Another Correa Problem

Co-written with Geoffrey McLatchey.

Following Hugo Chavez’s death, President Rafael Correa of Ecuador could be considered his likely successor as leader of South America’s pseudo-Marxist populist movement. True to form, he recently called on all Latin American countries to unify to combat the oppressive rule of multinational corporations, which he accuses of treating Latin American nations like “colonies.” His primary whipping boy is U.S. oil giant Chevron, which his country’s courts have found guilty of environmental damages to the tune of $19 billion. International arbiters, however, have suspended Ecuador’s ruling. Correa has accused the arbiters of being on the multinationals’ “pay list,” but it is Correa and his allies who are playing fast and loose with the rule of law, as new revelations show.

The Ecuadorian President is backed by an international green lobby, including a group of aggressive trial lawyers, determined to see Chevron pay. Now the plaintiffs’ lawyers are seeking a jurisdiction likely to rule in their favor — something which an arbitration panel in The Hague has deemed an unfair practice. But even if they succeed in their quest, their real trouble is the facts in front of them.

Last January, Ecuadorian Judge Alberto Guerra Bastidas said in an affidavit that the plaintiffs had offered $500,000 to the judge in the case, Nicolas Zambrano, for a favorable judgment, to be ghostwritten by Guerra. Now the environmental consultants who prepared the evidence on which the plaintiffs’ case relies say that they were “misled” by the plaintiff’s lawyer, Steven Donziger. They have described a legal process in Ecuador that “was tainted by Donziger and the Lago Agrio plaintiffs representatives’ behind-the-scenes activities.”

Such revelations should be enough to kill any case, but not this one. Correa and company are pressing on, in the hopes of political gains and big payoffs. The targeting of Chevron is instructive of their likely motives.

When Chevron acquired Texaco, it inherited a series of rainforest pollution allegations in Ecuador going back several decades, including in a region known as Lago Agrio. The current accusations come despite the fact that in 1998 Ecuador and its state-owned oil company, Petroecuador, released Texaco of any liability in the Amazon region of Lago Agrio after Texaco spent $40 million cleaning up its share of pollutants. However, the lawsuit this time around relies on the personal claims of Ecuadorians regarding health endangerment — claims that are inconclusive at best.

Since 1990, the only oil operations in the area have been conducted by Petroecuador, which became majority shareholder in the Lago Agrio joint oil venture as far back as 1977. Petroecuador is not a company immune to criticism itself, given its terrible track record in environmental pollution — some reports cite as many as 1,000 spills in five years. Moreover, Ecuador’s Ministry of Energy and Petroleum, the government entity legally responsible for ensuring oil activities are conducted safely and efficiently, has received no sanction for its apparent failure to do its job. So why is Chevron the sole defendant in this case?

Because what matters in this lawsuit is not what role Chevron actually played in the pollution in Ecuador, but that Chevron is a politically easy target for environmentalists to browbeat into paying billions of dollars in penalties. For their part, Ecuadorian officials have brought forth a lawsuit that displaces responsibility of its own governmental shortcomings onto the big bad oil company.

Correa’s accusations would be almost comical if not for their consequences for foreign investment in the region. Argentina, a country with a rapidly tanking economy led by Correa ally President Cristina Fernandez, recently froze Chevron assets there. By trying to mulct Chevron out of billions of dollars, Correa and his allies threaten to exacerbate the damage from their populist policies by driving away foreign oil companies eager to develop South America’s vast energy resources, creating thousands of well-paying jobs in the process.

Such considerations never stopped Chavez from driving Venezuela’s state oil company into the ground. They’re just as unlikely to stop Correa.