- The Washington Times - Friday, November 12, 2010

Kelly Hearn’s Tuesday Page One article “U.S. questions development bank after troubled gas project” contained serious errors of fact and misleading information about the Camisea gas project in Peru, which the Inter-American Development Bank (IDB) helped finance.

The article states that the IDB “last year suffered a billion-dollar loss after putting its money into mortgage-backed securities.” In fact, the IDB registered $1.3 billion in net income last year. It is incorrect to state that the U.S. government “is considering whether to approve” our $70 billion capital increase. In fact, the U.S. Treasury Department already has given its official approval by signing on to the March 2010 Cancun Agreement and, on July 21, formally endorsing the capital increase.

The article next says U.S. officials have “begun to question the reasonableness of the IDB’s loans” and that the bank is “more focused on securing new deals than making sure existing ones work as planned.” The story offers no documentation or corroboration to support these baseless assertions. The IDB is, in fact, focused on making sure that our projects work as planned. Yesterday in Lima, Peru, more than 80 people gathered for the ninth public consultation on Camisea organized and hosted by the IDB since the loan’s approval in 2003, with the participation of civil society organizations and representatives from affected communities.

Twice a year, staff from the IDB’s Environmental Safeguards Unit visit Peru to monitor and evaluate the project as well as consult with local communities, government officials and project operators. The IDB also closely monitors the technical and financial obligations under the Camisea-related loan with support from Exponent Inc., a leading engineering firm that has conducted numerous site visits as a consultant to the IDB.

Ms. Hearn’s story purports - but provides no verifiable information - to substantiate the allegation that in 2007 bank officials “manipulated” a technical investi- gation to produce a “fraudulent” report that cleared the way for IDB financing.

The central allegation of the article relies on a statement by Bill Powers, president of the E-Tech consulting firm, who claims that one of the contractors in Camisea “utilized pipe left over from other projects” and that those pipes “played a material role in one or more of the pipeline ruptures.”

Mr. Powers himself has admitted that this allegation is false. During a public consultation on the Camisea project on June 4, 2007, which was recorded and published on our website, Mr. Powers said:

“E-Tech stated in its Feb. 27, 2006, report that a significant percentage of tubes left over from other projects were used in the Camisea pipelines. This explanation of the poor physical condition of some of the pipe, that the pipe must have been left over from other projects, was demonstrated almost immediately by TgP [the contractor] to be an incorrect explanation. It was unproductive for E-Tech to state as fact, based on the demonstrable physical evidence of corrosion, what was undocumented opinion.”

The article quotes Beatrice Edwards of the Government Accountability Project as saying: “[IDB officials] cobbled together a report dismissing the E-Tech [sic] and leaving still unanswered questions and allegations.” In fact, the IDB rigorously examined all of E-Tech’s allegations. The Bank hired R.W. Beck Inc., a respected engineering firm, to further evaluate these allegations and consulted numerous entities, including the pipeline operator, Peruvian government officials and local stakeholders. After a thorough review, the IDB considered the matter of the allegations to be closed. However, it continued the rigorous monitoring of engineering, performance and environmental issues that had been in place before the inception of the loan and that continues today.

The article states that the IDB “failed to investigate” allegations of corruption made by a former Peruvian energy minister. As Ms. Hearns knows, the bank’s Office of Institutional Integrity (OII) is only authorized to investigate allegations of fraud and corruption in projects directly financed by the IDB. The alleged corrupt activities referred to concern Peru’s legislative process and are outside the scope of OII’s mandate. As your story also notes, the IDB has never received formal allegations of fraud and corruption related to the Peru liquified natural gas project.

The article implies that the IDB is being secretive regarding investigations by its Office of Institutional Integrity. In fact, the IDB’s disclosure policy regarding such investigations is designed to protect the identity of whistleblowers, prevent reprisals against persons who inform us of possible corrupt acts and ensure the integrity of the investigative process. In this respect, our confidentiality policies match international best practices.

There is one fact your article did report correctly: Since 2006, no further gas leaks have been reported in the Camisea project. Given the severity of the many errors in your report, we insist that you set the record straight.

PABLO BACHELET

Media Unit chief

Inter-American Development Bank

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