Brazil's National Destruction Bank Does it Up Big

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The headline in today's Folha de São Paulo daily stated ironically "Jirau, suspended by court order, gets biggest loan ever from BNDES"

This week, environmental agency Ibama fined the consortium (headed by Suez) building Jirau Dam on the Madeira River in the Brazilian Amazon US$408,000 for building a coffer dam without following its proscribed construction plan, and construction was suspended. This marks the second time in a month that the consortium has been punished for violations of environmental regulations.

But yesterday, the project, which is being built using a temporary construction license, having not complied with all environmental pre-conditions, received the biggest loan in the history of Brazil's public National Development Bank (BNDES – called by some activists the "National DEStruction Bank), US$3.1 billion. A part of the resources will be transferred via other banks, including the private Brazilian banks Bradesco and Unibanco, both of whom have committed to follow the Equator Principles. The loan represents 68.5% of what Suez says it will take to build the dam (US$4.5 billion).

BNDES said it will not release the loan until the construction violations are resolved.

In 2008, BNDES loaned approximately US$6 billion for dam construction in Brazil – about half of this money went for construction of Santo Antônio Dam, also on the Madeira River.

Activists say BNDES is being used by international financial institutions, including the World Bank, Inter-American Development Bank, and Andean Development Corporation (CAF) to channel resources for dam construction and other infrastructure projects, evading the need for compliance with the institutions' environmental policies. As an example – an upcoming infusion by the World Bank totalling $2 billion, mostly to fill the coffers of the BNDES.

In an era of shifty international finances, BNDES, along with the China Development Bank, are clear examples of using public resources which could be better spent on education, health, and housing to finance enormously destructive dams. In the case of BNDES, most of their financing comes from unemployment and welfare funds, based on payroll deductions.