Hidrosalá Hydroelectric Dam in San Pablo, Guatemala

Selene CastrucciJosie HirschJackson Hunt

Martin Garrett-Currie

POLS 255December 6th 2016

Table of Contents

Introduction………...………...……..…...………...…….………...………...………….3

Geographical Location…………….………...…………...………………….....……….4

Impacts…………………………………………………………………........………….7

Environmental Law……………....…………………………………………....………..9

Company Profile and Governance………………………………………………....….11

Funding Streams………………………………………………………………....…....18

Shareholder Contact Information……………………………………………….……..20

Bibliography………………………………………………………………....………..22

2

Guatemala’s history of multiple periods of conflict, including a civil war and

genocide, has slowed the country’s progress in establishing an effective system that

upholds social, political, judicial, and economic rights of all its people. This has led to

inequalities and divisions throughout the country, with indigenous peoples and rural

communities being the most negatively affected.1 This system of structural inequality has

impacted communities, affected the process of development, and led to outcomes like

environmental degradation throughout the country.

Private businesses are looking to increase Guatemala’s use of renewable energy

by building hydroelectric dams throughout the country. These dams generate electricity

using river currents as explained in Figure 1. Renewable energy sources are defined as

resources that are naturally replenished. Hydroelectric dams avert water, utilize its power,

and return the water to the river, without impacting flow rates. Although dams produce

renewable energy, these projects continue to be a point of tension in communities

because of the poor social and environmental standards.2 These private companies often

do not consult with communities prior to their development, nor do they receive consent.

In Guatemala, there are already twenty-two hydroelectric dams in operation, twenty-eight

under construction and twelve in process.3 Hidrosalá has one hydroelectric dam proposed

1 Cox, Pamela. “Republic of Guatemala Country Environmental Analysis Addressing the Environmental Aspects of Trade and Infrastructure Expansion.” World Bank, 22 June 2006.2 Koberly, Alex. “Reality Check for Guatemala’s Energy Plans.” International Rivers, 7 June 2012.3 MEM Extends Deadline for Construction of Hidrosalá.” Prensa Libre, 9 June 2015.

3

on the Salá River.4 Though the plans are made and permits were acquired, in January of

2015, the construction deadline was extended by a year due to community protests.5

Figure 1. How hydroelectric dams work

(source: Hidrosalá, 2016)6

Geographical Location

Guatemala has an abundance of natural resources and is one of countries with the

most biodiversity in the world. The main exports of Guatemala are sugar, bananas and

coffee.7 Petroleum and timber are the main natural resource, however, nickel, lead, zinc

and iron are also present. Growth of the nation relies heavily on the natural resources

present.8

4 “Expected Contribution.” Ministry of Environment and Natural Resources, 29 September 2015.5 Ministry of Environment and Natural Resources, 29 September 2015.6 Cox, 22 June 20067 United Nations Development Program, 20158 Ministry of Environment and Natural Resources, 29 September 2015

4

Over one third of the country is forested and undeveloped.9 The Guatemalan

government prioritizes protecting its land and the forested areas are federally preserved in

order to secure the wealth of ecosystems. However, since 1990, Guatemala has lost

seventeen percent of its forest area due to land degradation, mostly in the northwestern

region.10 Deforestation affects water capacity and soil erosion, which increases the

probability of landslides during heavy rains.11 This has become evident after multiple

landslides during Hurricane Stan as well as other recent natural disasters that have

affected the country. Additionally, deforestation and land use change account for more

than fifty percent of Guatemala’s greenhouse gas emissions.12

The country is on an isthmus between three intercontinental plates and on an

intertropical convergence zone.13 This makes the region vulnerable to the many tropical

storms, hurricanes, floods, droughts, earthquakes, and volcanic eruptions.14 Guatemala is

annually one of the top five countries to experience these types of events.15 Since 2014,

there have been eight extreme hydrometeorological events in Guatemala as a result of

climate change, amounting to damage costs over $3.5 billion (U.S.D).16 Climate change

and rising sea levels affect ocean currents resulting in altered, more frequent extreme

weather patterns.

9 Prensa Libre, 9 June 201510 ASTEG, 201611 Ibid12 Goteborg University, 11 September 200613 Vasquez, Bryon. “Hidrosalá Attack Attributed Crime Network.” Prensa Libre, 28 January 2015.14 Koberly, Alex. “Reality Check for Guatemala’s Energy Plans.” International Rivers, 7 June 2012.15 ASTEG, 201616Ibid

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Continued increases in magnitude and frequency of severe climate events are

expected to decrease clean water availability, increase food insecurity, and damage

protected natural areas.17 Natural disasters affect communities as they threaten livelihood

and cultural identity. Recovering from such events prevents important long-term

development as short-term solutions are prioritized. Natural disasters destroy resources,

which negatively impacts the country’s ability for growth, employment, exports, and

substance.18 No matter what preventative measures Guatemala takes, the country is

disproportionately affected by the impact climate change has on habitat loss,

deforestation, over-exploitation of natural resources, and contamination, and within the

country, indigenous people and farmers are disproportionately vulnerable as they are

prone to living on marginal lands.19 Due to historic discrimination and racism, indigenous

peoples often live in extreme poverty despite living in areas rich in natural resources. It is

also important to analyze the role of large scale development, often based in extraction,

with regards to climate change and increase of natural disasters.

Hidrosalá has proposed a hydropower plant on the Salá River in San Pablo, a

municipality in the San Marcos province (Figure 2). Guatemala faces land conflicts due

to titling processes that are fraught with irregularities. Indigenous people’s land has been

stolen throughout history as ancestral rights are disregarded. The land is currently

privately owned and is situated on the Argentina Estate. This lies thirty miles east of the

17 “UNFCEE Country Brief 2014: Guatemala.” United Nations Climate Change Secetariat, 2015. 18 Ibid19 “Country Rank.” International Energy Agency, 2014.

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Pacific Ocean and ten miles south of the Mexican border. The approved agreement is to

generate 15 megawatts over fifty years.20

Figure 2. Location of the proposed dam

(Source: Hidrosalá, 2016)21

Impact

According to the company, the communities expected to be impacted include

Nuevo San Carlos, The Andes, Loma Bonita, New San Francisco, Casco Urbano, El

Carmen, Beautiful Villa, New Buena Vista, Buenos Aires, New Castalia, Santa Anita,

and Candlemas.22 In Guatemala, almost sixty percent of the population lives in poverty

while over three quarters of indigenous peoples live in poverty (poverty measured by the

inability to meet the daily caloric intake of food). Over ninety percent of the San Pablo

20 “Expected Contribution.” Ministry of Environment and Natural Resources, 29 September 2015.21 “UNFCEE Country Brief 2014: Guatemala.” United Nations Climate Change Secetariat, 2015.22 Genhidro. "¿Quienes Somos?" Genhidro. 2016. Accessed October 20, 2016.

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population is living in poverty and twenty nine percent live in extreme poverty.23

Compared to the rest of Latin America, Guatemala has high levels of inequality where

one percent of the population controls sixty-five percent of the wealth. Poverty is closely

linked to malnutrition, and over one third of child deaths in Guatemala are due to

malnourishment.24 Additionally, the region faces scarcity and pollution of air and water

that causes significant disease.25 The lack of opportunity in the area, socioeconomic

inequality, and succession of natural disasters has led to vast migration to the United

States and Mexico.26 Annually, 900,000 Guatemalans move to the United States from

Guatemala, which is roughly twenty-eight percent of the total number of migrants the

United States receives from Central America. These factors makes the country

particularly susceptible to external powers and promises of economic development.

Through community consultation, in 2008 the Hidrosalá project was not approved

by the people. Leaders were not included in various phases of the license granting

process. The community feels as though their resources are being taken without their

permission, and many are angry because they are being displaced as their health and

wellbeing are in danger. Hidrosalá moved forward with the proposed dam, which has led

to continuous protests. Although protests began peacefully, they have since escalated. On

January 22nd, 600 men armed with AK-47s entered the farm and burned machinery. Over

23 Hidrosala. "Nosotros." 2016. Accessed October 20, 2016.

24 Casallas, David. "Roundup: Distributor Consolidation, Deca II-Camif Deal, Energy Efficiency." BNAmericas. 2012. Accessed October 20, 2016. 25 "Licencia-Construccion." Hidrosalá. Accessed October 20, 2016.

26 CMI-G. "PNC Y Ejército Custodian Ingreso De Maquinaria Para ..." Centro De Medios Independientes. January 21, 2015. Accessed October 20, 2016.

8

200 police officers were present to stop protests.27 Hidrosalá attributes the attack to crime

networks and claims that the damaged materials were intended to construct local

schools.28 These protests have led to the injury of local workers.29 Thus far, ten political

figures have been arrested, further angering the community.30 The prisoners are still

under house arrest and the legal process continues. Demands have been made to see the

documentation and reason for the arrests yet nothing has been provided.

Guatemala relies heavily on imported oil for energy. Recently, this has led to

political pressure to transition toward renewable energy to reduce this reliance; this has

translated into hydroelectric dam projects.31 Generally, not enough attention has been

spent on calculating the environmental risks and impacts of these dams, yet they continue

to be constructed. Hidrosalá has conducted a social audit in thirteen communities to share

information and hear concerns as well as an Environmental Impact Study approved by

the Ministry of Environment and Natural Resources in 2009.32 Results from these studies

have not been found, but community members have stated that they have felt excluded

from important phases of the licensing process.

All water used to generate electricity will be returned to the river after going

through extensive water treatment processes to ensure its cleanliness. Hidrosalá has

already begun carrying out its reforestation plan of planting over 100,000 trees in the

27 Independent Media Center. “Guatemala: Hidro Sala continues damming defenders of the territory.” Pueblos en Camino, 11 August 2016.28 "Successful Closing of Central American Infrastructure Fund - FMO." FMO, n.d. Web. 15 Nov. 2016. 29 Translated Velasco, Francisco. “Guatemala’s Constitution of 1985 with Amendments through 1993.” Constitution Project.30 Ibid.31 Ibid.32 Genhidro. "Política Del Buen Vecino." 2016.

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region. In addition to generating over 300 jobs in the construction phase, Hidrosalá plans

to invest in the communities surrounding the dam to promote development.33 Additional

projects they are working on include strengthening health centers, constructing roads and

renovating schools.

As with many environmental concerns, there seems to be a tradeoff between

environmental conservation, sovereignty, and rights to land. There is never complete

certainty when carrying out a project of this capacity and environmental risks are taken.

Environmental Law

Guatemala has laws that recognize indigenous peoples and their particular rights

along with the protecting of the environment, however the country faces difficulty

enforcing them. Article 66 of the constitution states, “Guatemala is formed by diverse

ethnic groups among which are found the indigenous groups of Mayan descent. The State

recognizes, respects, and promotes their forms of life, customs, traditions, forms of social

organization.”34 In 2005, Guatemala ratified the International Labor Organization (ILO)

to work towards improving work and living conditions for indigenous people.35 The ILO

hopes to create a space where indigenous people can control their own institutions,

development, and identity while establishing their own decision-making processes and

achieving respect. In writing, Guatemala has made commitments that recognize the

human rights of all peoples, and, in particular, indigenous peoples. Guatemala has not

33 Ibid.34 Ibid.35 Hidrosalá. "Contactanos." 2016.

10

only recognized these rights, but has made specific obligations to uphold and implement

these commitments.

Currently resources are being overexploited, which is resulting in pollution and

environmental degradation.36 Guatemala has many natural resources which make it

attractive to multinational companies and to the interest of other countries. For example,

Canada aims to utilize Guatemala’s natural resources. Moving forward, the government

aims to increase transparency, justice and equity in order to strengthen civil society and

stewardship of the environment.37 This will be done by monitoring deforestation and

environmental impacts by working with local governments in different areas.38

Guatemala is working towards creating incentive initiatives to engage with, and promote,

preservation.39 One study by International Rivers proposes freezing all new energy

generation projects until measures to improve energy efficiency are taken.40 The Center

for the New Energy Economy (CNEE) has a plan to fund and promote efficiency,

however, it has been stalled by the United States Congress. This would include a credit

line of $100 million (U.S.D) to Guatemala from the Inter-American Development Bank.41

Being energy efficient requires high startup funds but in the long run is proven to be cost

effective.

36 Genhidro. "Política Del Buen Vecino." 2016.37 Monaghan, Colin. "Ministry Shuts down Las Vacas Hydro Plant Due to Pollution ..." BNamericas. January 8, 2003. Accessed October 20, 2016. 38 Ibid.39 Asamblea de Pueblos Te Txe Chman. “COMMUNICADO A LA COMMUNIDAD NACIONAL E INTERNACIONAL”. San Marcos. August 3rd 2016.40 “Guatemala Country Profile,” United Nations Development Program, 2015. 41 Goteborg University, 11 September 2006

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Guatemala is one of 112 countries that have submitted action plans to the UN

Framework Convention on Climate Change (UNFCCC) in response to the Paris

Agreement last December.42 Guatemala’s brief, submitted in September 2015, highlights

trends in their annual CO2 emissions and energy consumption from 1990 to 2012, with

important information listed in the figure below (Figure 3).43 The country ranks 118 in

CO2 emissions per population and emits 0.1% of global greenhouse gases.44

Comparatively, these are notably lower rates than the other countries in the America’s.45

By 2030, Guatemala hopes to reduce its greenhouse gas emissions by 11.2% using a

baseline year of 2005. Meeting this ambitious goal will take technological advances and

financial support from the international community. The government will need to forge a

path forward that is respectful and mindful of both the needs of the citizens and the

environment.

Figure 3. CO2 emission trends from 1990 - 2012

42 Goteborg University, 11 September 200643 Ibid44 Ministerio De Energía Y Minas. 049-211. Ministerio De Energía Y Minas. Guatemala, 2011.

45 Ministry of Environment and Natural Resources, 29 September 201512

(Source: UNFCEE Guatemala, 2015)46

Company Profile and Governance

Important questions yet to be answered about Hidrosalá include how it plans to

operate with relation to indigenous communities, human rights, and sustainability. This

information remains inaccessible, even after extensive research. This is especially

concerning in regards to the local community, as it is doubtful that they would be able to

acquire this information either. There are multiple companies that have a relation to

Hidrosalá, although very little information about them exists. The first is Genhidro, a

Guatemalan company that has two hydroelectric dams already implemented in

46 Casallas, David. "EPM Expands Central America Footprint with Genhidro Purchase." BNAmericas. 2010. Accessed October 20, 2016.

13

Guatemala: Hidronorte and Hidrovacas.47 Although there is no mention of Hidrosalà on

the website of Genhidro, Genhidro’s social responsibility and good neighbor policies can

be found on the Hidrosalá website.48 The Fabrigas Group is the umbrella company under

which Genhidro and Hidrosala exist.49 The website provided for Fabrigas is extremely

underdeveloped and gives absolutely no information regarding board members or

shareholders. The websites for Genhidro and Hidrosala are more developed, however

neither of them contain any information regarding board members or shareholders either.

Whether this withholdment of information is intentional or not, it is a transparency issue

that hinders one's ability to ascertain their corporate motives. The three companies are

linked through the Ayau family lineage; the Fabrigas Group was founded by Manuel

Ayau, who passed over control after his death to his nephews Minondo Ayau and Raul

Minondo Ayau.50 Hidrosalá’s headquarters are located in Guatemala City. On the official

Facebook page of Hidrosalá, it is listed as “Hidrosalá S.A.” indicating that it is a

corporation.51 The fact that the website for Hidrosalá makes no mention of any parent

companies or related projects, aside from the inclusion of these policies raises a red flag.

Such basic information about their company background should be easily accessible to

anyone who visits their website.

47 Casallas, David. "Roundup: Distributor Consolidation, Deca II-Camif Deal, Energy Efficiency." 2012. 48 GoteBorg University. “Poverty and Environment in Guatemala.” Department of Economics, 11 September 2006. 49 Ibid 50 Genhidro. "Nuestros Proyectos." 2016. 51 International Finance Corporation. "Central America Mezzanine Infrastructure Fund II." IFC. 2015. Accessed October 20, 2016.

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Within Genhidro’s Corporate Social Responsibility (CSR) framework, emphasis is

placed on being a good neighbor, a good partner, and a good citizen.52 The three main

areas in which it aims to promote sustainability and ethical acts are the environment, the

local communities, and the country of Guatemala as a whole. With regards to

sustainability, Genhidro intends to preserve the biodiversity and landscapes of the natural

environment, to monitor possible polluting effects of their projects, and work to mitigate

and prevent carbon emissions and encourage use of renewable energies. For local

communities and the country of Guatemala, it describes a commitment toward building

trusting relationships with ancestral and indigenous communities and municipal mayors,

through support of legal institutions like the Consejos Departamentales de Desarrollo,

Consejos Comunitarios de Desarrollo, and the Consejos Municipales de Desarrollo.

Lastly, it states compliance with the human rights and labor declarations of Guatemalan

legislation, including not using child or forced labor, encourages respect for ethnic,

cultural, and physical differences, and intends to promote the integration of them

whenever possible.53

The good neighbor policy manual goes into more depth about how Genhidro

wishes to promote positive, ethical, and long-lasting relations within the local

communities in which their projects operate.54 A ‘Good Neighbor’ is described in the

manual as one that seeks an honest, positive, and consistent relationship with all groups

in which the company will interact with. The main goal is to maintain economic, social,

and environmental sustainability within these communities. It states that company actions

52 Ibid.

53 LAP. "Latin American Partners." LAP Funds. 2016. Accessed October 20, 2016.

54 Ibid.15

must be based on the principles of respect for Guatemalan law, an adherence to the

United Nation’s Universal Declaration of Human Rights, the recognition of the diverse

needs of Guatemala’s different ethnic groups, and an evaluation of the social, political,

economic, and cultural contexts of the community in which the company is working. It

establishes procedures for community relations including that decisions taken by the

community with regards to the company must not be under coercion from the company,

the company must commit to maintaining positive relations throughout the duration of

the project’s operation, and socialization must be timely, culturally appropriate, and

honest. Company decisions must take into account the customs and traditions of the

community, and must be respected and only modified with their knowledge. Genhidro

wishes to promote the physical and mental health, education, environmental safety,

infrastructure, and culture of local communities, as well.55

These two documents should be brought into light regarding the civil unrest in San

Pablo, especially the framework regarding community dialogue. It is clear that the

Hidrosalá has neglected this dialogue process to an extent, as shown by the large

community opposition toward the plant. Furthermore, the company is not transparent in

providing information on its board members and shareholders. This information is

nowhere to be found on either Genhidro or Hidrosalá’s websites. The combination of

these two factors bring into question the ethics of Hidrosalá’s governing mechanisms.

The main areas of substance in the CSR Policy are the ‘Principles of Action’, which

describe specific internal procedures undertaken by the company.56 The CSR

55 Ibid.56 Ibid.

16

Coordination in conjunction with the Committee for CSR will promote the commitments

that are specific to internal governance. While the commitments that are more specific to

the surrounding communities will be carried out via a relationship between a separate

committee comprised of leaders within the staff and key local representatives.57

The first principle of action that falls under the scope of internal governance is the

commitment to comply with current Guatemalan law.58 However, if these laws are not

stringent with regards to tax, labor, the environment, and health regulations, then the

company will adopt more stringent international law, as identified by the United Nations

Covenant on Global Human Rights, Labor Practices and the Environment, so as to

preserve its aforementioned commitments to the environment and surrounding

communities. The second mechanism is to ensure that all employees know what is

expected of them vis-à-vis the Code of Ethics and Conduct and the Transparency Policy.

The two converge to reiterate the company’s strict stance on illegal or unethical practices

to all members of staff. The third mechanism is to publish, on a regular basis, relevant

and reliable information on the activities of the company and the social and

environmental results of these activities. This procedure provides a record of

accountability; documentation on whether or not they follow up on their core values. The

last internal procedure of note is to monitor their pollution, which includes the reduction

57 Nelton Rivera, “Guatemala: en San Marcos se registró una nueva injusticia en contra de una autoridad maya ancestral”, Guatemala Communitaria, August 13th, 2016, Accessed November 14th, 2016.58 Hidrosalá. "Proyectos RSE - Hidrosala.com." 2016. Accessed October 20, 2016. http://www.hidrosala.com/PROYECTOS-RSE.

17

of carbon emissions, and to find suitable waste operations and to practice reuse and

recycling.59

Procedures that have a direct effect on surrounding communities are underpinned

by the principle of maintaining dialogue, in order to achieve consistency and align

expectations.60 It should be carried out between a committee made up of leaders within

the staff, and legal representatives of the community, specifically the municipal mayor.

This will allow activities of the company to be harmonized with the realities of the

cultures of surrounding communities.61

The Good Neighbor Manual outlines the details of this dialogue process: Firstly, the

key requirements of community representatives should be identified, and the committee

should be made aware of budgetary allocation as well as time limits of which the

company can act.62 Based on the requirements identified by the community, other actors,

such as governmental institutions may be deemed relevant. Expectations are that

governmental institutions and Genhidro can work in tandem as moderators in order to

deliver on said requirements. The next part of the process is to define a clear work plan,

which should include which actors are responsible for what, a timeline of the project and

the details of specific activities. This step is especially important, as it avoids false or

miscommunicated expectations. Lastly, it is reiterated that constant dialogue is necessary

59 “Map of Hydroelectric Plants in Guatemala.” National Commission on National Electrical Energy, 2009.60 “ILO Convention 169.” Indigenous Foundation, 2009.61 S.a., ASTEG. "Nuestro Compromiso." Nosotros. Hidrosalá, 2016. Web. 23 Sept. 2016.62 ASTEG, 2016

18

to mitigate potential miscommunicated expectations that may arise from changing

circumstances.63

The Good Neighbor Manual also contains a formal complaints mechanism.64 It

outlines the methods in which complaints can be made: orally to employees of Genhidro

who will then fill out a complaint form, sending a complaint form located on the website

to the company address, depositing the form to the company office mailboxes, or calling

the local office. Upon looking through Hidrosalá’s website, however, such a formal

complaint form was not found. Under their contact page, they encourage asking questions

to receive information, but there is only an online form in which people can share their

opinions, nothing directly mentioning complaints.65 In following up on a claim, the

company procedure is to receive and register it, evaluate whether or not to take action

within seven business days, if they decide to take action then the company must propose

a solution and have it be accepted by the community within ten business days, and

finally, the result will be monitored and evaluated.66

Although Genhidro appears to have good intentions, it is difficult to determine

how well Genhidro and its associated projects are actually living up to the commitments

they outline within their Corporate Social Responsibility and Good Neighbor Policy

framework. Despite the promising dialogue framework put forth by Genhidro, the civil

unrest of the San Pablo community suggests that such dialogue was either not followed

through with, or the community’s requests were ignored. The widespread opposition to

63 CAO. "CAO Assessment Report." Web. 2013. 64 Cox, 22 June 200665 “Guatemala Readiness Preparation Proposal for REDD+.” Forest Carbon Partnership Facility, 28 March 2012.66 Ibid

19

the construction of the plant eventually manifested in a mob of 600 armed protesters, who

destroyed machinery and acted in a violent manner toward construction workers and

community members who were in favor of the construction.67 This outburst is indicative

of a divided community in regards to the hydroelectric plant, and the lack of necessary

dialogue required to remedy the situation.

A statement made by the Assembly of the Indigenous People of San Marcos

consists of a denunciation of national and transnational corporate projects that exploit

natural resources in Mayan territories, without obtaining consent from indigenous people

in the local population. These people have expressed non-consent to their community

leaders on multiple occasions. The Assembly held that these projects have generated

social conflict, community violence and the criminalization of community leaders. The

Assembly found that Hidrosalá was in violation of domestic [Convenio 169] and

international legal framework in their failure to communicate with the indigenous

community. Instead, Hidrosalá held communication only with governmental institutions.

The Assembly also denounced the criminalization the indigenous people of San Marcos

face as a result of defending their human rights. The Assembly also asks that the

communal structures and authorities of the indigenous peoples be recognized by

Hidrosala.68

According to Genhidro’s website, Hidronorte, one of its two operational

hydroelectric dams has planted over 180 hectares of native trees in the region it operates

in as a project to demonstrate its corporate social responsibility commitment; and

67 Cox, 22 June 200668 Koberly, 7 June 2012

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Hidrovacas, the other operational hydroelectric dam, has helped with reforestation in its

region as well.69 The Hidrosalá website outlines other ways Genhidro has promoted

sustainable development, including helping over 1500 patients with regards to health and

nutrition, aiding students with scholarships, school renovations, and school supplies, and

activities that promote local culture and mental health.70 Information regarding projects

on the website is vague, not citing any specific details of the location, beneficiaries, or the

exact nature of the projects. Further research has not shown any other evidence of the

outcomes of these projects, either. The only information available is that represented on

the Hidrosalá and Genhidro websites. So the question still remains whether or not

Genhidro is acting on their supposed commitment to promoting the wellbeing of local

communities.

There is no evidence of any legal proceedings involving any of the companies.

However, a news article from 2003 reported that Genhidro’s Las Vacas dam, Hidrovacas,

was shut down by Guatemala’s environmental ministry due to contamination of the

wastewater sludge released from the hydroelectric plant into the nearby Motagua River.71

According to the article, a Guatemalan environmental protection group, Calas, planned to

file a lawsuit against the environmental ministry and the Hidrovacas plant owners.72 No

further information on the alleged lawsuit or the waste contamination was located, so any

legal proceedings to occur from this incident and the duration of the dam’s shutdown are

unknown.

69 Ibid70 Ibid71 Ibid. 72 “Mapa de Centrales Hidroelectricas mayores de 5 MW.” Gobierno de Guatemala, December 2014.

21

Hidrosalá remains a very mysterious presence within the community of San Pablos.

Research has not yielded the identities of the people behind Genhidro or Hidrosala, or

evidence of how Genhidro’s other projects have affected their communities. Therefore, it

is hard to determine the impact that the hydroelectric project will have in its community.

Although it appears that it cares about the community, there is little information to

predict how Hidrosalá will impact the indigenous people of the region or the

environment.

Funding Streams

The Hidrosalá hydroelectric power plant project in Guatemala was approved by

the Ministry of Energy and Mines in February 2011 on the condition that Hidrosalá S.A.

would provide a performance bond of US$112,500.73 The project is sponsored by a

network of several corporations, which this section will describe.

Hidrosalá S.A. is a publicly traded company whose primary direct owner is

Generadores Hidroelectricos S.A. (Genhidro), a private, Guatemalan holding company

that claims to provide clean, sustainable, hydroelectric energy for the people of

Guatemala.7475 Ownership of Genhidro has changed hands several times over the past few

years.7677 Most recently, the Central American Mezzanine Infrastructure Fund II L.P.

73 Genhidro. "Nuestros Proyectos." Nuestros Proyectos. 2016. Accessed October 03, 2016. 74 Genhidro. “Política de Responsabilidad Social Empresarial”, Hidrosalá. Accessed October 1, 2016.75 “PNC y Ejéricto custodian ingreso de maquinaria para construcción de hidroSalá,” Centro de Medios Independientes, accessed November 14, 2016, https://cmiguate.org/pnc-y-ejercito-custodian-ingreso-de-maquinaria-para-construccion-de-hidrosala/.76 Ibid.77 Hidrosalá. "Hidrosalá S.A. | Facebook." Facebook. 2014. Accessed October 20, 2016.

22

(CAMIF II) purchased 51% ownership of Hidrosalá along with a 3.12% stake in

Hidronorte from a subsidiary of Colombian based corporation Empresas Públicas de

Medellín E.S.P. (EPM) for roughly US$18.7 million in 2012.78

CAMIF II is a 12-year mezzanine fund that invests in private companies and

projects pertaining to infrastructure, transportation, and related sectors in Central and

South America.79 It was developed as a follow-up fund for the existing CAMIF I fund in

which the IFC invested US$40 million.80 CAMIF I has a history of clashing with

indigenous Central Americans. In 2013, a complaint was filed to the fund’s external

accountability agency, the Office of the Compliance Advisor Ombudsman (CAO) stating

that a land used for the Agua Zarca hydroelectric plant, which CAMIF was considering

funding, had been taken unjustly from Lenca people in Honduras.81 The complaint went

unresolved as CAMIF pulled their funding from the project, meaning the CAO no longer

had vested interest in pursuing the complaint.82 It will prove crucial to uncover other

complaints made against CAMIF projects to shed light on the nature of the fund’s

interactions with indigenous people.

Currently, CAMIF II is managed by a branch of Latin American Partners LLC

(LAP), a private equity and mezzanine fund manager headquartered in Washington D.C.

and focused on infrastructure in Latin America and the Caribbean.83 84 CAMIF II received

78 Genhidro. “Política de Responsabilidad Social Empresarial”. Hidrosalá. 2016. Accessed October 1, 2016.79 Ibid.80 Genhidro. "Política Del Buen Vecino." Hidrosalá. 2016. Accessed October 03, 2016.81 Genhidro. “Política de Responsabilidad Social Empresarial”. 2016. 82 Ibid.83 Ibid.84 Ibid.

23

an additional US$30 million in investments from the International Finance Corporation

(IFC), a lending member of the World Bank Group; US$12.5 million of this investment is

through loans while $17.5 million is equity.85 The IFC lists the following institutions as

fellow shareholders in CAMIF II:

1. Inter-American Development Bank (IDB), a development financing

institution for Latin America and the Caribbean based in Washington, DC;

2. FMO, a Dutch development bank;

3. Obviam DFI AG (Obviam), an independent investment advisor focused on

long-term investments in emerging and frontier markets;

4. Central American Bank for Economic Integration (CABEI), a multilateral

development bank headquartered in Tegucigalpa, Honduras;

5. Finnish Fund for Industrial Cooperation Ltd. (Finnfund) is a Finnish

development finance company;

6. Corporación Mexicana de Inversiones de Capital (aka Fondo de Fondos) is

a Mexican government-owned fund of funds;

7. Société de Promotion et de Participation pour la Coopération Economique

S.A. (Proparco), a development financial institution partly owned by

Agence Française de Développement (AFD).86

CAMIF II was expected to close at US$250 million by 2014 according to

estimates by the IFC.87 In 2016, CAMIF II closed at US$188.2 million.88 However, it is

85 Ibid. 86 Ibid 87 “Guatemala Readiness Preparation Proposal for REDD+.” Forest Carbon Partnership Facility, 28 March 2012.88 Ibid

24

unclear exactly how much of this funding is being funneled into Genhidro to support the

Hidrosalá project.

Further research must be conducted in order to uncover the projected costs and

profits of the Hidrosalá project, which are not readily available through CAMIF II,

Genhidro, Hidrosalá, or any of the projects other investors. However, Hidrosalá has

estimated that the programs it plans to produce to benefit the community will cost about

US$1,472,639.47.89 Construction of the hydropower plant will be orchestrated by Grupo

Fabrigas, owners of Genhidro.90

Shareholder Contact Information

Sections of the following table that are left blank indicate information that the company

did not provide.

CompanyPerson of Contact Job title Email Phone Mailing Address Website

IDB

The Independent Consultation and Investigation Mechanism (MICI) mecanismo@iadb.org

+1 (202) 623-3952

1300 New York Ave. NW Washington, DC. USA. 20577

http://www.iadb.org/en/mici/contact-us,19739.html

FMO Mr. F. SchellkensComplaint office complaintsoffice@fmo.nl

+31 (0)70 314 96 91

P.O. Box 930602509 AB The HagueThe Netherlands

https://www.fmo.nl/project-related-complaints

Obviam Florence Derron, M.A.

Impact Manager

fderron@obviam.ch +41 (0) 31 310 09 51

http://www.obviam.ch/about-us/team/

CABEI Guatemala Office

(502) 2410-5300

16 Calle 7-44, Zona 9, Guatemala City, Guatemala.

http://arc-www.bcie.org/?cat=4&title=Contact

89 ASTEG, 201690 “Deputy Supposed to have Burned Police Machinery Hidrosalá.” Prensa Libre, 10 February 2015.

25

%20Us&lang=en#.WENHs5OANBc

Finnfund +358 9 348 434

P.O. Box 391FI-00121 HelsinkiFinland

http://www.finnfund.fi/yhteystiedot/en_GB/yhteydenottolomake/

Fondo de Fondos

+52 (55) 4433-4500

Av. Insurgentes Sur 863Flat 4Col. NaplesDelegation Benito JuarezCP 03810 Mexico DF

http://www.fondodefondos.com.mx/es/contact

Proparco proparco@proparco.fr + 33 1 53 44 31 08

151, rue Saint Honoré

75001 Paris

http://www.proparco.fr/Accueil_PROPARCO/nous-contacter-1

26

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