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The dam, to be built at the confluence of the Inambari and Araza rivers, is one of dozens expected to power South America's economic ascent. (Ivan Kashinsky)

A Mega-Dam Dilemma in the Amazon

A huge dam on Peru's Inambari River will bring much-needed development to the region. But at what cost?

The town of Puerto Maldonado lies about 600 miles east of Lima, Peru, but locals call it the Wild West. Gold-buying offices line its main avenues. Bars fill the side streets, offering beer and cheap lomo saltado—stir-fried meat and vegetables served with rice and French fries. Miners and farmers motorbike into the sprawling central market to stock up on T-shirts and dried alpaca meat. Garbage and stray dogs fill the alleyways. There’s a pioneer cemetery on the edge of town, where its first residents are buried.

And Puerto Maldonado is booming. Officially, it has a population of 25,000, but no one can keep up with the new arrivals—hundreds each month, mostly from the Andean highlands. Residents say the town has doubled in size over the past decade. There are only a few paved roads, but asphalt crews are laying down new ones every day. Two- and three-story buildings are going up on every block.

Puerto Maldonado is the capital of Peru’s Madre de Dios region (similar to an American state), which abuts Bolivia and Brazil. The area is almost all rain forest and until recent decades was one of South America’s least populated and most inaccessible areas. But today it is a critical part of Latin America’s economic revolution. Poverty rates are dropping, consumer demand is rising and infrastructure development is on a tear. One of the biggest projects, the $2 billion Inter-oceanic Highway, is nearly complete—and runs straight through Puerto Maldonado. Once open, the highway is expected to see 400 trucks a day carrying goods from Brazil to Peruvian ports.

Later this year a consortium of Brazilian construction and energy companies plans to start building a $4 billion hydroelectric dam on the Inambari River, which starts in the Andes and empties into the Madre de Dios River near Puerto Maldonado. When the dam is completed, in four to five years, its 2,000 megawatts of installed capacity—a touch below that of the Hoover Dam—will make it the largest hydroelectric facility in Peru and the fifth-largest in all of South America.

The Inambari dam, pending environmental impact studies, will be built under an agreement signed last summer in Manaus, Brazil, by Peruvian President Alan García and Brazil’s then-president, Luiz Inácio Lula da Silva. In a joint statement released afterward, the pair praised the deal as “an instrument of great strategic interest to both countries.” At first, most of the dam’s electricity will go to Brazil, which desperately needs power to feed its economic expansion—a projected 7.6 percent in 2011, the fastest in nearly two decades. Over 30 years, the bulk of the electricity will gradually go to Peru to meet its own growing power demands. “The reality is, every year we need more and more energy,” says Antonio Brack Egg, Peru’s environmental minister. “We need hydropower.”

But the dam will also change the Inambari’s ecosystem, already damaged by decades of logging and mining. The river level will drop, and whatever water is released will lack the nutrient-rich sediment on which the lowland wildlife—and, by extension, the Madre de Dios region—depends. Meanwhile, the 155-square-mile reservoir created behind the dam will displace about 4,000 people in at least 60 villages. And this dam is just one of dozens being planned or built in what has been called a “blue gold rush,” an infrastructure spree that is transforming the South American interior.

Development of the Amazon basin, managed correctly, could be a boon for the continent, lifting millions out of poverty and eventually bringing stability to a part of the world that has known too little of it. But in the short term it is creating new social and political tensions. How Peru balances its priorities—economic growth versus social harmony and environmental protection—will determine whether it joins the ranks of middle-class countries or is left with entrenched poverty and denuded landscapes.

Madre de Dios claims to be the biodiversity capital of the world. Fittingly, Puerto Maldonado boasts a Monument to Biodiversity. It is a tower that looms over the middle of a wide traffic circle near the center of town, with a base ringed with broad concrete buttresses, mimicking a rain forest tree. Between the buttresses are bas-relief sculptures of the region’s main activities, past and present: subsistence agriculture; rubber, timber and Brazil-nut harvesting; and gold mining—oddly human pursuits to detail on a monument to wildlife.

I was in Puerto Maldonado to meet up with an old friend, Nathan Lujan, who was leading a team of researchers along the Inambari River. After getting his PhD in biology from Auburn University in Alabama, Nathan, 34, landed at Texas A&M as a postdoctoral researcher. But he spends months at a time on rivers like the Inambari. For the better part of the past decade he’s been looking for catfish—specifically, the suckermouthed armored catfish, or Loricariidae, the largest family of catfish on the planet. Despite their numbers, many Loricariidae species are threatened by development, and on this trip, Nathan was planning to catalog as many as possible before the Inambari dam is built.

The river Nathan showed me was hardly pristine. It serves many purposes—transportation, waste removal, a source of food and water. Garbage dots its banks, and raw sewage pours in from riverfront villages. Much of Puerto Maldonado’s growth (and, though officials are loath to admit it, a decent share of Peru’s as well) has come from the unchecked, often illegal exploitation of natural resources.

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