7:25 AM May 5, 1997

CHILE: COURT RULING PROMPTS NEW ENVIRONMENT REGULATION

Santiago, Apr 28 (PANOS/Heather Walsh) -- The Chilean government has passed a new regulation making environmental impact studies (EIS) obligatory for new industrial projects that may harm the environment.

As a result, some large projects that were previously approved by the government could now end up in court.

"The regulation is a benchmark in our country's environmental law," says Vivienne Blanlot, head of CONAMA, the government's environmental authority. "It will better prevent the unwanted environmental impact of development."

The government set up CONAMA in the early 1990s and gave it the task of reviewing all potentially contaminating new projects on the basis of EIS's submitted by companies.

The trouble is that the EIS's were voluntary until now, so any number of dubious projects could have slipped through the government's net, loose as it was.

Chile is well-endowed with natural resources, from fertile valleys to water resources and minerals, making it one of the top destinations for international companies.

But many projects have been environmentally harmful and the government has often had to answer charges by campaigners, that it had little real willingness to challenge the private sector on environmental issues.

There is a classic dilemma here. As with many other developing countries, the Chilean government too may have been concerned about scaring off new investment.

Foreign investment reached $6.17 billion in 1996, compared with $4.33 billion in 1995. Almost three-quarters of all investments in 1996 ($4.59 billion) were directed at plants and machinery, which is the sector that so alarms the environmentalists.

It needed a court verdict to change all that. The Supreme Court in March this year, overturned the government approval of a forestry project and questioned CONAMA's legal authority and effectiveness, forcing the government to pass the new regulation in April.

The case involved a $200 million project run by the Washington-based Trillium Corporation to harvest and mill lenga, a cherry-like fine wood, which is native to the Tierra del Fuego region.

The company, anxious to start the project this August, put in an EIS under the former voluntary system. A government technical committee which reviewed the study found serious gaps, saying, for instance, that the company had not specified where or how much wood it planned to cut.

Somehow, despite the dim review, Trillium's project was approved, upsetting environmentalists who went to court to try to stop it.

In theory, the Supreme Court ruling has thrown into question the legality of over 100 other projects approved by CONAMA, before the new regulation came into being.

Last year alone, CONAMA approved $3.4 billion in new projects. But only a few controversial and high-profile projects are likely to be challenged.

Fernando Dougnac, the environmental lawyer who won the Trillium case, is now opposing a $1 billion pulp plant being planned by one of Chile's biggest forestry producers, and an electricity plant in Santiago, being developed by the country's second largest electricity generator.

Some other forestry projects too are likely to be affected, according to Juan Eduardo Correa of the Association of Lumber Producers.

Campaigners interpret the ruling as allowing litigation, not only by people who are directly affected by projects, but also by outsiders. Previously, only people who were directly affected by a scheme, like those living near one, could make an effective claim.

"The ruling gives citizens the right to file an injunction against a project when the government doesn't fulfil its obligations to protect the environment," says Dougnac. "The ruling said that the environment is the heritage of all citizens."

Businesses and industry are fuming over the ruling.

Pedro Lizana, President of Sofofa, the manufacturing association, says it undermines the credibility of the government and creates "an atmosphere of incredulity on the part of the private sector."

Trillium Corporation said on March 20, "we invested in Chile for its political and economic stability and for its interest in establishing clear guidelines to protect the environment, as well as an unrestricted respect for private property."

"Nevertheless, we find ourselves ensnared in a legal dispute....investors and the environment are left unprotected."

The judgement comes, just as another high-profile proposal by one of Chile's biggest companies awaits the CONAMA stamp.

The top electricity generator, Empresa Nacional de Electricidad SA, Endesa, wants to build the second of a series of hydroelectric plants on the BioBio River, in Chile's eighth region, which starts some 400 km south of Santiago.

The first, a 450MW dam, called Pangue, is already up and running. Preliminary work has started on the second, larger dam upstream, called Ralco.

Both have met with fierce opposition from campaigners who say the dams will destroy unique flora and fauna, and threaten the culture of the indigenous Pehuenche community.

Even the World Bank's International Finance Corporation (IFC), principal lender for Pangue, is unhappy, and has threatened to declare Endesa in default on the remaining $150 million in loans, saying the company is not meeting agreed environmental and social conditions.

Meanwhile, unlike in its efforts to create a consistent national environment policy, the government appears to be making some headway on a plan to implement international standards for environmental management.

It is preparing to put in place the ISO 14000 series of voluntary standards on environmental management and auditing systems.

It also plans to accredit companies which have integrated these standards. The standards mainly concern the mining, fishing and forestry industries, which want to export to countries where these standards are compulsory.