The Inter–American Development Bank and Other International Financing Institutions
A key to addressing the impacts of large–scale infrastructure projects that affect river systems is to understand the role that international financial institutions play in financing such projects.
The Inter–American Development Bank (IDB) is the largest regional multilateral development bank in Latin America. Over the past decade, the IDB has approved $69 billion in loans, and has been a major driver of regional infrastructure integration programs, such as Plan Puebla Panama in Mesoamerica and the Initiative for the Integration of Infrastructure in South America (IIRSA).
The IDB has also been a consistent funder of large dams. Among the Latin American projects it has financed are Yacyretá, Sobradinho, Salto Grande, Itaipú, El Cajón, Cana Brava, and Chixoy dams. The bank also financed studies for the Paraguay–Paraná hidrovia project.
The IDB’s environmental and social record is spotty, at best. Despite having an independent inspection mechanism to look into complaints regarding the impacts of their projects, the IDB staff has done everything possible to scuttle investigations that could prove embarrassing to the bank. A recent example has been the complaint by people affected by Cana Brava dam in Brazil. Although the complaint was presented to the IDB panel in 2002, an investigation was only approved more than two years later, and the results have yet to be made public. Meanwhile, hundreds of families are camped, waiting to receive compensation and resettlement lands.
The IDB began revising its policies on environment, energy, indigenous peoples, and its independent investigation mechanism in 2004, and is expected to release new policies early in 2006. Draft policies show that, despite well–heralded consultations with civil society groups, the bank is unwilling to take sufficient measures to even bring its policies up the level of those of the World Bank, for example.
The Andean Development Corporation (CAF), is another important multilateral financial institution. Focusing particularly on the Andean region, CAF provides twice the level of financing regionally that the IDB does. About half of the $3.5 billion it loaned in 2004 went to large infrastructure projects. The CAF has very weak environmental and social policies, and has no independent body to address complaints by populations adversely affected by its loans.
An increasingly powerful financial agency is Brazil’s National Economic and Social Development Bank (BNDES). Of its more than $3.5 billion in loans in 2004, about half went to electrical energy projects, including about $1 billion for large dams, making it one of the world’s largest financers of hydropower. Like the CAF, BNDES lacks substantive environmental policies. It has extended financing for regional infrastructure projects, and has financed roads, dams, and transmission lines in Peru, Ecuador, Venezuela, and other South American nations through its export–import bank.
- BNDES Could Finance Company With History of Social and Environmental Conflicts
- Read article by IRN’s Glenn Switkes regarding possible financing by Brazil’s National Development Bank for Tractebel’s Estreito dam project, despite past instances of social and environmental irresponsibility by the Belgian company, April 19, 2006.
- Environmental and Social Impacts of IDB Projects Since the Eighth Capital Replenishment
- A case study by IRN, FOE, Environmental Defense, BIC on the IDB’s environmental record, including a chapter on Cana Brava and Yacyretá, 2005.