Canadian pension funds linked to controversial project in Patagonia

Douglas Tompkins, the acclaimed adventurer and multimillionaire clothing magnate, flew his private plane over British Columbia in 1992 and he was inspired–but not by B.C.'s beauty. Tompkins, the American founder of the North Face and Esprit brands, was so horrified by the province's clearcuts that he immediately exited the business world. He then flew to the other end of the planet and started to buy up large blocks of temperate rainforest in a region that still resembles British Columbia before the arrival of the Europeans.

Tompkins's first acquisition, a $50-million, 714,000-acre piece of pristine forest, cut Chile in two: industry to the north and nature to the south. Now called Pumalin Park, Tompkins's first nature reserve is an environmental roadblock that extends from southern Chile's eastern border with Argentina all the way west to the Pacific Ocean. There is no major road from Chile's central lake region to Patagonia–only a circuitous network of frequently washed-out gravel roads and an assortment of unreliable ferries.

Tourists who brave it into northern Patagonia stand in awe when confronted with the region's globally unique flora and fauna. Highlights include massive groves of alerce trees ( Fitzroya cupressoides , often referred to as the "redwoods of the Andes"), a tiny deer called the pudú, and the Rio Futaleufú, considered by many to be the most beautiful river on earth.

Tompkins's dream of conserving Patagonia's prodigious resources may soon be crushed. A Chilean utility, HQI Transelec Chile S.A., owned by a consortium led by Canada's Brookfield Asset Management Inc. (which includes major Canadian pension fund managers), is hoping to receive Chilean government approval next year to industrialize Patagonia for the first time.

According to a news release issued on June 16, 2006, the Brookfield consortium's investors include a B.C. government-owned Crown corporation that invests money on behalf of every nurse, postsecondary instructor, and municipal and provincial employee, as well as firefighters, police officers, transit operators, and ICBC and BC Hydro workers. The pension funds of most public-sector workers in this province are backing a company that is–in the words of its critics–involved in the destruction of one of the planet's greatest environmental treasures.

The Brookfield consortium intends to build the world's longest (2,000 kilometres) high-tension power line from a series of as-yet-unapproved dams in Patagonia to Chile's central and northern industrial centres. Hundreds of transmission towers will be built alongside a superhighway that will open up Patagonia to the encroachment of industry for the first time.

"The dams are a big threat, but the power line and roads will do the most damage," Tompkins said during an interview earlier this year in Patagonia. "The Canadian power line is going to industrialize Patagonia, and it is going to discount the one economic card the region has to play, which is the tourism."

It is no secret that Chile's only major electrical transmission company, Transelec, was purchased by the Brookfield consortium last year for a sticker price of $1.55 billion. But do Canadian pensioners know that more than $500 million worth of pension funds were spent on the venture?

Critics of the Canadian consortium's decision to buy Trans ­elec claim that the Toronto-based Brookfield (formerly named Brascan Corp.) and its two partners, the Canada Pension Plan Investment Board and the British Columbia Investment Management Corporation, can look forward to a prolonged and expensive legal battle against one of the most powerful environmental alliances in world history.

EFFORTS TO LEARN MORE about how and why the Brookfield consortium chose to buy a company with such a controversial and expensive plan resulted in even more questions.

Chris Trumpy, the bcIMC's chairman of the board at the time of purchase, told the Georgia Straight in an e-mail that he wasn't even involved in the decision. Under the Public Sector Pension Plan Act, Trumpy and other board members are prohibited from participating in investment decisions made by the CEO and chief investment officer, Doug Pearce.

"The investment in Transelec did not come to the board or to me in my role as chair," Trumpy wrote.

According to bcIMC spokesperson Gwen-Ann Chittenden, bcIMC owns 26 percent of Transelec and has one seat on the nine-member board.

A representative for the other pension-fund manager in the deal, the Canada Pension Plan Investment Board, refused to comment. May Chong, a CPP spokesperson, admitted that the Canada Pension Plan Review Board (which invests Canadian pension funds not used to pay current dues) owns 27 percent of Transelec, but she directed any specific questions about the Patagonian power scheme to Brookfield, the consortium's lead in the investment.

Repeated attempts to reach Bruce Flatt, Brookfield's 42-year-old CEO, resulted in a telephone interview with the company's media chief, Denis Couture.

"We've got risk-management measures in place and we work closely with our partners to make sure all standards are met," Couture said. "We never do things that are not welcome by the local populations. If we can't do it after the review process”¦we won't."

Juan Pablo Orrego, a prominent Chilean environmentalist, disagrees.

"This kind of project could never be implemented in a full-fledged democracy," he said. "Our country is still under a constitutional, political, and financial checkmate to democracy which was put in place during the military dictatorship and empowers the private sector." Orrego, who is leading the domestic fight to save Patagonia with the group Ecosistemas, says that industrial megaprojects in Chile do not operate under the same laws of transparency that exist in Canada.

Couture defended Brookfield's industrial motives in Chile. "Nobody can accuse Brookfield of going to a developing country to take advantage of it," he said. "Isn't it preferable to have a Brookfield-sponsored initiative in Chile instead of something taken care of by a company from Russia or China?"

Like Orrego, Tompkins was quick to react to Couture's assertions. Tompkins believes the preservation of Patagonia represents one of the last stands for the planet's biodiversity and that Brookfield is the kind of profit-driven entity that is pushing the planet to the point of ecological extinction.

"What we have here are insensitive businesspeople who work at growth for growth's sake”¦no energy-conservation consciousness or energy-efficiency efforts," he said in a recent interview.

Tompkins's point has been echoed and amplified by the New York–based Natural Resources Defense Council, an environmental group that has retained Robert F. Kennedy Jr. as a lawyer. The NRDC has been lobbying the Chilean government to take simple steps toward energy efficiency. These include a requirement for insulation in Chilean homes and increased efficiency standards for Chilean industries.

"Chile needs to use the power they already have in a more efficient way before they consider destroying one of the world's last truly pristine places," said Hamlet Paoletti an NRDC spokesperson.

However, Bernardo Matte, a senior member of Chile's powerful Matte family and a minority investor in the power scheme, suggests that foreign environmentalists like Tompkins and Paoletti are hypocrites.

"How can you try to block us from building a hydroelectric power line when all of the power of Manhattan comes thousands of miles from Canada?" he asked members of the NRDC on a recent visit to New York.

But one thing that Matte may not have considered during his visit to the U.S., the world's most wasteful consumer of electricity, is that things are changing. On the East Coast, the State of New York is well on its way to a greener future with a billion-dollar investment in wind and tide technologies. On the West Coast, Californians now use almost half the kilowatt-hours of electricity used annually by the average American, due in large part to energy-efficiency measures.

DESPITE EARLY SIGNS that the new Chilean government of President Michelle Bachelet would be open to the development of renewable-energy sources and the promotion of energy efficiency, it appears that Bachelet's young regime is ready to give Brookfield a green light. Criticized for not taking the necessary steps to resolve Chile's ongoing energy crisis, Bachelet's administration recently declared the Patagonian power line a project of national importance.

Due to a traditional overreliance on hydroelectric power, Chile's energy supply has been always been overtaxed in times of drought. But in the late '90s, Chilean industry was boosted by new pipelines bringing natural gas in from neighbouring Argentina. Gas-rich Argentina, however, soon suffered the greatest economic crisis in its history, and natural-gas exports to Chile were drastically curtailed. Unable to look north to gas-rich Bolivia (Bolivia still resents Chile for taking its only access to the Pacific Ocean in the War of 1879), Chile's current energy crisis was born.

Former Chilean president Ricardo Lagos has even suggested numerous times that the country might need to go nuclear if it didn't dam more rivers, and the Bachelet government is on the record as saying it will decide on the viability of nuclear power before its mandate ends in 2010.

"That's pure blackmail," said Antonio Horvath in an article in NRDC's OnEarth Magazine . "Throw a scare into people and get them to say yes to the dams." Horvath, a provincial senator in Patagonia, a political conservative, and a previous champion of Patagonian development.

Yvon Chouinard, a global environmental icon whose company, Patagonia Inc., is a world leader in sustainable business practices, agrees with Horvath's statement.

"Chile, more than any other country on the planet, is in a position to capitalize on the advancing technologies of solar, wind, geothermal, and wave power," said Chouinard, the son of a French-Canadian who first visited Patagonia with his good friend Tompkins back in 1968. "These technologies are just being developed, so it would be shortsighted for the Chileans to destroy Patagonia."

Just one government decree from Bachelet could change the situation dramatically. The two main players in the project to dam Patagonia, Endesa Chile (one of the largest electricity-generation companies in Latin America) and Brookfield, have a great deal of experience in other power-generating techniques. Enel, the Italian co-owner of dam builder Endesa, is a world leader in geothermal power (useful in a volcano-filled country like Chile), and Brookfield owns the Prince Wind Farm in Ontario. But given that faster money can be made in Chile with hydroelectricity, it appears that international power companies won't explore other options until they are mandated to do so.

It is still not known when the power companies will be allowed to break ground on the project, but Ontario's Ministry of Business Development reported last year that the companies will "conclude the studies and engineering of the project in June 2008, when it will launch the construction tender."

If the Chilean government gives Brookfield the nod to break ground, Brookfield CEO Flatt will go down in history as the man who industrialized one of the last untouched regions on the planet.

"Our shareholders are paying us to produce a high risk-adjusted return but not take a lot of risk for it," he told the Globe and Mail last year. "We want to earn a very good return, not take very many risks, and never get into something where we bet the company."

But is Flatt overestimating what his clients are willing to support to make a buck?

"Of course I want my pension to earn higher interest, but I had no idea that my investments would help industrialize Patagonia," said Derek Johnston, a Vancouver resident who contributes to the Canada Pension Plan. "I've heard about Patagonia, and I want to go there one day. This world is already trashed enough to see a place like that destroyed."

Orrego, the Chilean environmentalist, was shocked when he learned that Canadian pensioners are paying for the industrial advance into Patagonia.

"Canada is a country with an environmentally conscious reputation," he said. "Canadians should act now to stop the Brookfield consortium from participating in a venture that a vast majority of Chileans consider an aberration."

Paula Christensen, a Patagonian who owns a small lodge with her family on Patagonia's picturesque Lake General Carrera, says that the pendulum of Chilean public opinion will soon swing against the Patagonian power scheme.

Christensen's assertion is supported by the fact that Chilean politicians, businesspeople, and Patagonians have joined the green side of the fight against Brookfield. It was no surprise when socialist politicians such as Rene Alinco spoke out against the power scheme, but business insiders were shocked when the powerful Ví­ctor Hugo Puchi, the kingpin of Chile's billion-dollar salmon-farming industry, joined the fight as well. Puchi's conversion is an indication that Brookfield's opposition is growing in both political clout and financial muscle.

Carlos Munoz, a legendary Patagonian fly fisherman, said the power project means that Chileans will lose while foreigners gain. "Like many other Patagonians, I don't think the power is for the Chilean people," he said. "It's mostly for the mining and industrial companies who need power to increase their production and shareholders' prosperity. Only five percent of their sales go to wages and less than five percent of their income to taxes."

Christensen described a television interview she saw with a different type of Chilean: an old, iron-tough Patagonian. She said the nameless man's simple but thought-provoking words about the Patagonian power scheme made the television interviewer so speechless that he was forced to take a commercial break.

"I might be able to buy another piece of land and start all over again, build a small house and buy some cattle," the old man said. "But for sure the ducks, the geese, the fish, the fox, the huemules, the pumas, and the woodpeckers will never come back, and this is a situation that you, sir, who are a rich and cultured man, and the Chilean government will never be able to revert."

Rick Montgomery is the executive director of Global Roots, a nonprofit organization that supports existing grassroot environmental and poverty initiatives in remote places across the globe, including Chilean Patagonia.