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The Narco News Bulletin

"The Name of Our Country is América"

-- Simón Bolívar

Conflict-of-Interest at AP Bolivia Bureau

AP's Peter McFarren Surveys His Empire from High Atop La Paz (Photo: Christian Science Monitor)

Bolivia AP Correspondent Peter McFarren Violates the APME Code of Ethics

McFarren Uses AP to Defend the Banzer Regime as He Lobbies Bolivian Congress for a $78 Million Dollar Water Export Project

Correspondent Insists that AP "Knows All About" his Lobbying Activities

A Symptom of Deteriorating Standards at AP and Among US Media Correspondents in Latin America

Special to The Narco News Bulletin

Part I in a series

By Al Giordano

October 6, 2000

In this poorest of South American nations, where the "water wars" of last April have now exploded into full scale insurrection throughout Bolivia, Peter McFarren is covering events for the Associated Press (AP) that, through his unethical activity, he helped to provoke.

AP's Bolivia correspondent, instead of covering today's historic news events, is covering them up.

The Narco News Bulletin has learned that on September 14, 2000, just days before recent protests exploded into nationwide road blockades - by social movements that have now united and paralyzed the country - Peter McFarren made a presentation in the hall of the federal Senate.

There, McFarren lobbied the Bolivian Senate as a representative of the "Corporación Boliviana de Recursos Hidricos, S.A." or COBOREH, the Bolivian Hydro-Resources Corporation.

McFarren offered a slide show for government officials, urging them to support the $78 million dollar private industry plan. COBOREH seeks permission to export 3,000 liters-per-second of Bolivian water to mulitinational copper mining companies in neighboring Chile.

The McFarren slide show is now available on the Internet:

McFarren, who was born in Bolivia in 1954, enjoys dual US citizenship and studied in the States, made his pitch to government officials in Spanish.

McFarren told The Narco News Bulletin that his lobbying activities do not constitute a conflict-of-interest because he is working for the multi-million dollar private sector project "pro bono."

And yet, McFarren's lobbying presentation directly asks for Bolivian governmental approval of the mega-project.

And the project, if approved by the government, will provide direct financial benefits to a foundation headed by McFarren.

"What does the Project Need from the Government?" asks one of the slides in McFarren's presentation.

McFarren's slide show answers: "A decision that defines the State gifts (that would be) product of the exportation of water and subterranean sources to neighboring countries." The presentation also lobbies for passage of, "a specific law."

What is a Conflict-of-Interest?

According to the Associated Press web pages, "the AP subscribes to the code of ethics written by the Associated Press Managing Editors Association," or APME.

The APME "works in partnership with AP to improve the wire service's performance," according to its own publicity. "APME is on the front line in setting ethical and journalistic standards for newspapers."

"These principles are a model against which news and editorial staff members can measure their performance," reads the preamble to the APME Code of Ethics. "They have been formulated in the belief that newspapers and the people who produce them should adhere to the highest standards of ethical and professional conduct."

"The good newspaper is fair, accurate, honest, responsible, independent and decent," according to APME's Code of Ethics. "Truth is its guiding principle. It avoids practices that would conflict with the ability to report and present news in a fair, accurate and unbiased manner."

"The newspaper should serve as a constructive critic of all segments of society. It should reasonably reflect, in staffing and coverage, its diverse constituencies. It should vigorously expose wrongdoing, duplicity or misuse of power, public or private. Editorially, it should advocate needed reform and innovation in the public interest. News sources should be disclosed unless there is a clear reason not to do so. When it is necessary to protect the confidentiality of a source, the reason should be explained."

"The newspaper should report the news without regard for its own interests, mindful of the need to disclose potential conflicts," says the APME.

AP Failed to Disclose Conflicts

AP has never disclosed the conflicts - potential and real - of its Bolivian correspondent Peter McFarren to its readers nor to its member newspapers.

If AP had followed its own Code of Ethics, it would have been duty bound long ago to disclose its correspondent's conflicts, which predate his September 14 lobbying presentation. The Code of Ethics is very specific on this point. The newspaper, it says, "should report matters regarding itself or its personnel with the same vigor and candor as it would other institutions or individuals."

"The newspaper and its staff should be free of obligations to news sources and newsmakers," says the AP Code of Ethics. "Even the appearance of obligation or conflict of interest should be avoided."

"Financial investments by staff members or other outside business interests that could create the impression of a conflict of interest should be avoided."

"Outside Business Interests"

On the most basic fact of this case - that AP Bolivia correspondent Peter McFarren lobbied that nation's congress on September 14 for approval of a private-sector water export project - McFarren has committed a serious conflict of interest.

McFarren has not committed merely an oversight leading to "the appearance of conflict." He has committed a blatant unethical conflict that no news agency would never tolerate inside the United States by one of its correspondents -- that is, lobbying before Congress.

Now it touches upon Associated Press, to quote again from its own Code of Ethics, to "report matters regarding itself or its personnel with the same vigor and candor as it would other institutions or individuals."

What are the "outside business interests" represented by Peter McFarren as he lobbies the Bolivian Congress?

The McFarren lobbyist "slide show" was made publicly available on the internet because a courageous citizen surreptitiously videotaped his presentation. The slide show presentation does not reveal who are the "business interests" or officers of the COBOREH corporation.

However, the McFarren slide show does reveal which "outside business interests" want Bolivia's water: precisely, Chilean mining companies.

According to the McFarren presentation in the halls of the Bolivian federal senate, "Phase One" of the mega-project would pump Bolivian water a distance of 29 kilometers to the copper mine in Chile known as Empresa Minera Doña Ines de Collahuasi.

The Doña Ines copper mining operation (largest in the world, supplying 3.6 percent of global copper output) is owned jointly by three foreign companies. "Canada's Falconbridge Ltd. and London-listed Anglo American Plc each own 44 percent of Collahuasi, and a Japanese consortium, headed by Mitsui & Co, owns the remaining 12 percent," according to a September 22 Reuters report.

At a projected construction cost of $17 million US dollars, "Phase One" would pump 800 liters per second of water to the Chilean copper mine in the project's first year, and, eventually, 2,000 liters per second. By the time "Phase Three" kicks in, water-scarce Bolivia will lose 3,000 liters per second to the copper mines of Chile.

Massive Exodus of Water

"For those who have no idea what those volumes of water mean, it can be stated that the volume of water that the SEMAPA agency supplies to the city of Cochabamba as of last month (August 2000) was 780 liters per second," writes engineer Juan Carlos Alurralde. "COBOREH S.A. seeks to exploit the subterranean aquifers of the state of Potosí during Phase One in greater volume than the water supply of SEMAPA."

"Phase Two" of McFarren's project would construct a longer pipeline, 129 kilometers, from the wells in Bolivia to supply the CODELCO (Chile's state-owned copper company) mine in Chuqulamata, as well as to the Empresa Essan and the Empresa Minera Río Chilex S.A., owned by the Canadian-based Algom LTD. That phase of the project would cost, said McFarren, $30 million US dollars.

In fact, McFarren's water grab enters into and impacts a very fast-moving and volatile copper market, thirsty for Bolivia's water.

Falconbridge LTD is a company courting Force Majeure (legal shutdown of contracts) because its efforts to break the Canadian Auto Workers union in its mines in Sudbury, Ontario, have provoked a strike among 1,260 workers.

Meanwhile, Chile's El Diario reports that the Doña Ines mine is seeking to increase production. Global copper prices, after a long slump, are rising, in part due to lower supply - conveniently? - caused by Falconbridge's own union-busting provocations.

The Greedy Grab

Scratch the surface of McFarren's water project, and the "outside business interests" reveal an even larger pattern: the looting of América and its natural resources.

The greedy grab underway is barely touched by the daily news suppliers of Associated Press in Latin America: McFarren, with his own inadequate coverage of events in Bolivia, is hardly the only offender. (A review of McFarren's AP coverage of the drug war and other matters in Bolivia will be vetted in Part II of this investigative report; it reveals a slavish promotion of the Banzer regime and of US policy in Bolivia, with biased reporting that can only help him gain government approvals for his project.)

Bloomberg reports on October 5th that another of McFarren's "Phase Two" recipients of Bolivian water, Río Algom, has just been purchased for $2.7 billion Canadian dollars by the Billiton corp. This, after Chile's Codelco (another McFarren water project client) and Canada's Noranda "declined to boost their hostile takeover bid for Río Algom, clearing the way for Billiton to take over the Canadian copper producer."

"Phase Three" of the mega-project promoted by Peter McFarren on September 14, before the Bolivian Senate, would supply the Empresa Minera La Escondida in Chile. At an estimated cost of $30 million US dollars - this time with a pipeline more than twice as long, at 322 kilometers, but at the same price as the $30 million spent on Phase Two - it will raise the total construction price of the project to more than $78 million US dollars.

The profits, however, are staggering in their projections. By its fifth year of operation, the COBOREH water export business will take in an annual income equal to the $78 millon dollar initial construction costs. McFarren is offering Bolivian federal and state governments about one-quarter of those proceeds, but whomever is behind his project stands to reap an even larger profit.

McFarren also hinted in his presentation to the Bolivian Senate that COBOREH will look to other quasi-governmental sources of funding. His slide show states: "This project can be endorsed by: World Bank/International Finance Corp., OPIC, the US Overseas Private Investment Corp., and CAF, Corporación Andina de Fomento," the regional development agency.

The Power of Silence

AP has a correspondent in Bolivia who, for business reasons, can't anger the Bolivian government, nor the World Bank, nor the US government, nor the top regional development agency, nor the Chilean copper industry, nor the Chilean government that owns a piece of his promoted project.

In other words, McFarren is so deeply in the tank with an interlocking set of governmental and big business interests in Bolivia that his coverage of this Andean nation cannot possibly be considered fair or impartial.

The Bolivian people have already paid a high price for McFarren's conflicts of interest. They continue to pay that price in the present. That an online journal like Narco News has reported on the present Bolivian crisis more extensively than AP is to be expected. Yet compare even the Reuters coverage in recent days of the earthshaking events underway right now in Bolivia - Reuters has been reasonably fair and timely in its reporting - and it becomes clear that AP has been AWOL.

What little reporting McFarren has done on the events that shake his friends in government has only sought to disqualify the Bolivian people and their social movements and to defend the status quo.

And it is precisely the silence, the lack of coverage by AP of Bolivia's social movements, that has allowed McFarren to best serve the interests of Power. McFarren - the gatekeeper of information from Bolivia to the English-speaking world - engages in a selective censorship of the news events that have placed the Banzer regime and the US-imposed drug war in check. This non-active "journalism" by McFarren helps the very governmental and business interests upon whom McFarren must rely to get his project approved.

There are other potential conflict-of-interest issues regarding Peter McFarren and Associated Press that The Narco News Bulletin will explore in coming days and weeks. Some of these issues are long established and, according to McFarren's own private email communiqué to a reader, obtained by Narco News, the AP has long known about other potential conflicts and approved of them.

Later in the series, when we address other longstanding issues surrounding McFarren's work for AP in Bolivia, we will publish that correspondence in full.

We also welcome McFarren, the Associated Press, and the AP Managing Editors Association to respond to this story, and offer to publish their responses. Indeed, we believe that all three parties owe separate explanations to the international public.

"I believe," wrote McFarren in his email to one of the citizen-journalist readers of Narco News, that "AP and any other news organization depends on the moral integrety (sic) of whomever works for them and if there exists any possible conflict of interest, the editors should be made aware of it."

A US correspondent in any Latin American country has inherent power: he is the filter of information to the developed world. Governments and industries rise and fall based on how and whether news is reported internationally, as we are reporting in Bolivia today.

As Narco News has reported on unethical activity by other US correspondents in Mexico and Colombia, that power is systematically abused. But this is the first case we have encountered in which a journalist for a US press agency actively lobbied a government for a private-sector project.

McFarren: "My Boss is Aware of It"

Narco News reached Peter McFarren on his cellular telephone on October 5th. McFarren confirmed that he is a "pro bono" (unpaid) "promoter of the water export law" that would pave the way for this $78 million dollar pipeline mega-project.

He acknowledged that the mega-project would also "set up a fund for culture, and Quispus will receive the profits." The Quispus Foundation has as its president Peter McFarren, and has constructed museums in Bolivia.

He insists that he has not committed any conflict of interest. "I've made the point of never writing about anything that I am involved with." And yet he continues to write about the Bolivian government, most recently the October 1, 2000 AP story, "Bolivia Farmer Talks Break Down."

McFarren says of his work for COBOREH corporation, "My boss is aware of it. As a citizen I have a right to do nonprofit and pro bono work." Asked if his boss was an editor at the AP Latin American desk, McFarren stated that he disclosed this information not to New York or Washington, but to AP correspondent Eduardo Gallardo in Santiago de Chile.

McFarren said he is not an owner or officer of the Corporación Boliviana de Recursos Hidricos S.A. (COBOREH). Asked to identify the officers and financiers of COBOREH, he said he would answer in writing, via email, and Narco News has sent him that request.

The conflict of interest remains blatant and serious. McFarren is in violation of the Code of Ethics of the AP Managing Editors Association. McFarren works for "outside business interests," lobbies the government that he reports on, and, his powerful media position creates fear among opponents of the water mega-project that McFarren represents. Every source on this story who lives in Bolivia asked not to be named. "McFarren is very powerful," said one. "I want to keep living here," said another.

Indeed, Peter McFarren Deutsch has parlayed his press pass into his role as a near mythical player in the highest levels of Bolivian society. It's not unusual for him to be the subject of press coverage himself as he rubs elbows socially with the Divine Caste of La Paz, the foreign diplomatic corps, the commander of the Bolivian armed forces and other officials, as the social pages of the daily La Razon in La Paz have reported.

McFarren's role in Bolivia is a throwback to the old Viceroy system of the Spanish Conquest; the conquering world's journalist-power broker.

A journalist with these conflicts of interest is incapable of reporting the truth of what is happening right now in Bolivia, and it shows in both his coverage and his silence on key developments in the battle underway.

If it is true that the Associated Press knows about all of McFarren's "outside business interests" and lobbying activities, then the AP in Latin America has reached a new low point in corrupted journalism.

Associated Press gave Peter McFarren an inch, and he took 322 kilometers of pipeline.


Former Boston Phoenix political reporter Al Giordano is publisher of The Narco News Bulletin, reporting on the drug war from Latin America. He receives email at

Read Part II of this Series on Corrupted Journalism

Memo to Civil Society:

What Can Be Done About Corrupted US Journalism in Latin America?

1. Join the Discussion at the APME web site:

2. Write to the APME officers:

President: Jerry Ceppos, vice president/news, Knight Ridder; (408) 938-7830; fax: (408) 938-7766;

Vice President: Chris Peck, editor, Spokesman-Review, Spokane; (509) 459-5423, fax (509) 459-5482,

Secretary: Caesar Andrews, editor, Gannett News Service; (703) 276-5898;

Treasurer, David B. Offer:

Chair, Journalism Studies: Ed Jones, editor, The Free Lance-Star, Fredericksburg, Va.; (540) 374-5401, fax (540) 373-8455,

Vice Chair, Journalism Studies: Paula LaRocque, assistant managing editor, Dallas Morning News; (214) 977-8770; fax: (214) 977-8164;

3. Seek Alternate Routes to Factual Reporting from Latin America

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