SETBACK FOR ALCOA SMELTER IN TRINIDAD

UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000021 SIPDIS SENSITIVE SIPDIS SAN JOSE FOR REGIONAL ENVIRONMENTAL HUB E.O. 12958: N/A TAGS: EINV EMIN SENV TD SUBJECT: SETBACK FOR ALCOA SMELTER IN TRINIDAD REF: A) POS 847; B) 05 POS 2064 SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY ¶1. (SBU) SUMMARY: After months of controversy about plans to construct aluminum smelters in Trinidad and a day-long national symposium to discuss the development of a national aluminum industry, Prime Minister Manning announced Christmas Eve that the GOTT was discontinuing plans for the industrial estate where Alcoa's proposed US$1.5 billion aluminum smelter was to be located. Instead, the GOTT would accelerate construction of an offshore industrial estate, to include aluminum smelters and downstream industry. While this move could be viewed as a response to public pressure, other statements and actions by government ministers have only reinforced a perception of GOTT indifference to public opinion and a lack of transparency in decision making on major projects. The vehemence of public debate over aluminum may also foreshadow increased opposition to future industrial projects in T&T. In the wake of these events, the fate of Alcoa's proposed investment in Trinidad appears less certain, while prospects for the smaller Alutrint smelter, a GOTT joint venture involving a Venezuelan partner and Chinese construction, appear secure. END SUMMARY. ¶2. (U) Proposals to construct two aluminum smelters in Trinidad's southwestern peninsula (see reftels) have generated increasing public debate in recent months. While Prime Minister Patrick Manning and Energy Minister Lenny Saith as well as previous governments have consistently promoted the idea of aluminum as a way to use Trinidad and Tobago's natural gas to stimulate downstream manufacturing, opposition politicians and environmental activists have directed intense criticism at Alcoa's plan to construct a 341,000 metric ton per year facility at a cost of US$1.5 billion in the sparsely populated rural village of Chatham, an opposition UNC party stronghold. A smaller facility to be operated by Alutrint, a 60/40 joint venture between the GOTT and the Venezuelan firm Sural, with participation from the China National Machinery and Equipment Import Corporation, and constructed in the traditionally industrial village of La Brea, a ruling PNM party district, has by comparison all but escaped criticism. -------------- Goodbye Chatham, Hello Otaheite -------------- ¶3. (U) In his yearly Christmas Day message, Prime Minister Manning announced that while the smelter symposium held two weeks earlier had provided support for the government position that aluminum smelters would present no unmanageable environmental risks, plans for an industrial estate at Chatham village have been abandoned. Instead, GOTT would "accelerate development of a new industrial estate offshore Otaheite Bank" that could include aluminum smelters and other aluminum-based industry. Several days later Energy Minister Lenny Saith backtracked on whether the planned Otaheite estate would include aluminum, saying that it was only one of several possible alternative sites for Alcoa's proposed smelter. Alcoa representatives expressed disappointment with the decision to abandon the Chatham site, as new feasibility and environmental studies would need to be conducted, but have not officially commented on their plans. Moreover, the plan for an Otaheite estate, which calls for the construction of a 4000-acre island on reclaimed land in the Gulf of Paria, connected to shore by a causeway, would impose a significant delay on Alcoa and is not guaranteed to be controversy-free, as local fisherman have already initiated protests against the construction. -------------- The Smelter Symposium -------------- ¶4. (U) Prime Minister Manning's announcement on the site change came at the end of an eventful month of smelter-related events. On Wednesday, December 6, the South Trinidad Chamber of Industry and Commerce, in conjunction with the National Energy Corporation (NEC), the University of the West Indies (UWI) and the University of Trinidad and Tobago (UTT) hosted a one-day "Symposium on the Aluminum Industry in Trinidad and Tobago" in response to growing public debate about the construction of up to three (and in some reports four) aluminum smelters in Trinidad. The South Chamber invited 350 selected stakeholders, "inclusive of the broadest range of views" to attend the symposium, and TV and radio stations provided full live coverage of the event. ¶5. (U) Most commentators credited the South Chamber for organizing a fair and balanced meeting. Several international technical experts presented information meant to reassure the public that technological measures exist to address any environmental and health PORT OF SP 00000021 002 OF 003 concerns. Meanwhile, local professors offered cautious views, questioning whether aluminum was the best economic use of T&T's natural gas resources; proposing alternative industries in the area, such as eco-tourism or raising buffalypso (Trinidadian water buffalo); and emphasizing the need to ensure community development if a smelter is constructed. -------------- "Let the bacchanal begin!" -------------- ¶6. (U) When the live audience grew restless with the string of technical experts in the afternoon session and called for an opportunity to air their views, the symposium organizers cancelled the final presentation, a planned videoconference with USEPA experts on air quality standards, and opened the floor for comment. Upon hearing this, panelist and UWI Professor Dennis Pantin said "Yes! No more technology, let the bacchanal begin!" - apparently giving voice to the feelings of many of the audience members. ¶7. (U) Smelter opponents in the audience proceeded to dominate the last two hours of the symposium. As in much of the debate prior to the symposium, while some opposed aluminum smelters in general, opposition to the planned Alcoa smelter in Chatham was far more vocal. Some audience members voiced cynicism towards the assurances of the technical experts, pooh-poohing studies that have shown that health hazards can be managed with modern technology. Many also doubted the EMA's capacity to conduct an adequate Environmental Impact Assessment (EIA) prior to smelter construction or monitor emissions in accordance with international standards during smelter operations. -------------- Real Government Outreach? -------------- ¶8. (U) While pre-symposium fears that only government "propaganda" would be heard at the symposium were alleviated, questions remain about what the government intended to achieve by holding the symposium. Prime Minister Manning's government has drawn criticism for its lack of public outreach and consultation and the perception of government disregard for public opinion on this issue. In a speech to local business owners on the day before the symposium, Prime Minister Manning appeared to validate perceptions of high-handedness when he stated that the symposium was held only to provide the public with "all the facts" and denied that it was meant to serve as a public consultation. He did not say that the smelters were a "done deal" as some critics claimed, but he did express confidence in the "rectitude of our cause" and asserted that so far no questions had been raised that the government had not considered before opting to establish an aluminum industry. ¶9. (U) Media commentary also has criticized Prime Minister Manning for a lack of transparency in the GOTT's negotiations with Alcoa. Many have called for disclosure of the price negotiated for the natural gas that Trinidad will provide to power the Alcoa smelter, in order to permit a transparent cost-benefit analysis of whether aluminum smelters are an optimal use for T&T's gas reserves. However, the Prime Minister has maintained that rules of commercial confidentiality apply in this situation. Furthermore, the Prime SIPDIS Minister's decision to cancel the planned industrial estate at Chatham also has provoked intense speculation, as his Christmas Eve speech to the nation provided no clear reasoning behind the decision. -------------- Will There Be An Alcoa Smelter? -------------- ¶10. In recent remarks to the press, Alcoa's Wade Hughes, Director of Public Strategy, stated that the smelter project may not proceed if the "commercial arrangements" cannot be negotiated, i.e. the price of the natural gas, in current negotiations between Alcoa and GOTT on a new Memorandum of Intent. Responding to recent statements by Prime Minister Manning that the environmental issue was not open for negotiation, Hughes added that Alcoa knows how to build and safely operate its facilities, so meeting environmental standards has never been an issue. ¶11. (SBU) COMMENT: Government officials have stated in the aftermath of the symposium that they still intend to develop an aluminum industry in Trinidad. Whether Alcoa will be part of this industry is less clear. Recent comments by Alcoa and the government and the government's abandonment of the Chatham industrial estate raise the prospect that commercial negotiations could fail, prompting Alcoa to PORT OF SP 00000021 003 OF 003 withdraw its proposal. The Alutrint smelter project, which is 60 percent GOTT and 40 percent Venezuelan owned and will use Chinese technology, has not faced similar scrutiny or public protest and looks likely to proceed as planned. ¶12. (SBU) COMMENT CONT'.: The public protests that accompanied Alcoa's smelter proposal have no precedent in Trinidad's long history of industrial development, as many academics during and after the symposium have pointed out. Taking inspiration from foreign environmentalists' protests against another Alcoa project in Iceland, a small but vocal group of domestic activists succeeded in dominating media coverage and reversing GOTT policy. While the symposium appears to have dampened some of the concern raised about environmental and health impacts, the fundamental policy question - how best to use T&T's hydrocarbon reserves - continues to resonate. There are also growing calls for a national sustainable development framework, especially in reference to "mega-projects," and greater public involvement in determining the path of Trinidad's development. While the GOTT remains committed to capital-intensive projects, including petrochemicals, steel, and plastics, that would use T&T's energy resources to establish a foundation for downstream manufacturing, the smelter debate may represent only the start of a more contentious road for the current government, which faces elections before the end of the upcoming year, and Trinidad's future onshore industrial development. END COMMENT. AUSTIN