Political and Community Value of IFI Compliance Mechanisms:

CAO and Uruguay Pulp Mills

Presented by David Barndendavid@cedha.org.ar

Center for Human Rights and Environment (CEDHA)

IFC and MIGA • IFC to finance two large scale pulp mills on the

River Uruguay– US$200m ENCE (Spain) – US$170m Botnia (Finland)

• MIGA to provide – US$350m political risk insurance Botnia

Argentina Uruguay

Rio

Uru

guay

Botnia

ENCE

ARGENTINA URUGUAY

Grounds of Action at CAOSeptember 2005

• Violations to Environmental and Social Safeguards

• Violations to Disclosure Policy• Violations to International

Waterways Policy• Poor Stakeholder Consultation• Poor EIAs• Violations of International

Treaties• > Focuses on Obtaining Audits

IFC: ‘broad community support’

CAO Audit

Findings

• Complaint by 40,000 Stakeholders – “IFC’s due diligence to satisfy itself that the EAs

were complete in all material respects was inadequate and not incompliance with the organization’s Disclosure Policy” (CAO, Feb 22, 2006)

– Insufficient evidence that proper consultation has occurred

– No cumulative impact study; IFC Fosters Separation of Projects!

– Need to generate transboundary trust in Local Communities

– Botnia’s beginning construction undermines legitimacy

– Special Efforts must be made to legitimize future studies

– Must study impacts of eucalyptus tree farming on water

– Must examine International Law Obligations; MIGA says not needed!

– Establishes legitimacy of (Gualeguaychú Assembly)– IFC Fails to Give Clarity on how it will address Study

Flaws– “Further technical information and facts will not

be sufficient”

Community Value of CAO Findings

• Ease of access for stakeholders - low threshold mechanisms for complaint process

• Direct access - stakeholders to IFI• Exposed stakeholder marginalisation• Legitimised stakeholders AND concerns• Psychological value for community• CAO helped community by explaining their

own mandate

‘The public’s response to these new industrial features ... may potentially change over time as the public becomes accustomed to the new landscape.’ Final CIS

CAO Findings - Political Value

• Inter American Commission on Human Rights– Dialogue between international tribunal and

compliance mechanism– First time ever CAO findings used by an International

Human Rights Tribunal• Cited by Argentina at the International Court of

Justice – CAO refers to ‘undermining legitimacy of protocols’

• Equator Principles (based on CAO findings)– ING cancels US$480m of involvement– Calyon loses sustainable banking award– BBVA endures protests in Spain

CAO Findings - Political Valuecontinued...

• OECD Complaints (based on CAO findings)– open dialogue between stakeholders and

Botnia for the first time– engages export credit agency and private

banks– diplomatic facilitation occurs for first time

(Finland and now Sweden)• ENCE relocates • Impact on the IFC

– Delayed decision to finance for 14 months– Forced improved review of impacts

120 000 protest against Botnia

The world’s largest environmental march

No Appeal Mechanism: Compliance Fallout

• Role of CAO over after release of Preliminary Assessment and Compliance Audit

• No mechanism for review or appeal• IFC and MIGA limited response to CAO findings• IFC failed to

– Fully address findings– Incorporate some findings into revised EIA - errors persisted– Address legal, political and social concerns raised by CAO

• What the World Bank President failed to do– Act upon findings, instruct Executive Directors to give weight to

findings

Botnia today:IFC financed and over 60%complete