-Caveat Lector- From ChiTrib
}}}>Begin http://www.chicagotribune.com/news/nationworld/chi-0203220262mar22.story >From the Chicago Tribune Enron ran global game of finance, report says By R.C. Longworth Tribune senior correspondent March 22, 2002 Enron Corp. was able to become a global giant only because government agencies, both American and foreign, gave it more than $7 billion in publicly funded financing over the past decade, a new report by a Washington think tank asserted Thursday. In addition, officials of the U.S. government and international agencies like the World Bank pressured Third World countries to change laws, privatize their economies and accept Enron bids, even making future aid contingent on cooperation with the now- disgraced Houston company, said the report from the Institute for Policy Studies said. Now that Enron is bankrupt, the Third World countries themselves must repay outstanding loans, according to Jim Vallette, co-author of the report. When development agencies give loans or guarantees for commercial projects, they usually require a "counterguarantee"--in effect, a co-signature--from the country where the project is to be done. Indonesia already has paid the World Bank $15 million for an Enron project that went bad. 25 Enron projects backed U.S. agencies such as the Overseas Private Investment Corp. and the Export-Import Bank backed 25 Enron power projects with $3.7 billion in loans and guarantees. The World Bank chipped in another $760 million, the Inter-American Development Bank $751 million and the Asian Development Bank $26 million. Other international development banks and nations, such as Britain, Canada, Japan and France, gave $1.9 billion to support Enron projects. "Enron would not have scaled such grand global heights, nor fallen so dramatically, without its close financial relationships with government agencies," Vallette and co- author Daphne Wysham wrote in the report, "Enron's Pawns: How Public Institutions Bankrolled Enron's Globalization Game." "The now-fallen giant . . . marched into risky projects abroad backed by the deep pockets of government financing and with the firm and at times forceful assistance of U.S. officials and their counterparts in international organizations," the report said. Altogether, Enron received $7.2 billion in public financing or guarantees toward 38 projects in 29 countries since 1992, the report said. The Institute for Policy Studies often is critical of globalization and global corporations, but its report was based mostly on official publications, especially those of the lending agencies themselves. The report noted the irony of Enron's reliance on government money, even though it was a leading advocate of privatization and deregulation and indeed profited from investments in newly privatized industries around the world. `National grip at home' "Domestic political relationships facilitated Enron's national grip at home," it said. "Overseas, Enron acquired pipelines, transmission lines and power plants thanks to strong-armed diplomats and the coffers of export credit agencies and multilateral development banks. "Here's how it worked," it said. "The World Bank would issue loans for privatization of the energy or the power sector in a developing country or make this a condition of further loans, and Enron would be among the first, and often the most successful, bidders to enter the country's newly privatized or deregulated energy markets." Government backing is as important psychologically as it is financially, and often is crucial to making a deal happen. This backing sends a signal that governments or international agencies think the deal is worth supporting. This signal persuades private banks or investors to support a project. "Many of these [Enron] projects would never have occurred without official backing from multilateral development banks and export credit agencies," Vallette and Wysham wrote. Enron got $168 million from the Overseas Private Investment Corp. to buy part of the newly privatized state national-gas pipeline system in Argentina and an additional $375 million from the Inter-American Development Bank to run it. According to the report, George W. Bush called Argentine officials in 1988, shortly after his father became president, to urge them to accept Enron's bid for the project. Enron got $1.1 billion from a variety of foreign and international development banks-- but no American sources--for a Brazil-Bolivia pipeline project. Most of the financing came after the World Bank lent Bolivia $10.6 million to help it privatize its state- owned oil company. Enron got $222 million in insurance and guarantees to build power facilities in Guatemala. About half came from the Overseas Private Investment Corp. and most of the rest from the U.S. Maritime Administration. According to his disclosure statement, the new head of the Maritime Administration, William Schubert, was a maritime consultant for Enron. Best-known project The best-known Enron project abroad was a liquefied natural gas-fired power plant at Dabhol, India. The plant has been sitting idle since last June when the main contractors, Bechtel and General Electric, stopped work, allegedly because Enron failed to pay them. Starting in 1994, the Overseas Private Investment Corp., the U.S. Export-Import Bank and other agencies, including two from Japan and Belgium, provided $1.2 billion for this project, the biggest financing for any Enron project. Four Indian government institutions guaranteed these financing packages. The U.S. and Japanese government are now demanding that the Indians repay the money. Copyright © 2002, Chicago Tribune Improved archives! Searching Chicagotribune.com archives back to 1985 is cheaper and easier than ever. 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