World Bank accused of double standards over IFC Amazon projects

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By:
Rob Dwyer
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Critics says IFC's standards lack rigour of World Bank’s 2018 Environmental and Social Framework; Bank accepts it has made many mistakes, caused environmental and social damage in the Amazon.

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The World Bank made a stumbling defence of its track record of causing environmental and social damage when financing projects in the Amazon.

Speaking at a seminar at the IMF/World Bank meetings in Washington on October 18, Valerie Hickey, practice manager for the environment and natural resources in LAC at the World Bank, said: “Development is hard and we have made mistakes, but we have learned. [Though] sometimes we forgot what we have learned.”

Deforestation caused by illegal fires has spiked under the administration of Brazilian president Jair Bolsonaro. 

Livi Gerbase, policy adviser at the Brazil-based NGO Inesc, said that deforestation had jumped by 91.7% between January and August this year when compared to 2018 – the highest rate in over a decade. 

She pointed to studies that prove that much of this deforestation is directly caused by large-scale infrastructure projects, many of which have been financed by the World Bank. 

“Roads and ports create pathways to deforestation and the expansion of the agricultural frontier – which in turns leads to demand for further infrastructure,” says Gerbase.

Lessons unlearned

Brent Millikan, Amazon programme director at International Rivers, an international NGO that seeks to protect the quality of rivers and help communities that live near them, says the World Bank has continually failed to learn the lessons from environmental and social catastrophes that have accompanied infrastructure projects in the country dating back to Polonoroeste, a road project linking Cuiaba and Port Velho in the western Brazilian Amazon in the 1980s.  

“Why are lessons unlearned, and then forgotten?” he asked. “These are big, large-scale projects, and with high risk comes high reward – the incentives structure at the bank needs to be better aligned and there is also a lack of due diligence.”

In response, Hickey stated that the bank has improved its governance – particularly in terms of enforcing its best-practice guidelines – suggesting that in the past there had been a failure to live up to its stated environmental safeguards.

“Illegality is not the answer, such as laundering cattle into the official beef industry,” she said.  “However, nor is criminalizing poverty – poor people, if they act outside the law, that’s one thing. But if big businesses or big banks encourage illegality, then that’s behaviour we can’t stand.”

Hickey said that the World Bank’s 2018 Environmental and Social Framework (ESF) was a rigorous set of standards to ensure the negative externalities of its projects were minimized. She also pointed to the bank’s efforts to promote private-sector banks and investors to adopt similar principles, as well as a project with 42 central banks to incorporate them.

“Our money is as green as it can be, and we want other money to be as green as it can be,” said Hickey.

Standards

Millikan accepted that the standard of governance at the World Bank was improving, particularly with the adoption of the ESF, but pointed out that the same standards do not apply at the IFC, the sister organization of the World Bank and the investment arm that is leading on capital disbursements in the Amazon – many of which have been criticized for creating large-scale environmental and social damage.

One particularly controversial project is the IFC’s $30 million equity investment in 2015 in Hidrovias do Brasil, a company that operates a shipping terminal in the Brazilian state of Pará. 

According to a report by The Intercept, the investigative news organization founded by journalist Glenn Greenwald, the terminal has led todeforestation in the surrounding area.

“The IFC’s safeguards are not the same,” Greenwald said. “We can’t just talk about the World Bank when these safeguards don’t apply to the IFC. We need to see that this is a double standard that is within the World Bank.”

Hickey didn’t comment on the IFC’s activities in the Amazon and no one from the IFC participated in the seminar.

However, a spokesman responded: "IFC is deeply concerned about the wildfires in the Amazon – including the well-being of people and the environment impacted. IFC’s environmental and social policies seek to avoid impacts to the ecosystem and protected biodiversity where possible. 

"IFC has been investing in Brazil’s private sector since 1957, helping the country to address its development challenges. Investing in infrastructure is key for long-term sustainable growth in Brazil and in Latin America as a whole, and it is a priority for IFC. We work with our clients to mitigate risks by advising them on how to build their overall environmental and social management capacity and adopt our performance standards."