An IDB audit confirms that the Bank approved the loan to co-finance two dams in Pamama despite knowledge that the project fails to meet Bank safeguards. The Pando y Monte Lirio dams will divert 90 percent of the River’s water, together with 25 other similar dams in construction or planned for the Chiriquí Viejo River, will transform it into a series of isolated pools with obvious harm to the region’s biodiversity and people that depend on the river.
On Wednesday, October 24, the Inter-American Development Bank (IDB) Board of Directors will discuss an audit report finding that an IDB hydroelectric power project violates Bank policy and threatens the life of a major river in Western Panama and the communities that depend on the river for survival.
The Bank approved a US$40 million loan for the Pando-Monte Lirio Hydroelectric Power Project as part of a US$180 million funding consortium that also included theWorld Bank’s International Finance Corporation (IFC). The audit confirms the IDB approved the loan despite knowledge that the project fails to adequately address the risk that the Bank supported 83 MW Pando and Monte Lirio dams, which will divert 90 percent of the River’s water for 26 kilometers, together with 25 other similar dams in construction or planned for the Chiriquí Viejo River, will transform it into a series of isolated pools. Twenty-seven hydroelectric projects are currently planned on the River, eight of which are already being constructed, without finalization of studies or plans to understand or manage the harm that will result from water diversion along the entire river.
There is still no acceptable cumulative impact study. The ecological flows study represents the single most important risk assessment instrument, which the client has repeatedly missed deadlines to produce. The absence of a completed and publicly disseminated ecological flows study and a full assessment of cumulative impacts have so far prevented the Pando Monte Lirio project from adequately considering or adopting the appropriate mitigation options.
The Pando y Monte Lirio dams are not the exception. Panama is building and planning a large number of dams that lack proper planning. A March 2012 editorial in a national paper by IDB former country manager, Marcelo Antinori, “El problema del sector eléctrico está en su diseño: Marcelo Antinori,” questions the pace and logic of energy sector deregulation in Panamá as having contributed to the hydroelectric planning problems, such as those of the Viejo Chiriqui river. Antinori states that the Bank has some responsibility for the outcomes of a rushed energy reform process in Panama.
“Take as an example the Chiriqui Viejo River that is very conducive to energy generation by its topography and because there are hydropower projects that can be implemented without the need for resettlement of population. If there were a centralized national planning, accompanied by a study of how to make the most of the river basin, these would define where and how many generation projects should be built, harmonizing their features to increase efficiency. This would mean that the best utilization of the basin would have been more efficient in terms of technical, social and environmental benefits to the entire population of the region and the country. This is something very different from what happens today in the basin, where projects were defined by the interest and investment opportunity and where beside some excellent projects, there were as many as 14 the last time I counted, that most likely, if implemented, will cause a negative cumulative impact on the sustainability of water resources in the basin and region.”
Panamanian groups demand that the IDB Board take urgent action to protect the River and nearby communities before it is too late. “We need the Bank to show leadership by conditioning any further loan disbursements on completion of key environmental studies, implementation of a watershed-wide management plan, and verification that changes to the Project will safeguard the River,” states Damaris Sánchez, Coordinator of Environmental Alliance for Integral Development – United for Panama(“AAPRODIUPA” for its initials in Spanish), an umbrella organization representing nineteen local organizations who came together to demand accountability from the IDB. “Such conditions must have teeth,” she explains, referring to information disclosed in the audit report released last Friday indicating that the Bank had previously conditioned the first loan disbursement on a key environmental study, yet released the money anyway when the study was not conducted as promised.
See AAIPRODIUPA Letter to IDB President Moreno on the ICIM Report:
Letter to IDB President Moreno on ICIM investigation of Pando y Monte Lirio dams Oct 10 2012
See Oct. 24 press release by AAIPRODIUPA, Accountability Counsel and BIC
Pando y Monte Lirio dam ICIM press release 10.23.12The audit report found that the dam constructor, Electron Investment S.A. (EISA) repeatedly missed deadlines to complete required environmental impact studies and commit to adequate harm prevention measures. The report also questions the Panamanian environment authority’s capacity to manage risks. Vince McElhinny, Senior Policy Advisor at the Bank Information Center explains, “The audit asks whether the IDB should be involved in a high risk project before the minimum safeguards are in place for managing impacts. The Pando-Monte Lirio experience seems to indicate that the answer is no. The Bank should meet the demands of the local complainants to show that it has learned this lesson.” Conflict over the poorly planned expansion of hydroelectric dams in Panama has been the source of growing conflict between the government, private sector and local communities.
According to David Samudio, an Agriculture Specialist at an AAPRODIUPA member organization, “The report issued by the IDB’s accountability mechanism largely validates the concerns we raised in our complaint that the Bank project sends the wrong signal to other dam builders and risks killing the River – damaging the environment and local communities who depend on the River for consumption and agriculture. The decision to move forward with the Project was made without any of the necessary studies or a plan to manage the cumulative impacts of all similar projects.”
The response of IDB Management to the project audit, which states “key issues are being resolved in a favorable manner,” is inconsistent with the views of the groups in Panama that brought the complaint to the Bank – calling into question whether management is taking seriously enough the challenge of fixing the problems for which it now bears responsibility. If feasible solutions exist to meeting the environmental flows requirement for the Pando and Monte Lirio dams, it will be more a matter of luck than planning.
It is not yet clear if the IDB or IFC will take greater responsibility for the cumulative impacts of these and the other dams planned for the Chiriqui Viejo River.
“The IDB’s accountability mechanism has shown independence and candor by putting together a hard-hitting report that finds numerous significant violations of Bank policy, which will hopefully lead to concrete changes on the ground to protect the River and the people who depend on it,” states Sarah Singh of Accountability Counsel, an organization assisting the groups in Panama. “In sharp contrast, after receiving a nearly identical complaint by AAPRODIUPA, the IFC’s accountability mechanism declined to conduct an audit, a puzzling decision given the similarity in the two Bank’s policies and the potentially dire consequences of the project.”
The Panama groups sent the attached letter to the CAO in March of this year, providing a critical analysis of the lack of compliance with the IFC’s performance standards and appealing to the CAO to rethink the decision to not conduct a full compliance review, to no effect. The letter lists some of the concerns at the time.
Letter to CAO Director on Pando y Monte Lirio eligibility decision for compliance review, March 6, 2012CAO response to AAIPRODIUPA letter on Pando Monte Lirio, March 30, 2012
While there is much to say about the good quality of the ICIM report on non-compliance with IDB policies, it must also be observed that delays in completing this review process have unnecessarily allowed the construction of the dams to proceed without needed changes. Close to eight months passed between the original receipt of the complaint in Jan 2010 by the CAO and eligibility for consultation (in part due to the start up of the ICIM in late 2010). When the consultation phase did not work, another eight months passed before a compliance review proposal was approved – again, an inexplicably long time. Finally, the delay between the first full draft of the ICIM compliance report in March, 2012 until the final draft was disclosed in mid-October (six months) passed with little explanation about why this process was delayed again. The total time from complaint submission to the final Board action on the report is approaching the two year mark.
The IDB, along with five other co-financing institutions (IFC, Andean Development Corporation, the German Bank DEG, Banvivienda and BG , have disbursed about one third of the US$180 million total loan package. The next joint disbursement is scheduled for this November. The complainants have asked the IDB to condition any next disbursement on concrete and verifiable steps to address the problems found in the IDB audit.
For more information and access to the report, please contact:
Ms. Damaris Sánchez, Coordinator, AAPRODIUPA, amisconde@cwpanama.net; www.fundiccep.org
Mr. Vince McElhinny, Senior Policy Advisor, Bank Information Center,vmcelhinny@bicusa.org
Ms. Sarah Singh, Director of Strategic Support, Accountability Counsel, +1.415.296.6766,sarah@accountabilitycounsel.org