directly and gravely damaged. 1. Make the support of the PLN official

To build the social coalition previously mentioned we have, unfortunately, very little time. What we have in our hands is something less palatable, but useful: a political coalition. And that implies the full integration of the PLN, which is by far the most important actor in this coalition. With the exception of our legislative faction, so far the role of the organisms of the PLN in support of CAFTA has been excessively moderate. There is not a single official pronouncement from the PLN in favour on CAFTA, nor is there a clear directive to the structure of the party. That has created great confusion in our leaders, who know very well that part of the party is against CAFTA. The official structure of the PLN (Directors, Executive Committee) has to start talking unmistakeably in defence of CAFTA, in the understanding that one of the main winners or losers of the referendum will be the PLN. 1. Structure and launch of a massive campaign in the media

Beyond what can be done in the communities and in private enterprise, there is such little time left that we should have no shame in saturating the media with publicity. And precisely because of this short time, it is imperious to direct the campaign in two directions: 1) Shatter the idea that this is a struggle of the rich against the poor. That requires that we choose very well the faces of the massive communications of the YES, using almost exclusively, workers and small entrepreneurs. Likewise, we have to greatly increase the presence of the government in the media.

2) Stimulate fear. We can use four kinds of fear: i. Fear of loss of jobs. Here it would seem very recommendable to use intensively testimonials of very simple people in precarious situations that might loose their job, or have already

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lost it because of the non approval of CAFTA. This is also vital to reinforce the idea that this is not a struggle of the rich against the poor. In the same way, it is possible that in some specific regions it would have a great impact to show specific cases of companies that have postponed investments, that have cut shifts or that are considering leaving the country due to the non approval of CAFTA. ii. Fear of attack to the democratic institutions. It is crucial to make YES the equivalent of democracy and institutionality (this is what Eduardo Ulibarri said: we have to fill YES with a content of values) and make NO the equivalent of violence and disloyalty to democracy. There is something very important here: this campaign is no longer rational and, in consequence, about the contents of CAFTA. So, the argument of the defence of democracy is the only resource we have left to move the emotions of the people who favour CAFTA. At this moment the people in favour not only don‟t have any motivation, but feel intimidated by the motivation shown by the NO people. We have to understand one thing: no one is willing to “die” for free trade, but maybe they would for democracy. We have to give YES an ethical motivation, and not only an instrumental one. iii. Fear to the foreign influence in the NO. We have to insist everywhere on the connection of the NO with Fidel, Chaves and Ortega, in very strident terms. It is possible that this kind of campaign might be uncomfortable to some people, but it is almost sure that it can have a considerable impact amongst the simplest people, which is where we have the most serious problems. iv. Fear of the consequences of a triumph of NO on the Government. All the surveys show an important degree of satisfaction with the President and the government. Many people simply haven‟t made the connection that a triumph of NO in the referendum will leave the government in a precarious situation, with its effectiveness totally reduced, and the country in a situation of poor governance. That connection has to be induced. This is an argument that might only work for certain sectors, but it can be very effective in planting doubt. There are three questions that have to be planted in the minds of people, that can make their finger shake if they are planning to vote NO: 一. ¿Are you willing to risk the financial stability that almost everybody acknowledges as a government accomplishment? 一. ¿Are you willing to return to the times of Abel, when no one governed, there was no sense of direction and nothing happened in the country? 114

一. 一. ¿Have you considered who will rule the country if NO wins? (Induced answer to the question: Albino, Merino, Carazo, etc, will rule) 一. Likewise, it is very important to strengthen our presence in radio (both national and local) and in rural written media, where we have big problems. We have to have a presence in every opinion program, and enhance advertising of the government in a series of radio programs conducted by people who are willing to help the government (example Javier Rojas, Jaime Peña, etc). If the presence of YES on the radio doesn‟t drastically improve, this will continue to manifest in our weakness in rural areas. It is very possible that the problems we have in rural zones have less to do with the basis of the campaign (themes badly attended or non-attended by it) and more with the way that people get informed in the rural zone, where radio is a very powerful media of information.

1. Generate a great amount of printed documentation about CAFTA and about the opposition which can be easily distributed. A serious problem some of us who are doing advocacy in favour of CAFTA have is the total absence of easy-to-digest documentation that can circulate massively. As it is known, this is a point in which the NO has developed particularly well. At this moment the whole country is wrapped in flyers. The documentation that has to be done is of three kinds: 1).The one that clears, in very simple language, some of the most insidious arguments against CAFTA (medicines, water, cell phones, etc). As part of this, it is very important that some key institutions (for example, ICE, CCSS, AyA, MTSS) generate official flyers that answer in very clear terms the flyers that are being distributed in their own offices by the unions of the institutions. These are information flyers that cannot, in any way, ask for support for CAFTA (this because of the resolution from the TSE – Supreme Election Tribunal); 2).The one that exposes the effects of a rejection of CAFTA over specific sectors or aspects (example: the presentation used by Jorge Woodbridge); 3). One that seeds ill feelings over the leaders, motives, methods, financing and international connections of the NO.

8. Organize a systemic visit program to companies by high government officials. At present, the space for campaigning which is the easiest to make use of and offers best opportunities is, by far, companies. There are more than a million workers there. We must organize a systemic visit effort to the largest companies of the country, with talks in favour of YES given by high level people and with documentation in hand. No campaigning effort is potentially as effective as this one. Ideally, this requires five steps: 1) Obtaining information on which are the largest companies and where they are located. 2) Contact the entrepreneurs obtaining time for the talk: 3) Have the company send immediately a letter to the Ministry of Planning requesting that the government send a representative to speak about the

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National Development Plan or the future vision of the country or something like that (this to cover our backs when facing TSE - Supreme Election Tribunal); 4) Put together a program of visits to companies for, at least, 30 government dignitaries; 5) The dignitary visits the company (in some cases accompanied by the congressmen of the area) and leaves documentation

If 30 dignitaries visit 10 companies per week, it will be possible to cover almost 2500 companies in the next 8 weeks. We have put emphasis on the largest companies and those that are exportation oriented. What is important, in any case, is to make sure that the dignitaries of the government and the congressmen are not seen going around with the President. This is an unjustifiable loss of time and effort. 9. Organize a multitudinous act of strength to motivate the campaign

There is a great lack of motivation among those who favour CAFTA, disorientation due to the lack of a campaigning and, in many cases, fear of expressing an opinion. We have to motivate the party members of the YES, make them feel that the campaign is doing things, that they are not alone, that we are many. It is recommendable to organize a public act or festival that is multitudinous (it could be a march, but there we almost always have problems). But people have to feel supported and motivated.

Source: (Casas& Sanchez, 2007)

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Appendix B

Source: (Quiros, 2009) 117

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