Industry knocks on the door in remote Chile

The best thing about Aisén, the vast expanse of wilderness in southern Chile, says Mirium Chible who owns a restaurant here, is its untouched nature. "The water is clean," she says. "You can drink from the rivers."

Aisén sits at the northern end of Patagonia deep in southern Chile. It is one of Chile's most undeveloped and least inhabited regions.

But with the Canadian mining and metals company Noranda considering a $2.75 billion aluminum-smelter project – the most expensive project proposal in Chilean history – industrialization in the pristine zone stands to greatly advance.

Chile is among the most politically stable of Latin American nations and has a long history of openness to foreign investment. The foreign inflows – led by the United States, Spain, and Canada – helped Chile's economy boom through the 1990s and become one of the best in the region.

But now, environmental observers are warning that the zeal for outside capital, if unchecked, will lead to the depletion of Chile's natural resources. The Noranda proposal, given its size and proposed location in the wilds of Aisén, stands to be a defining moment in how the nation balances foreign investment with environmental concerns.

"Countries like ours are growing at the cost of their natural resources," says Manuel Contrera, an ecological-sciences professor at Santiago's University of Chile. "It's the same in all Latin America."

That doesn't mean Noranda's plans should be rejected, says Mr. Contrera. But he says the emphasis on industry and economic development over the environment – the hallmark of Chile's last three administrations, including that of current President Ricardo Lagos – needs to be rethought and environmental regulations beefed up.

The debate over the project, dubbed Alumysa, is already intense. Noranda officials, labor unions, and many business leaders say the project will bring money, higher wages, and jobs to the isolated zone, without undue environmental harm.

Fishing is the main industry in Aisén, a region cut by fjords, canals, and rivers that feed into the Pacific. But labor leaders say the fisheries industry pays low wages. Local residents in other professions agree. "We want all industries, without question, because that will bring better-quality work and better salaries," says Mauricio Muñoz, a labor leader and machine operator at a logging company here.

But ecologists question Noranda's claims that the project will have minimal environmental impact. They say it could open the zone, prized by fly fishermen and backpackers, to unfettered development. They also say the plans underscore the need to protect areas still outside industry's grasp. "This is the last part of Chile that hasn't been tamed," says Ms. Chible.

Noranda, which already has a large presence in Chile's northern copper mines, has been mulling Alumysa for more than 10 years. Plans call for construction of an aluminum smelter capable of producing 440,000 tons of aluminum a year outside Puerto Chacabuco, a small port 40 miles west of here. Dams for three hydroelectric facilities would be built on two lakes and a river. These would generate enough electricity to power the facility.

Robert Biehl, the Chilean businessman heading up Alumysa, says aluminum production technology has advanced to the point that smelters operate in Canada's wilds and among Norway's fjords without causing harm. He says emissions would fall within Chilean and World Bank norms.

Still, opponents warn that Alumysa's approval would open the doors to more industry. "If Alumysa comes, there will be no impediment to a cement factory, to other manufacturers," says Carlos Perez, an electrician and project opponent in Coihaique. Environmentalists tout alternative forms of development like tourism and organic farming.

Oscar Muñoz, planning director for a local municipality, says the area's immense size will reduce any environmental impact. "There are still going to be vast, untouched areas," he says. He also says the roads built to access the dams and hydroelectric facilities will ease access to untouched areas, boosting tourism.

But for observers such as University of Chile ecology professor Italo Serey, the issue isn't so much whether the company enters Chile, but rather, the conditions under which it would do so.

He praised the 1995 legislation that required, for the first time, that industrial projects face review by Chile's National Environmental Commission before implementation. Serey says the government needs to focus on environmentally friendly development. "If we don't, we'll have more environmental problems that will result in more [cleanup] costs for the public."