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The Devil's Curve: Faustian Bargains in the Amazon

Emily Schmall
World Policy Journal 2011 28: 111
DOI: 10.1177/0740277511402804

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 REPOR TAGE

The Devil’s Curve

f a u s t i a n b a rg a ins
in t h e a m a z o n

E M I LY S C H M A L L

B AGUA GRANDE, Peru—Daylight had not yet broken on a

remote road outside this small city in the heart of the Amazo-
nian rainforest of northern Peru. But along the narrow strip of
highway—known to locals as the Devil’s Curve—thousands of protest-
ers were huddled. Most were members of indigenous tribes. It was June
5, 2009, and they had been blocking the highway for two months.
The tribes and the environmental activists allied with them were
demanding the repeal of two legislative decrees that had opened the
rainforest to oil exploration, mining and large-scale agricultural de-
velopment. The Amazon natives feared new exploration would force
them out, and felt slighted after the government set a plan in action
without consulting them. Their confrontation with Peru’s president,
Alan Garcia, had reached a fever pitch.

SPRING 2011 111

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 REPOR TAGE
Protesters built makeshift tents of
plastic sheeting on the highway and used
tree trunks and rocks to block passage to a
lucrative oil pipeline and the road to Peru’s
northern ports. Helicopters swarmed over
the crowd. Officers from the national police
force trained their automatic weapons on
the protesters gathered below.
The sense of crisis had spread all
the way to the capital, Lima. Just a day
earlier, Ollanta Humala, the head of the
Peruvian Nationalist Party and a rival
of Garcia, had called on Congress to set
up an extraordinary session to repeal one
of the decrees. His plea went unheeded.
On June 5, Garcia ordered security forces to
clear the highway. The siege began around
5:30 in the morning. Some 500 security
officers flooded the road, firing tear gas
into the crowd. As the violence continued
throughout the day, 34 people died by
gunfire, including 23 police officers.
“The number of people injured is un-
imaginable,” reported Carlos Flores, a jour-
nalist for Radio La Voz de Bagua. “They’re
strewn all over the highway. Please, we
need help to make the violence stop.”
Journalists later reported seeing po-
lice dump bodies into the nearby Utcu-
bamba River, and human-rights groups
condemned the siege as a state-orchestrat-
ed massacre. Townspeople sympathetic to
the indigenous protesters contributed to
the melee, burning down a police station.
Each side accused the other of responsibility
for the brutal attacks. The political fallout
began with the resignation of the prime
minister several weeks after the siege.
Eighteen months later, five indigenous lead-
ers accused of inciting the tribes to violence
Emily Schmall has written for Bloomberg and Forbes. She is the country director for
New Narratives, a training program for women journalists in Liberia.
112 WORLD POLICY JOURNAL
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in the protests leading up to Bagua were
convicted of treason and sentenced to four
years in prison. At least 250 other govern-
ment complaints have been lodged against
protesters, according to the indigenous-
rights advocacy group Amazon Watch.
The incident at Bagua—the Baguazo,
as it became known in Peru, using a local
idiom to express the size of the event—
attracted little international attention.
But it serves as a stark reminder of the
potentially high costs, both human and
political, faced by developing countries
hoping to spur economic growth by
taking advantage of natural resources in
environmentally vulnerable areas. It’s a
tempting path. But it comes with serious
built-in risks and trade-offs—social and
political, as well as economic—as Peru’s
leaders and citizens are discovering.
A Model for Balance?
As commodity prices soar on growing de-
mand from China and other large markets,
Peru might emerge as a proving ground
for Latin American approaches to balanc-
ing economic growth with human rights,
environmental concerns, and a respect for
the way of life—or, in some cases, the very
survival—of indigenous people.
The tension between these compet-
ing aims is roiling the entire Amazonian
region and posing major challenges to its
political leaders. In Ecuador, President
Rafael Correa has pledged to refrain from
drilling for oil in the Yasuni National Park,
a 10,000-hectare, species-rich area of the
Amazon that sits above nearly 20 percent
of the country’s oil reserves, forfeiting $3.6
billion in revenue. In Bolivia, environmen-

Straight to hell on the Devil’s Curve
tal activists are waging a crusade to protect
Madidi National Park, a 1.9 million-hect-
are nature preserve in the upper Amazon
River basin where the Bolivian govern-
ment hopes to drill for gas and oil.
But it is in Peru where the conflict has
become most stark. Among the world’s
fastest-growing economies, Peru has
passed a series of laws promoting foreign
investment and bolstered growth with
oil, natural gas and mineral exports. But
these initiatives risk trampling the rights
of large numbers of its people, especially
those who live off the land, while destroy-
ing the nation’s environmental heritage.
The stakes are high. Peru is one of the
most biodiverse places on the planet. Half
of all species in Peru are found nowhere
else. That means that what happens in this
CORBIS
corner of Latin America should be of con-
cern far beyond its borders.
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THE DEVIL’S CURVE
Peru’s way forward depends to a great
degree on President Garcia, a veteran
of the country’s political system and its
many intrigues. Garcia has undertaken a
broad effort to transform the structure of
the nation’s economy, at times ignoring
indigenous concerns along the way. During
his first term as President, in the late
1980s, Garcia’s protectionist policies—
referred to in Latin America as economic
“nationalism”—drove the economy to
near collapse. Voters tossed him out in
1990 after one term, and elected Alberto
Fujimori to succeed him. After Fujimori’s
government began investigating Garcia’s
conduct while in office, Garcia fled into
self-imposed exile abroad until 2001.
During his time out of power, many
of his economic views shifted—as did his
ideas about the political means necessary
to implement them. In a series of essays
SPRING 2011 113
 REPOR TAGE
and books published in the run-up to the
2006 election, Garcia presented his plan
to develop Peru by exploiting natural re-
sources and encouraging major foreign in-
vestment. Developing millions of acres in
the Andes and Amazon rainforest would
not only benefit big companies, Garcia
wrote in one essay, “but also will create
hundreds of thousands of formal jobs for
Peruvians who live in the poorest zones of
the country.” After winning office, Garcia
signed free trade agreements negotiated by
his predecessors, Fujimori and Alejandro
Toledo, opening Peru to unprecedented
foreign investment and industry.
Garcia has said he wants Peru to be a
“first world” country by 2021, its bicenten-
nial year. But his push for economic growth
has produced uneven results. Since 2006,
GDP has increased by 41 percent, accord-
ing to the World Bank. But the wealth cre-
ated by this new growth has been unevenly
distributed. Still, there has been a “rising
tide” effect. When Garcia was sworn in
as president in 2006, Peru had a nearly
50 percent poverty rate. Official numbers
say the current poverty rate has decreased
to about a third of the population. Signifi-
cant downsides notwithstanding, Garcia’s
approach has lifted a substantial portion of
Peruvians out of poverty. “It’s an example
for Latin America of how to coordinate so-
cial policy and economic policy with the
goal of reducing poverty,” says Marcos Ro-
bles, an economist at the Inter-American
Development Bank. “It’s not the country
that has most reduced poverty, but it’s the
country that worked most insistently to
achieve these goals.”
But the poverty-reduction statistics do
not tell the whole story. Peru spends less
than any other Latin American country on
social programs like education and health
care. Weak enforcement reduces regulation
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to little more than lip service to the goals
of improving living or working standards
for the vast majority of its most deprived.
“If you look at the social statistics, they don’t
yet paint Peru as a stable country,” Robles
concedes. It is estimated that 25 percent of
the total population has no access to water,
and more than half lack adequate sanita-
tion. The quality of education is among
the lowest in the hemisphere, according
to the Inter-American Development Bank.
In those vital measurements of a country’s
overall well-being, there has been little
change for the better in decades—as ordi-
nary Peruvians are all too aware.
Victor Raul Zapata Ramos, 23, used
to work at a foreign-owned textile facto-
ry. Now selling handmade jewelry for 10
soles (about three dollars) outside an up-
scale, oceanfront shopping mall in Lima,
Zapata abandoned his job at the factory
because of the tough working conditions.
“For us, nothing has changed. Companies
exploit you. You work 12, 13 hours a day,
Monday to Saturday, and even that work is
not secure,” he says.
For indigenous tribes living in the
Amazon, conditions have only worsened,
according to Amazon Watch. “We’re see-
ing an intensification of poverty in the
Amazon Basin,” says Britton Schwartz,
the group’s advocate for Peru. Schwartz
points to the loss of fishing opportunities
on the Urubamba River that have resulted
from increased boat traffic associated with
nearby resource-extraction projects.
But in the wake of the Bagua clash,
Garcia was more concerned with assuaging
a different constituency—the residents of
Peru’s coastal cities, who have been enriched
by five years of pro-investment policies.
That was Garcia’s target audience during a
televised interview he gave on the day of the
clash. “If 400,000 natives can say to 28 mil-

lion Peruvians, ‘You can’t come here,’ that
is a very grave error,” he said. “Anyone who
thinks that way wants to take us on an ir-
rational and primitive retreat into the past.”
In another interview, Garcia described the
protesters as standing in the way of Peru’s
economic progress, likening his opponents
to a dog who doesn’t want food but doesn’t
want anyone else to eat either. Failing to
move forward would condemn Peru’s rural
and indigenous communities to “another
century of misery,” he warned.
Most provocatively, Garcia compared
the demonstrators to the Shining Path, a
quasi-Maoist insurgent group that spent
more than two decades trying to topple the
Peruvian state, killing thousands of civilians
and security personnel. Garcia used this
dubious comparison to justify declaring a
state of emergency in four different regions,
including Bagua, giving security officers
license to use force to disperse crowds. But
judging from the strength of subsequent
demonstrations over the use of natural
resources, the environmental protest
movement is only gaining ground.
As it happens, many opponents
of Garcia’s approach are members of
the country’s mainstream political
establishment. During the administration of
Alejandro Toledo, former First Lady Eliane
Karp, a Belgian-born anthropologist and
former World Bank employee, championed
pro-Amazonian legislation as head of the
Commission of Andean, Amazonian and
Afro-Peruvian Peoples. The measure called
for Congress to consult indigenous groups
before passing laws that would affect them.
After Bagua, Congress passed the bill.
But Garcia dragged his feet. In August
2010, he said he would only sign the law if
it included several modifications that critics
claim would blunt its impact. “We’re
not going to accept a law that has been
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THE DEVIL’S CURVE
mutilated and slanted by the government,”
said Melchor Lima of the Campesina
Confederation of Peru, a group that
promotes the rights of indigenous people.
Despite Peru’s steady economic growth
during Garcia’s term, the indigenous groups
in Bagua enjoy a good deal of public sup-
port across the nation—posing an enormous
political challenge
to the government. The biggest fear
While the fighting
was underway in is that sections
June 2009, huge of the Amazon
crowds gathered in
Lima in support of
will soon be
the protesters. The inhabited
crowds received with islands
alarming reports
about the ongoing of drilling
violence from one platforms.
of the demonstra-
tion’s leaders, Alberto Pizango, president of
the Interethnic Association for the Develop-
ment of Peru’s Jungle.
“They’re shooting at us just like if we
were delinquents, or animals,” Pizango
told a group of foreign journalists
gathered for a press conference in Lima
the day after the police intervention.
Pizango was subsequently charged by
the government with inciting rebellion
and sedition, and for leading a protest in
August 2008 when demonstrators seized a
natural gas field and a petroleum pipeline.
He fled to Nicaragua but was arrested
upon his return to Peru in May 2010. The
case against Pizango remains at the trial
stage. His is just one of an estimated 250
criminal cases lodged against participants
in demonstrations held in the months
before Bagua and in the Bagua protest
itself, according to Amazon Watch.
Several weeks after the Bagua siege,
Prime Minister Yehude Simon apologized
SPRING 2011 115
 REPOR TAGE
for the government’s hard-line response
and resigned, along with the government
ministers in charge of the military and police.
Simon, a former left-leaning political
activist who Garcia appointed in an effort
to appease nationalist groups in the country,
acknowledged that the tribes should have
been consulted before the decrees opening the
rainforest to development were given the force
of law. At the same time, Congress repealed
the decrees and passed the consultation law—
which remains unsigned by Garcia.
Meteoric Growth
As in neighboring Colombia, Ecuador and
Bolivia, the entry of private industry—
through land concessions for mineral and
hydrocarbon exploration—has been a
polarizing social and political issue in Peru.
In October 2008, Garcia purged his entire
cabinet amid an ongoing scandal over
whether officials in the government received
bribes in exchange for oil exploration
concessions. In turn, Pizango and other
Garcia critics launched massive protests
in response to the corruption charges.
“There are social conflicts related to an
economy that is growing really fast and
steadily upward and the kind of inequality
that produces. The rich are getting richer
and there’s resentment over who is getting
a cut of the pie,” says Cynthia Sanborn,
a professor of political science at Lima’s
Universidad del Pacifico.
None of this, however, seems to be
slowing the economic juggernaut. Peru’s
economy is estimated to have grown 8.8
percent in 2010. Within Latin America,
Peru is second only to Brazil in attracting
foreign investment. The United States is
Peru’s biggest trading partner, and follow-
ing a free trade agreement between the two
countries that went into effect in February
2009, American investment in Peru rose
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from $5 billion in 2006 to $8.5 billion in
2009—a substantial portion of Peru’s total
foreign direct investment, which grew some
20 percent from $15.5 billion in 2006 to
$18.8 billion in 2009, according to Peru’s
government. A free trade agreement with
China went into effect in March 2010.
Peru’s social strife apparently hasn’t
diminished the allure of Peru for foreign
investors. “It’s already priced in,” says
Jorge Rave, a spokesman for the Canadian
trade group Export Development Canada.
Many foreign investors have shrugged off
the unrest in the country as nothing more
than inevitable growing pains as Peru’s
economic role expands. But there are many
sides to the Peruvian growth story—and
the tensions that have punctuated it.
A GROWING THIRST
In the past decade, Peru has made huge
investments in agriculture, improving
irrigation systems to convert some 370,000
acres of coastal deserts into arable land.
It is now a top exporter of specialty crops
like asparagus, grapes and avocados.
Farming the heavily populated, arid coastal
lands satisfies a growing foreign demand
for Peruvian produce, while offering jobs
to farm workers. Still, maintaining that
output requires ever more water, leading to
the development of major irrigation projects
to direct water from the Andes or Amazon
River basins to the coast. These projects have
become another rallying cry of advocates
for the indigenous, who claim that water
diversions to the coast threaten the water
supplies of tribes in the source regions.
Last September, an international
consortium was awarded a $424 million
contract to build a dam and two hydroelectric
plants and irrigate 38,000 acres in Arequipa,
about 600 miles from the capital. More than
1,000 protesters opposed to the project broke

through the walls surrounding the airport,
killing one person, injuring 18 others, and
shutting down tourist destinations in nearby
Cusco. The protesters claimed the project
will drain local aquifers, depriving residents
of water for household and agricultural use.
In December, President Garcia signed
off on the project. In January, however, a
Cusco judge ordered the project halted un-
til an impact study is conducted.
Finally, There’s Oil
Peru’s 2009 free-trade agreement with the
United States specifically stipulated that
multinational corporations would receive
greater access to Peru’s natural resources—
especially its hydrocarbons. The Peruvian
government projects foreign investment in
mining, oil, and natural gas could total $35
billion in the next five years. But energy
exploration is a risky endeavor. In 2004,
the government signed a $3.9 billion deal
with the Camisea consortium, led by Ar-
gentina’s Pluspetrol and Texas’s Hunt Oil,
to extract natural gas from a pristine stretch
of the Amazon. Four months after the proj-
ect came online, its main pipeline ruptured,
and an explosion ripped through the jungle,
spewing contaminants into the rivers and
streams. Eight months later, it happened
again—then once more, 18 days later.
By March 2006, the rainforest pipeline had
seen five ruptures. In the lush jungle village
of Echarati, the most recent rupture caused a
fire that engulfed farms and set roofs ablaze,
sending three burn victims to the hospital.
Critics called on the government to
reevaluate the laws regulating hydrocarbon
exploration. Protests over the issue in August
2008 closed down parts of the Camisea
project and shut down electricity stations in
the northern Amazon. Last August, Garcia’s
administration declared a state of emergency
after demonstrators burned a camp and
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THE DEVIL’S CURVE
attacked a gas pumping station near the
Camisea gas fields. Several days later, 1,000
activists blocked the road leading to Camisea
to protest its exportation of liquefied natural
gas. The demonstrators demanded that the
government reserve some of the gas for the
domestic natural gas market and ask for
higher royalty payments from the Camisea
consortium. This marked a sharp shift in the
opposition’s tactics—from a blanket effort to
preserve the entire eco-structure to a more
accommodating political strategy. Local
indigenous leaders, it seemed, had been co-
opted by the promise of higher royalties.
The government conceded one lot’s
proven reserves to the domestic market,
pending a renegotiated contract with
the companies who hold the licenses.
Renegotiations are ongoing. Meanwhile,
Peru’s government has already divvied up
70 percent of the rainforest into oil and
gas concessions. While oil has been drilled
in the Amazon for 35 years, the scale
of past exploration pales in comparison
to what’s in store. In 2003, there were
27 energy concessions in the Peruvian
rainforest. There are now more than 100.
Environmental protections are baked into
most of the energy concessions, but no
regulatory mechanism has been introduced
to enforce them. An environmental
ministry was created in 2008, to help
the government comply with standards
imposed by the free-trade agreement with
the United States. But observers say it’s
still struggling to get on its feet.
“The biggest fear is that the most re-
mote, and therefore most intact, sections of
the Peruvian Amazon will soon be inhab-
ited with islands of drilling platforms and,
even worse, new roads and pipelines,” says
Matt Finer, an ecologist who co-authored a
Duke University study of Amazon oil and
gas projects that recommended finding a
SPRING 2011 117
 REPOR TAGE
way to introduce further exploration with-
out building any new roads.
Pragmatism or Opportunism?
President Garcia has been heralded by some
as a pragmatist for taking steps to confront
economic realities and the resulting social
changes that some see as all but inevitable.
“During the administration of Alan Garcia,
the country experienced tremendous
growth. The fact that the economy has been
growing for so many consecutive years has
been positive. However fragile and however
unequal, the growth itself is positive,”
says Cynthia Sanborn, the professor of
political science at Lima’s Universidad del
Pacifico. But Garcia’s willingness to crush
any opposition by using force may cost his
center-left party the elections in April 2011.
(Garcia himself is prohibited by law from
seeking a second consecutive term.)
The latest ipsos poll shows former
president Toledo ahead of three likely
contenders: former Lima Mayor Luis
Castaneda; Keiko Fujimori, a popular
legislator and the daughter of former
President Fujimori (currently serving a 25-
year prison sentence for crimes committed
during his tenure); and Ollanta Humala,
the nationalist candidate who narrowly
lost the 2006 election.
Anger over the violence against
demonstrators has aided the political
fortunes of parties tied to indigenous
groups. Protest leaders have won seats
in office and secured higher royalties
for their regions. In local elections
last September, politicians supporting
nationalist economic policies—such as
increasing the royalties paid to Peru
by multinational mining companies—
prevailed at the polls. Yet in a victory of
sorts for Garcia, whoever succeeds him
will almost certainly maintain his pro-
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development economic policies. Indeed,
all three frontrunners in the race to replace
him are perceived as center-right. That
is partly the result of the political failure
of the coalition of indigenous-rights
advocates and environmental groups that
have been Garcia’s most vocal opponents.
Though the events in Bagua provoked
widespread outrage, opponents of Garcia’s
economic-development approach were not
able to convert that anger into increased
political influence for themselves.
The uncertain strength of tribal
advocates and environmentalists is a
political reality that will have implications
beyond Peru. The country has been
generously rewarded by international
investors for displaying less reluctance
than its neighbors—namely Ecuador,
Bolivia and Colombia—to open up
environmentally sensitive land occupied
by indigenous people to exploration and
drilling. The fact that Garcia, or at least his
policies, seem to have triumphed in Peru
may be changing the political calculations
of leaders in those neighboring states.
Indeed, Peru’s neighbors have already
begun reversing previous stances and are
beginning to move in a direction similar to
Peru. Bolivia plans to drill for oil and build
a hydroelectric dam within a national park
while Ecuador is offering greater numbers
of concessions to oil and gas companies to
drill in its portion of the Amazon.
Following Peru’s lead may prove
advantageous in the short term to Bolivia’s
Evo Morales or Ecuador’s Rafael Correa.
But in the long run, if the Amazonian
states do not find a way to enroll the vast
bulk of their disenfranchised populations
in the economic miracle that today benefits
only the privileged few, they risk unrest
on a scale that might make the violence in
Bagua seem merely a prelude. l