July 3, 2014

Environmental Rollbacks in Peru Threaten Obligations under U.S.-Peru Free Trade Agreement

Washington, DC-The Government of Peru is proposing a packet of economic measures and regulatory
rollbacks that will cause significant harm to the environment and drastically diminish the Peruvian
Governments ability to hold corporations accountable for violations of environmental standards.
Fifty civil society organizations and Indigenous groups in the United States and Peru have taken a stand
against the measures which they cite as a serious environmental setback.
The measures, referred to as an Economic Reactivation Packet or the Paquetazo Castillaa nod to
Perus Minister of Finance and Economy and main proponent of the measures, Luis Miguel Castilla
were introduced June 16, 2014. Framed as necessary to promote investment and stimulate economic
growth beyond a projected three percent in the year ahead, the measures will diminish the capacity of
the Ministry of Environment and related bodies to monitor, control, and sanction companies.
Additionally, these proposals will weaken the ministrys ability to carry out thorough and accurate
environmental impact assessments before projects are initiated. President Ollanta Humala stands
behind the packet and is actively pushing the measures through Perus Congress for a final vote.
The President has stated that the measures are being presented to Congress because "There is an
existing set of limitations to private investment being carried out at the speed we Peruvians need."
Weakening environmental standards to increase investment, as the proposed legislation seeks to do, is
in direct violation of Peruvian obligations under the U.S.-Peru Free Trade Agreement. Article 18.3.2 of
the agreement reads, The Parties recognize that it is inappropriate to encourage trade or investment
by weakening or reducing the protections afforded in their respective environmental laws. Accordingly,
a Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such
laws in a manner that weakens or reduces the protections afforded in those laws in a manner affecting
trade or investment between the Parties."

The U.S. and Peru have been working to establish strong and useful environmental protections since
the FTA was signed in 2006, says Annalise Romoser, Latin America program coordinator for EIA.
Substantial U.S. resources have been dedicated to the task and the proposed measures threaten those
investments. They stand in stark contrast to Perus professed commitment to sustainable management
of its natural resources.
The measures also send a contradictory message. Perus economic growth is lauded by the World Bank,
which in April predicted the economy to be the second best performing in Latin America; Minister
Castilla himself has projected significant economic growth. Further, as President of the 20th Session of
the United Nations Framework Convention on Climate Change (UNFCCC) to be held in Peru this year,
President Humala has noted the importance of environmental protections and negotiations such as the
UNFCCC, yet now he stands behind the proposed measures which will diminish environmental standards
in the country.
The new measures precede plans to launch an auction of gas and oil contracts in the Amazon region,
while most of the proposed changes to environmental standards are specifically oriented to promote
fuel and oil extraction in the coastal and Amazon regions. Minister of Agriculture Juan Manuel Benites
announced recently that the government will also re-launch forest concessions, a process that will be
facilitated by the packet of legislative changes in order to bring private investment [to the forest sector]
and promote forest plantations and the planting of alternative crops such as palm oil.
We see the Peruvian Government making international commitments to environmental protection
while simultaneously pushing for legislation to strip competent authorities and institutions of the ability
to enforce sensible environmental regulations, Explains Julia Urrunaga, EIAs Peru country director.
Perus rich natural resources are at stake, and we risk sacrificing long-term development for all to
secure immediate gain for just a few.
Proposed reforms to Perus environmental regulations include:
- A reduction in the audit capacity of the Ministry of Environment and its Body for Assessment
and Audit (OEFA). This includes a three year moratorium on OEFAs ability to fully sanction
companies that fail to meet environmental standards.
- Alterations to protocols and timeframes for Environmental Impact Assessments which are likely
to lead to accelerated deforestation and facilitate investment in areas unsuited for timber, oil,
gas and agricultural operations.
- Significant changes to the process necessary for establishing Nature Reserves and Protected
Natural Areas, including diminishing the ability of the Ministry of Environment to establish
reserves via resolution and shifting that responsibility to a council of ministers with no
environmental expertise or current purview to do so, including the Minister of Finance and
Economy.
The U.S.-Peru Free Trade Agreement includes a binding Environmental Chapter explicitly limiting both
parties ability to weaken environmental protections to facilitate greater trade and investment.

The Environmental Investigation Agency urges the Peruvian Congress to reject these measures and calls
on the U.S. government to take action if the measures are adopted.