Laine:

Having reviewed Abe's and Eduardo's comments on the joint security assessment 
report, I would like to provide my comments:

The things you should look at doing:

1. Get the government involved in enforcing the laws and stopping the illegal 
behavior.  Let the government decide how to do that - whether through the 
national police or the military.  "Get the government involved" is not quite 
the same as "bring in the Army" - although that may be a part of the final 
decision.  Pointing out to the government that the project is important to 
Bolivia as well at to Enron/Shell may help to get them off dead center.

2. Expand your PR program to include education of the people about illegal 
acts and their consequences.  Obviously if the government doesn't want to get 
involved, there won't be any consequences and in that case you might as well 
skip this step.  You may already have assets in place to do this - the CLO's 
and Jose Castro of GOB(?).  A little more push with the local civic committee 
to get them to accept your bringing in an outside member.

3. Consider bringing in outside security people from Santa Cruz (Wackenhut 
can get you national police on contract) to ride 'shotgun' on the vehicles 
and protect work sites and offices, if you feel a physical threat exists to 
your employees.  The cost will be high, as you will have to provide housing, 
food and transportation in addition to salary.  This would help in reducing 
the number of 'carjackings' of your vehicles and threats to your employees.  
This might, however, have a negative impact overall, and the confrontations 
may turn violent if the youth organization won't back down from a fight.  
Escalation at this point in the construction might lead to a longer 
completion time than if you just 'go with the flow'.  In my opinion, I would 
use this only if the government doesn't get involved in crime suppression 
activities.

4. Refuse to continue paying extortion to the populace.  Bear in mind, 
however, that this decision will probably escalate future incidents, with 
results equivilent to those mentioned above in #3.

The above are my immediate recommendations - the below are my general 
comments:

- I think the problem is more than just the 'PR issue' that the report seems 
to indicate.  There are illegal acts being committed, in violation of 
Bolivian laws, by a populace who is used to doing things their own way, 
without the benefit of following laws made by the government far away who 
doesn't take an active interest in crime suppression.  The only remedy for 
committing illegal acts is punishment for the offender, which sends a message 
to the community that illegal acts will not be condoned.  Can Enron punish 
the offender?  No - that can only come from the government through their 
legal system.  Enron should not be required to submit to extortion by groups 
committing illegal acts.  Enron's push here should be to get the government 
involved at whatever level it takes to investigate and prosecute those 
committing the illegal acts.  

- You have a short time frame to work in before the project is complete.  
Putting things in motion now wouldn't guarantee they would be in place before 
the end of the project - however, the operator of the pipeline is going to 
have to face these or similar issues - they are not going to go away just 
because the pipeline is finished.  The acceptance by the general populace of 
use of illegal acts can easily become a breeding ground for future sabotage 
of the pipeline, kidnapping of employees and contractors.  Whatever 
short-term solution you use will affect the long-term security of the 
pipeline, and needs to be well considered.  Whatever other options you have, 
education of the people probably wouldn't hurt.  If the operator of the PL 
can get involved in the education of the populace, it would be in it's best 
interest to do so.

- Your subcontractor, Conduto, seems to be a focal point for at least some of 
the problems through their non-use of local labor.  There is no indication in 
the report or in Abe's comments that the local populace are qualified for 
available jobs.    Maybe a lesson learned for next project - try to use local 
labor where possible (and qualified).  This friction - between Conduto and 
the populace - seems to be the major issue.

- The CLO concept, as I understand Abe's comments, seems to be on the right 
track, but maybe their responsibility should be expanded to include educating 
the populace that there is a difference in nogotiating for something in good 
faith rather than under duress.  Also that Illegal acts will not be 
tolerated.  One potential problem I see is that if GOB refuses to negotiate 
over future issues (wants of the people), then, without the education part of 
it in place, you will probably see sabotage on the PL or of company vehicles, 
and possibly violence against your employees.  Obviously you want to continue 
to use people such as Jose Castro - possibly expanding his role to include 
education issues.

In any case, this is not a problem that is going to go away overnight, and 
any actions you take at this point may not have a positive effect by the time 
the project is complete.  Hindsight is always better - maybe for the next 
project we will consider a due diligence assessment of the areas our pipe 
will pass through and see if similar conditions exist there.

Hope to see you before long.

Regards,

Mike Hicks









Laine A Powell@ENRON_DEVELOPMENT
03/14/2000 03:25 AM
To: Michael Hicks@ECT
cc: Abraham Moreno/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 
Subject: Tradu??o

Mike -

 Attached is a copy of the translation of Eduardo Cordi's comments to the 
investigation done by the security folks in San Matias.  Summarizing Abe's 
comments and Eduardo's the reaction seems to be that many of the 
recommendations don't apply for the area.  Am not sure what the next step 
should be.  Any suggestions?

rgds

Laine
---------------------- Forwarded by Laine A Powell/ENRON_DEVELOPMENT on 
14-03-2000 07:21 AM ---------------------------


Clarissa Sauer
13-03-2000 06:32 PM
To: Laine A Powell/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  

Subject: Tradu??o

Laine, 

A tradu??o que vc me pediu.




Rgds, 
Clarissa