Chile's environmental laws and the HidroAysen northern Patagonia dams megaproject: how is this project sustainable development?

Author:Pearson, Marcus T.

Abstract: Chile has taken important steps toward creating a more comprehensive environmental regulatory system. Beginning in the early 1990s, Chile's aggressive approach in creating Latin America's strongest free market economy and negotiating free trade agreements stimulated national legislators to improve the country's environmental laws and regulations, as well as its enforcement capabilities. Chile's most recent development achievement--accession to full member status in the Organization of Economic Co-operation and Development ("OECD")--culminated in the formation of both a cabinet-level Ministry of the Environment with a potentially robust enforcement and oversight branch within that Ministry. This Article assesses Ley 20.417, and Chile's legal precedent regarding environmental decisions, through the lens of the proposed HidroAysen project to construct a series of hydroelectric dams in Chile's northern Patagonia Aysen region. This project, easily the country's most controversial environmentally-related project to date, has generated both national and global attention. This Article concludes that the HidroAysen project does not qualify as sustainable development under Ley 20.417, despite the Chilean Supreme Court's decision approving the power-generating portion of the project; no legal action has occurred to date on the transmission part of the project. However, even if the project ultimately is considered sustainable development from a technical standpoint, the court of public opinion has resoundingly rejected it.


    "The problem isn't that HidroAysen doesn't have the right to ask the government for a dam permit. The problem is that the government has failed to protect my family, protect our region, uphold its promises, and meaningfully challenge HidroAysen's project."

    --Elizabeth "Lilli" Shindele, Estancia Los Nadis, January 14, 2011. (1)

    Here, on a remote estancia (ranch) in the region of Aysen, 1,000 miles south of Santiago in a glacial valley tucked between two of the world's largest ice fields, lies the epicenter of a struggle that has captured national and international attention. Lilli and her husband Rozendo, have refused to accept a buyout from HidroAysen, the local subsidiary of a multinational joint energy venture composed of ENDESA, a Spanish-Italian company, and Colbun, S.A., its Chilean counterpart. (2) They are one of two families in the area who will not move to make way for a large-scale hydroelectric project that would provide power to the population centers and the mining sector in central and northern Chile by damming the Baker and Pascua Rivers and flooding almost 15,000 acres of private and national park lands in Chilean Patagonia, an area known for its rugged beauty. (3) The project's associated transmission line, which is integral to the project, would create a 1,500 mile clear-cut area from Aysen to Santiago, passing through three national parks, numerous national reserves, and thousands of private landholdings in a seismic landscape dotted with volcanoes and punctuated by the world's largest earthquakes. (4)

    Public opinion remains fiercely divided, although opinion polls indicate seventy-four percent of the Chilean population opposes the project. (5) Environmental organizations unsuccessfully challenged the approval of the project in court, and on April 4, 2012, the Chilean Supreme Court affirmed a lower court ruling that approved the generation portion of the project. (6) Interestingly, a Chilean congressional committee found, in January 2012, that various government agencies might have contributed to "serious irregularities" in the approval process for HidroAysen's permit. (7) Factual errors and questionable science were purportedly included in the project's initial Environmental Impact Assessment, approved in May 2011. (8) Despite these alleged irregularities, the Chilean Supreme Court's approval cleared the final hurdle in the way of the generation portion of the project. Whether Chilean judicial approval would have resulted under Chile's recently enacted environmental laws and regulations is addressed in detail below.

    This project exposed weaknesses in Chile's 1994 Environmental Framework Law (Ley Sobre Bases Generales del Medio Ambiente, or "LSBMA"). The Organization of Economic Co-operation and Development ("OECD") criticized Chile's environmental laws and regulatory institutions as falling below the standard required for OECD membership and advised Chile to improve those laws and institutions before seeking full membership. (9) To increase the country's chances of gaining such membership, Chile redesigned LSBMA to ensure that the country's environmental institutions meet OECD's high standards. (10)

    This article seeks to assess relevant portions of Chile's revamped environmental law--known as Ley 20.417 (11)--the agencies it creates and empowers, and its scope of power. The proposed HidroAysen project provides a reference point to compare Ley 20.417 to LSBMA. Specifically, the article explores whether Chile's revamped environmental regulatory framework significantly alters the status quo by improving the prior law. Ultimately, this article argues that Ley 20.417 represents a step forward for Chile. Combined with the benefits and requirements that accompany OECD membership, Ley 20.417 strongly incentivizes Chile to make a more searching review of future large-scale projects similar to HidroAysen. Because Chile updated its environmental framework law in 2010 (after the project was proposed), courts reviewed legal challenges to HidroAysen's permit under the less stringent measures of the LSBMA; (12) thus, the project provides a solid reference point to compare Ley 20.417 with its predecessor. Questions to keep in mind regarding this comparison are: whether the newly overhauled system accounts for social and ecological costs, as well as economic benefits; and, more importantly, whether the new system will involve the necessary agencies and interest groups to ensure that proposed projects impacting the environment receive an objective, holistic, and searching review.

    Because of Chile's unique legal and political history, Part II provides the reader with Chile's pertinent legal framework, particularly its unique free-market legal tools, before describing the HidroAysen project. Part III describes and critiques Chile's previous environmental institutions and explains how international trade considerations have strongly influenced Chile's environmental regulatory development. Part IV discusses Ley 20.417, analyzes what it accomplishes, and analyzes the Chilean Appellate Court and Supreme Court decisions upholding the HidroAysen project's approval under LSBMA. Part IV concludes that the Chilean Courts would have likely reached a different outcome had they applied Ley 20.417's standards to the HidroAysen project.


    Chile's unique free-market structure has shaped its legal development and fostered strong economic growth and trade relationships, but has often pitted economic development against environmental protection. (13) This part of the article first provides a short legal history of the Augusto Pinochet dictatorship (1973-1990), primarily to show the way free market reform influenced how Chile developed its environmental, energy, and water laws. It then describes the proposed HidroAysen hydroelectric dam, explaining that the project has provoked strong sentiment because it pits the country's economic wellbeing and energy security against the socio-environmental health of Chilean Patagonia.

    1. Pinochet's Free Market Reforms

      Pinochet's free market reforms have permitted Chile to develop economically at the expense of Chile's environmental laws and regulatory institutions. The various ways this has occurred are discussed below.

      1. The Dictatorship's Free-Market Reform Came at the Expense of Government Oversight

        On September 11, 1973, Chile's armed forces stormed the Presidential Palace in Santiago and forcibly ousted the democratically elected President, Salvador Allende. (14) General Augusto Pinochet took power and ruled over Chile for seventeen years. (15) Two stories emerged from the Pinochet era: one of human rights abuses that claimed more than 3,000 lives and quashed free speech; and one of spectacular economic growth through free-market policies designed to transform the country's economic and legal institutions. (16) This subsection focuses on the second story of Pinochet's military dictatorship, as other authors have adequately chronicled Pinochet's human rights violations. (17)

        Under Pinochet, Chile's legal system codified radical (at least for Latin America) free-market policies, first introduced to Chile by a cadre of economic scholars from the University of Chicago led by Milton Friedman. (18) The so-called "Chicago Boys" promoted laissez-faire economics and scorned state intervention in economic development. (19) The Chicago Boys' influence over Pinochet's policies culminated in 1980 with a new Chilean Constitution that institutionalized the free-market economic model. (20)

        Pinochet remains a highly polarizing figure in Chile, partly because of the uneasy truce that ended his seventeen-year rule. (21) In 1988 he called for a plebiscite, as mandated by the Constitution that Pinochet's government had written in 1980, to submit his name as an official candidate for President. (22) He lost, with fifty-five percent voting for him to step down. (23) The negotiations following the plebiscite ensured that Pinochet would avoid prosecution for his human rights violations and would receive a lifetime seat in the Chilean Senate. (24)

        Most importantly, however, Pinochet's legal legacy still impacts the everyday lives of Chileans, as the Constitution and numerous legal codes enacted during his regime remain in effect. (25) In addition, his free-market reforms encouraged...

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