DEVELOPMENT: Bank’s Inspection Arm a Mess, Critics say

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Dec 20 2002 (IPS) - The investigative arm inside the largest public bank operating in Latin America is in disarray, lacks transparency and is not independent, say activists from a leading economic watchdog.

The Bank Information Centre (BIC), a Washington-based monitor of international financial bodies, says that the process the Inter-American Development Bank (IDB) uses to review alleged malpractices in Bank-financed projects was neither efficient nor accountable in the past, and could jeopardise communities in Latin America affected by current and future projects.

The Bank’s independent investigation mechanism (IIM) is ”not at all independent and certainly not at all transparent", said Jane Garrido, a BIC activist.

"The way the mechanism functions doesn’t allow it to be independent or objective."

Both times that the Bank used the mechanism – once in 1996 and another currently under way – it failed to share information with the complainants, and placed constraints on the work of the investigators, activists say.

In 1996, the IIM looked at the Yacyreta project, a 66-kilometre-long hydroelectric development on the Parana River in Argentina and Paraguay, which members of Paraguayan communities said adversely affected them.

Today it is examining the Termoelectrico Del Golfo coke smelting plant being built in Mexico, the first such project in the North American nation. Complainants from the community of Tamuin, San Luis Potosi, (a town of 13,000 people) and the environmental group Rescate Ecologico de Tamuin say the project could damage their environment and health.

During the Yacyreta probe, activists say, instead of finding out exactly how people were being affected, the Bank assigned the investigators to evaluate whether its mitigation measures, compensation and relocation efforts were followed – not exactly what the complainants wanted.

"That wasn’t necessarily a bad question to ask, but it wasn’t the right question," Garrido said.

In the end, the IIM did not agree with the complainants’ requests, which included compensation and an end to privatisation of the project. It did agree to set up two information centres and to loan money to Paraguay to address some of the project’s shortcomings.

The experience with the Yacyreta project prompted activists, lawyers and communities to demand that they be able to provide input to the investigators’ terms of reference, which includes, among other things, their schedule, the issues they will look into and their deadlines.

But those demands were never met.

The same grievance has now re-surfaced in Mexico, where the affected communities, who have cited concerns about possible violations of Mexican law and lack of data on the project’s impact on the environment and public health, say they have been kept in the dark about the investigation process.

Investigators have not provided the claimants with their schedule, deadlines or even information on whether their concerns will be addressed, said Amy Gray, another BIC activist who has just returned from the site, where she met members of the communities and Mexican officials.

The IDB’s now controversial mechanism is dwarfed when compared to other similar, but more fixed, inspection instruments affiliated to other international financial institutions, like the World Bank’s Inspection Panel.

Critics charge that although other banks’ inspection processes also have irregularities, the IDB stands out as the worst offender when it comes to disclosing information and operating independently.

Although an IDB official told IPS that complaints are posted on the Bank’s web site, the Bank’s internet page, in fact, shows little information about the mechanism’s staff, funding, pending investigations, dates or review requests by complainants.

Unlike other banks with internal review mechanisms, the IDB does not post the texts of complaints, preventing the public from knowing the nature of the problems.

Neither does the web site reveal, contrary to what IDB officials say, if any complaints were filed during the six-year gap between 1996, when the first investigation was requested, and the current inspection in Mexico.

Activists say they have no way of finding out if complaints were filed or if they were rejected, and why.

According to Gray, the IIM’s staffing, budget, and the speed at which requests are being pushed to the Bank’s board of directors, which decides whether complaints are worthy of a review, are not disclosed.

IDB public relations officials say 15 people are on the IIM roster of potential investigators, but the BIC says that there are only eight, and that their names and biographies are unavailable.

This contrasts with the practice of the Asian Development Bank, another controversial regional public bank, which added information on members of its investigative arm to its website earlier this year.

But the biggest concern of civil society groups remains that the brief but discouraging record of the IIM does not augur well for pending cases, of which three are known.

These cases include a request by Brazil’s Movement of Dam-Affected People (MAB) concerning an IDB loan to Belgian multinational Tractebel to construct the Cana Brava dam project on the Tocantins River in Brazil.

In that case, hundreds of families and individuals say they lost their land and livelihood because of the project, and were left with little or no compensation. Their investigation request has not yet been processed.

Although the IIM is practically the only means available to people affected by IDB-funded projects, activists charge that the Bank is lax about handling cases – a recipe for disaster given the Bank’s weight and influence in the region.

The IDB is important because, at 8.5 billion dollars in loans annually, it is by far the biggest public lender to Latin American countries.

Although the World Bank is the largest and oldest international public bank, with a capital of 100 billion dollars dedicated for Latin America, the IDB, created in 1959 to focus on Latin America, has a capital of about 150 billion dollars for the Western Hemisphere.

It is funded by governments – the United States alone provides about one-third of the Bank’s capital – and through bond issues.

But the Bank’s influence and importance is not necessarily understood by its own staff, say activists. "There’s a problem and a disconnect in the people who work at the IDB understanding themselves to be public servants," said Gray.

"It’s not well understood at all there that they are supposed to be working for us and that, as members of the public, we have an interest in their procedures."

DEVELOPMENT: Bank’s Inspection Arm a Mess, Critics say

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Dec 20 2002 (IPS) - The investigative arm inside the largest public bank operating in Latin America is in disarray, lacks transparency and is not independent, say activists from a leading economic watchdog.
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