Peruvian environmentalists have welcomed a decision by the country’s Energy Ministry to cancel the development of a hydropower plant in the Amazon basin.

Vice-Minister for Energy Luis Gonzales Talledo announced the decision to terminate a concession for the 1.5 GW Inambari dam on June 13 after reviewing the project and meeting with local communities.

The decision is a blow to Empresa de Generación Eléctrica Amazonas Sur (Egasur), the Brazilian consortium that was to have developed the project, and to the Brazilian government, which wants to tap the hydropower potential of Peru’s Amazon basin.

According to NGO International Rivers, the Inambari dam would flood 410 km2 of forest, including part of the Bahujan Sonene National Park buffer zone, and leave more than 15 000 people without agricultural lands. Flooding 120 km of the recently built Inter-Oceanic Highway would also affect the economic development of the region, says International Rivers.

“Although this resolution does not prevent the construction of all dams in the Inambari Basin, it is very important because it clearly cancels Egasur’s participation,” said Aldo Santos of local NGO SER (Rural Educational Services). “The resolution states that all future proposed projects must be subjected to prior consultation with local communities according to ILO Convention 169 on Indigenous and Tribal Peoples, which is an important precedent.”

Last year the Peruvian government signed an energy agreement with Brazil under which Brazil committed to purchase electricity from six dams in the Peruvian Amazon. The second proposed dam under the Brazil-Peru Agreement, the Pakitzapango Dam, was stopped in 2010 by an administrative legal action by the Central Ashaninka del Rio Ene, an indigenous organisation.

The $4.9 billion Inambari Dam was expected to be financed by the Brazilian National Development Bank and was in an advanced stage of planning.

The recently-released Brazil Energy Expansion Plan for 2011-2020 includes a total of 7000 MW of imported hydropower from the Peruvian Amazon.