The World Bank Group has delayed disclosure for more than a year of an internal investigation examining an investment in a doomed Guatemalan dam project that has been linked to the murder of a local activist.
The investment by the bank’s private sector lending arm, the International Finance Corporation, supported Hidro Santa Cruz, a project by a Spanish company to build a hydroelectric dam near a mostly indigenous community in northwestern Guatemala.
Two security contractors employed by Hidro Santa Cruz are now on trial for the murder of a local activist, Andrés Pedro Miguel, who led community opposition to the dam’s construction in the face of alleged repression, displacement and corruption.
Residents of the heavily Mayan Q’anjob’al community of Santa Cruz Barillas charged in a complaint to the IFC’s internal ombudsman that company security guards and other personnel “have acted with impunity, to a criminal extent, causing terror among community members.”
The IFC’s Board of Directors must decide how the lender will respond to the ombudsman’s investigation into the case, which was completed in November 2018 but has not been made public.
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Kate Geary, the co-director of the watchdog group Bank Information Center Europe, said the case poses a crucial test of the bank’s commitment to protecting communities harmed by its development projects.
“I can see for IFC, they just want to walk away,” Geary said. “We think they have a duty of care to the people who suffered as a result of their investment.”
The World Bank’s response is expected to be closely scrutinized following the U.S. Supreme Court’s February 2019 Jam v IFC decision, which stripped the Bank of immunity from lawsuits related to its lending activities. The Hidro Santa Cruz case represents perhaps the most serious allegations by an affected community to be considered in the aftermath of the historic court ruling.
Mark Wu, a law professor at Harvard University, said the IFC’s potential liability applied to activities that are “commercial in nature,” but that lower courts had yet to decide which if any of the lender’s programs met this standard.
“The exact risks faced by the IFC, following Jam, are still unclear,” Wu said.
The implications are significant: between 2004 and 2013, an estimated 3.4 million people were physically or economically displaced by World Bank-financed development projects, as revealed by the International Consortium of Investigative Journalists‘ 2015 Evicted and Abandoned investigation. ICIJ discovered that the bank often failed to follow its own rules for resettling these communities and ensuring that they were protected from violent evictions and other human rights abuses.
In a statement to ICIJ, the IFC noted that construction of the Santa Cruz dam was ultimately abandoned following community protests, and said it had strengthened its oversight of its projects’ impact on local communities.
“Since the time of this investment, IFC has devoted more resources to environmental and social risk management,” said IFC spokeswoman Fredrica Mayer.
In 2008, the IFC provided $20 million in loans and $10 million in equity to an infrastructure funder called the Corporación Interamericana para el Financiamiento de Infraestructura (CIFI). CIFI, in turn, provided an $8.2 million loan to Hidro Santa Cruz for the construction of a hydroelectric dam on the Cambalam River near Santa Cruz Barillas.
When community members protested, Hidro Santa Cruz responded with a campaign of repression that included the killing of Miguel and the severe wounding of two others by two of the company’s security contractors in May 2012, residents of Santa Cruz Barillas alleged in their complaint to the IFC’s ombudsman. In addition, at least 19 community members were unjustly detained and imprisoned by the government, the complaint alleges.
The complaint charges that the IFC violated four of its own performance standards in its handling of the project, including rules for evaluation of social risks, oversight of security personnel, proper land acquisition practices, and informed consent from indigenous communities.
Cecilia Mérida, whose common-law husband Rubén Herrera was among those imprisoned, said years of repression against community members has taken a serious economic and personal toll that persists long after the project was abandoned in 2016.
“On a personal and family level, it has been a very painful experience,” Mérida said. “Prison is one of the worst places in the world.”
The May 2012 attacks have recently come under renewed scrutiny, and two of Hidro Santa Cruz’s security contractors, Oscar Ortiz Solares and Ricardo Garcia Lopez, are currently on trial for the shootings in the regional capital of Quetzaltenango.
The case also has been marked by an unusual delay in the IFC’s response to its ombudsman’s investigation, which normally is released within a few months of its completion, according to Geary of the Bank Information Center.
The Hidro Santa Cruz investigation was finalized in November 2018, sent to the World Bank Group President’s office along with a written response from IFC management in January 2019, and to the IFC’s Board of Directors for final clearance in October 2019, according to a spokesperson for the IFC ombudsman. The report’s release is pending upon Board discussion.
The delay is partly because of a recent policy change which added a review by the IFC Board prior to the public disclosure of investigation reports and management’s responses, the spokesperson said.
The Board now faces a difficult decision: if the ombudsman has found that the IFC violated its own rules, it must decide whether to accept those findings, acknowledge any errors, and take measures to assist residents of Santa Cruz Barillas.
The IFC’s recent loss of legal immunity at the hands of the Supreme Court, as well as an ongoing IFC review of its accountability mechanisms, mean the decision could be a significant marker of how the lender plans to address cases of serious harm alleged by communities in the future.
“I hope that our experience is cause for reflection for the directors of the World Bank,” said Mérida, the resident of Santa Cruz Barillas. “We haven’t lost our determination to keep fighting.”