Guatemala: a development dream turns into repayment nightmare. Touted high-tech dam saddles nation with high economic, social costs

In the remote Mayan-Indian highlands of northeastern Guatemala stands the giant Chixoy hydroelectric dam. In a region littered with the temples of long-forgotten religions, the dam has its own symbolism: a monument to the unfulfilled promises of third-world development. Once touted as an engineering miracle that would power an under-developed economy into the next century with cheap electricity, the 300-megawatt dam is now mired in domestic and international controversy.

When it opened last April, Chixoy replaced oil-burning power stations and met 75 percent of the nation's electricity needs. But corruption in past military governments, engineering failures, and inflation left the dam two years behind schedule, and skyrocketed the original price from $340 million to $1 billion.

As a result, President Vinicio Cerezo Ar'evalo may be forced to increase consumer electricity prices by as much as 70 percent this year in order to pay off the dam's international creditors, including the Inter-American Development Bank and the World Bank, owed $127 million and $118 million respectively).

But raising electricity prices could prove politically explosive for President Cerezo. In a country where 75 percent of the population earns less than $300 a year, inflation is a spark that risks igniting popular unrest. Last year, a five-cent increase in urban bus fares generated a week of rioting.

``It will cause social problems - there will be a rebellion. The people will not pay the increase,'' says Richard Shaw, a Guatemalan opposition congressman.

The state-owned electricity company (INDE) is threatening the US and European companies who built the dam with a $165 million lawsuit. INDE contends that the contractors are responsible for a tunnel collapse that delayed the dam's opening and increased its cost.

Like much of the developing world, Guatemala's economy has experienced sharp reversals in the last decade. Gone is the boom-town optimism of international banks, eager to lend money for large development projects like Chixoy. In its place is a chilling feeling among some third-world governments that they were often persuaded to squander money in the quest for Western-style development.

``We were taken advantage of by the lending institutions, the engineering companies, everyone,'' says INDE president Robert Balsells about the Chixoy dam. ``It should have been smaller. We have learned to distrust all experts.''

And with much of the $600 million in outstanding Chixoy loans due in the next two years - along with payments on the rest of Guatemala's $2.5 billion foreign debt - the dream of development has become a nightmare of repayment.

``A billion dollars is a lot in Europe, but they can afford it,'' Mr. Balsells says. ``Here it means going without medicines and food. We were poor before, now we are miserable.''

Guatemala's problems with the dam parallels cases throughout the third world where the sale of inappropriate first-world technology has saddled impoverished nations with debt. Very often loans and projects were contracted by undemocratic governments who brought in multinational firms partly in order to line their own pockets. In the Philippines, for example, President Corazon Aquino's government owes debts on a corruption-ridden nuclear power project, ordered by former president Ferdinand Marcos.

In Guatemala, it was Gen. Romero Lucas Garc'ia's military dictatorship that, starting in 1976, presided over the Chixoy dam's construction. In addition to its bloody human rights record, the Garc'ia regime was also the most corrupt in the country's history, political analysts say.

The generals may have stolen $500 million from Chixoy, according to Rafael Bolanos, dean of the School of Civil Engineering at Guatemala's San Carlos University. ``It was their biggest gold mine.''

Other estimates of corruption vary. Balsells said that while Chixoy cost a billion dollars to build, insurance companies have valued it at $650 million. ``Draw your own conclusions,'' he added.

The dam's construction was overseen by LAMI, an international consortium. It included Lahmeyer International from West Germany, Motor Columbus from Switzerland, and the International Engineering Company from San Francisco.

LAMI and another West German contractor, Hochteis, deny that they are financially responsible for the partial collapse of a 26-mile tunnel through which the dam water traveled to the power station. It was this 1983 collapse which added two extra years to the construction time, plus the cost of repairs.

``It is a pity for the country, but I do not feel responsible,'' says LAMI official Martin Lommatzch. ``We believed our design and assumptions were safe enough.''

These denials anger INDE's Balsells. ``The engineering companies overlooked warnings. They knew it was a lousy site,'' he says. ``We contracted the best in the world. We spent a billion dollars and get nothing for it. Whose fault is it?''