The project will change the face of the Xingú river

"Almost all of the long term financing in Brazil is concentrated in the BNDES... the government is taking action to promote other sources of long term financing, but for now, for a project of Belo Monte′s size it is impossible to not count on the BNDES," says Machado, Meyer, Sendacz e Opice Advogados partner Ricardo de Lima Assaf, who is advising one of the members of the Norte Energía Consortium, which was awarded the contract to build and operate the dam.

On 2 February the Folha de São Paulo reported that the consortium, which has a total of 17 companies as members, was dropping the loan that had been approved in December because it could only use it to pay suppliers and not to clear 238 hectares of land as it had planned.

Assaf is sure that BNDES will grant financing for the project eventually, but says in the short term the bridge loan will be easily replaced through commercial loans and equity from the consortium members. He adds that an institution such as the International Finance Corporation could not replace BNDES in this project, since most of Belo Monte′s revenues are in reais and it would be difficult to mitigate the long-term foreign exchange risk.

On 26 January, Brazil′s environmental agency, Ibama, granted the consortium a licence to start preparing the project site, including the clearing of trees and the construction of roads leading to the Xingu River, where the dam will be built. But the licence does not allow the consortium to start building the actual dam, for which it will have to wait for further approval.

"In Brazil the public financing institutions have specific regulations when granting money to potewww.machadomeyer.com.brs. By law they can only give the financing if the licence decision has been approved in its entirety," says Machado Meyer environmental partner Roberta Leonhardt, who adds that it is very uncommon to see one licence for one part of the project and then another licence for the rest.

Meanwhile, the project has faced another legal challenge, this time from state prosecutor Felicio Pontes, who filed an appeal arguing that the agreed-upon environemtnal conditions had not been met, particularly concerning the rehabilitation of degraded zones.

"Due to decisions like this, we can say today, (the environmental agency) is the author of the worst offence against the environment in the Amazon," Pontes said.

Celebrity opponents to the dam, including Avatar director James Cameron, musician Sting and actress Sigourney Weaver, who fear that it could displace up to 50,000 indigenous people, have continued their fervent opposition to the project.

But the dam also has powerful supporters, including former president Inacio Lula da Silva and current head of state Dilma Roussef.

"They have the support of the government but they have to look closely at timing - if they have a timing failure it could cause severe damage to the project," explains Assaf.

In order for the consortium members to get their expected returns from the project, it has to be concluded before the scheduled date "to allow the concessionaire to sell energy in the free market before they have the supply commitments with the regulated market which have a lower price," Assaf says, adding that the inability to build during the rainy season is another constraint.

These obstacles are just the latest in a long history of opposition to the dam, which was first proposed by the military government in the 1970s. More recently the project has faced injunctions and a series of changes in the make up of the consortium in charge of the project.

Once Norte Energia won the bid, it in turn hired a second consortium of 10 construction companies, including Andrade Gutierrez, Odebrecht and Camargo Corrêa, to build the dam.

Counsel to members of the Norte Energía consortium

Counsel to Bolzano

·         In-house counsel - Lara Piau, Roberto Federici and Fernanda Raibolt

·         Machado, Meyer, Sendacz e Opice Advogados

Partners José Virgílio Lopes Enei, Eliana Chimentti and Ricardo de Lima Assaf, and associate Maria Julia Florencio

Counsel to Galvão Engenharia, Mendes Junior Trading e Engenharia, Contern – Construções e Comércio and Serveng-Civilsan

·         In-house counsel to Mendes Junior Trading e Engenharia - Maurício Guimarães Veloso

·         In-house counsel to Serveng-Civilsan - Melissa Sualdini Adrien Fer

·         Arap, Nishi & Uyeda - AdvogadosPartner Massami Uyeda Junior and associates Rodrigo de Mello Motta and Maria Elisa de Carvalho Pullen Parente

Counsel to members of the construction consortium

Counsel to Construtora Andrade Gutierrez

·         Veirano Advogados

Partner Luis Fernando Pacheco

(Latin Lawyer 07.02.2011)

(Notícia na Íntegra)