· highs and lows on safeguards. how do bndes, china exim bank, idb and caf work? authors...

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Lima, October 2014

Highs and Lows on Safeguards. How do BNDES, China ExIm Bank, IDB and CAF work?

AUTHORSFrancisco Rivasplata CabreraJorge Zanafria VásconezMartha Torres Marcos-IbáñezSilvia Molina CarpioVanessa Torres Rico

TRANSLATORÁlvaro D. Alvizuri Boza

COVER PHOTOSébastien Snoeck

EDITING COORDINATORAnnie Morillo Cano

EDITORDerecho, Ambiente y Recursos Naturales (DAR)Calle Coronel Zegarra 260, Jesús María (Lima 11)Phone number: (511) 2662063E-mail address: [email protected] webpage: www.dar.org.pe

DESIGN AND LAYOUTRealidades S.A.Los Jazmines Street 423, Lince – Lima E-mail address: [email protected] webpage: www.realidades.pe

SUGGESTED CITATIONThe Highs and Lows on Safeguards. How do BNDES, China ExIm Bank, IDB and CAF work? Lima: DAR, 2014.First Edition: October 2014, consists of 1500 copies.Legal Deposit at the National Library of Peru No. 2015-03868ISBN 978-612-4210-23-5

The partial or total reproduction of this book is permitted, introduced into a retrieval system or transmitted in any form or means, such as electronic, mechanical, photocopying or otherwise; with the necessary indication of the source when it is used in publications or broadcast by any means.

The publication was made possible due to the collaboration of the Regional Coalition for Transparency and Participation formed by Asociación Ambiente y Sociedad (AAS) of Colombia, Centro de Derechos Económicos y Sociales (CDES) of Ecuador, Centro de Estudios para el Desarrollo Laboral y Agrario (CEDLA) of Bolivia, Derecho, Ambiente y Recursos Naturales (DAR) of Peru and the Instituto Brasileiro de Análises Sociais e Econômicas (IBASE) of Brazil. Additionally, we are grateful fo the support of the Bank Information Center (BIC)

This publication is made possible by funding from Charles Stewart Mott Foundation, Avina Foundation, Global Witness, Open Society Foundations and Rainforest Foundation Norway. The publication presents the views of the authors and not necessarily the view of Charles Stewart Mott Foundation, Avina Foundation, Global Witness, Open Society Foundations and Rainforest Foundation Norway.

Printed and made in Peru.

CONTENT

FOREWORD

EXECUTIVE SUMMARY

INTRODUCTION

CHAPTER I DEFINING THE SAFEGUARDS IMPLEMENTATION FRAMEWORK 1. What are the safeguards?2. Functioning system and institutionality of safeguards 3. Project cycle and implementation of the safeguards system

CHAPTER II

ANALYSIS OF ENVIRONMENTAL AND SOCIAL PERFORMANCE OF BANKS IN TERMS OF ITS PROJECT CYCLE

A. CASE OF INTER-AMERICAN DEVELOPMENT BANK (IDB) AND SAN FRANCISCO-MOCOA ALTERNATE ROAD CONSTRUCTION PROJECT (COLOMBIA)

1. Safeguards tools established by the IDB2. Project profile3. Project cycle

B. CASE OF THE BRAZILIAN DEVELOPMENT BANK (BNDES) AND VILLA TUNARI - SAN IGNACIO DE MOXOS HIGHWAY (BOLIVIA)

1. Safeguards tools established by the BNDES 2. Project profile3. Project cycle

C. THE CASE OF EXPORT-IMPORT BANK OF CHINA (CHINA EXIM BANK) AND COCA CODO SINCLAIR HYDROELECTRIC (ECUADOR)

1. Safeguards tools established by the China ExIm Bank” 2. Project profile3. Project cycle

12

14

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CAPÍTULO I 35 3539 40

45

45

464753

71

737882

94

9498102

D. THE CASE OF THE ANDEAN DEVELOPMENT CORPORATION (CAF) AND THE INTER-OCEANIC SOUTH HIGHWAY ROAD (PERU)

1. Safeguards tools established by the CAF2. Project profile3. Project cycle

CHAPTER III

COMPARATIVE FINAL MESSAGES

1. About the organizational framework of the project cycle2. About the delays in the development of the project cycle3. About the policy of transparency and access to information 4. About the quality of the assessment process and environmental and social management5. About the levels of dependence on the own requirements of the financial institutions regarding the

use of national systems for risk management6. About environmental mitigation programs7. About the quality of indigenous consultation processes and public consultation8. About complaints mechanisms

RECOMMENDATIONS

ANNEXES

1. Inter-American Development Bank (IDB)

ANNEX 1: IDB project cycleANNEX 2: Project timelineANNEX 3. List of interviews

2. Brazilian Development Bank (BNDES)

ANNEX 1. Organizational chart of the BNDESANNEX 2: Project timeline and milestonesANNEX 3: Studies and related documents project milestones

113

113115117

131

131132136 137

138141141143

145

149

149150153

154

154155158

3. Export-Import Bank Of China (China ExIm Bank)

ANNEX 1: Functions of the main chinese agencies of control over investments abroad

ANNEX 2: Organizational chart of the China ExIm BankANNEX 3: Chronology of Coca Codo Sinclair hydroelectric projectANNEX 4: Timeline of Coca Codo Sinclair hydroelectric projectANNEX 5: Published in relation to major milestones of project cycle

recruitment process China ExIm Bank and documentsANNEX 6: Estimated costs for implementation of hydroelectric project Coca

Codo Sinclair

4. Andean Development Corporation (CAF)

ANNEX 1: Cycle Project for CAF fundingANNEX 2: Timeline of project ANNEX 3: List of interviews

BIBLIOGRAPHY

1. Inter-American Development Bank (IDB)2. Brazilian Development Bank (BNDES)3. Export-Import Bank of China (China ExIm Bank)4. Andean Development Corporation (CAF)

160

160161162163

164 165

166

166167169

170172175176

INDEX OF TABLES

TABLE 1: MAJOR INVESTMENTS BY CHINESE OIL COMPANIES IN LATIN AMERICA, 1994-2010.

TABLE 2: MAJOR INVESTMENTS BY CHINESE MINING COMPANIES IN LATIN AMERICA, 1990-2012.

TABLE 3: SAFEGUARDS - NATIONAL SYSTEMS - INTERNATIONAL SYSTEM.

TABLE 4: SYSTEM AND INFRASTRUCTURE FUNCTIONING OF SAFEGUARDS.

TABLE 5: CHART WITH THE DESCRIPTION OF EACH STAGE OF THE PROJECT CYCLE APPLIED TO SPECIFIC CASE.

TABLE 6: INFORMAL PROCESS OF PROCESSING OPERATIONS OF BNDES LOAN PREPARATION STAG.

TABLE 7: INFORMAL PROCESS OF PROCESSING OPERATIONS BNDES STAGE OF EVALUATION, APPROVAL AND CONTRACTING THE LOAN.

TABLE 8: INFORMAL PROCESS OF PROCESSING OPERATIONS OF THE BNDES - LOAN IMPLEMENTATION STAGE.

TABLE 9: STAGES OF THE CHINA EXIM BANK’S PROJECT CYCLE AND COCA CODO SINCLAIR HYDROELECTRIC PROJECT ENVIRONMENTAL MANAGEMENT PLAN PROGRAMS.

TABLE 10: CAF RELEVANT DOCUMENTS ACCORDING TO THE PROJECT CYCLE.

TABLE 11: REVENUE FROM TOLLS ON STRETCHES 2, 3 AND 4.

TABLE 12: CONTRIBUTIONS FROM PERUVIAN STATE BY PAO AND PAMO.

TABLE 13: MILESTONES OF THE PROJECT CYCLE: SUMMARY OF THE FOUR OR FIVE DECISIVE MOMENTS IN THE IMPLEMENTATION OF SAFEGUARDS IN THE PROJECT CYCLE.

INDEX OF GRAPHIC

GRAPHIC 1: BNDES, WORLD BANK GROUP, IDB, CAF AND CHINA FINANCING IN LATIN AMERICA (2005-2013).

GRAPHIC 2: DISBURSEMENTS FOR INFRASTRUCTURE IN LATIN AMERICA.

28

28

38

39

54

84

87

88

102114

130

130

135

29

71

INDEX OF FIGURES

FIGURE 1: TIMELINE OF THE EVOLUTION OF THE ACCESS POLICY AT THE WORLD BANK.

FIGURE 2: PROJECT CYCLE AND THE SYSTEM OF SAFEGUARDS.

FIGURE 3: DURATION OF THE PROJECT CYCLE (AVERAGE TIME VS. CURRENT PROJECTS).

FIGURE 4: PROJECT MAP.

FIGURE 5: PROGRESS OF SOUTH ROAD TRANSVERSALLY SEEN. CONSTRUCTION OF THE SAN FRANCISCO MOCOA ALTERNATE ROAD.

FIGURE 6: STAGES OF PROCESSING OPERATIONS IN THE BNDES.

FIGURE 7: SAN IGNACIO VILLA TUNARI MOXOS HIGHWAY THROUGH THE TIPNIS.

FIGURE 8: LOCATION OF THE COCA CODO SINCLAIR HYDROELECTRIC PROJECT.

FIGURE 9: STRETCHES OF THE INTEROCEANIC HIGHWAY – SOUTHERN INTEROCEANIC HIGHWAY.

FIGURE 10: DURATION OF PROJECT CYCLE (CURRENT DEADLINES).

37

40

42

49

51

77

79

100

116

134

AEX Foreign Trade Area (Área de Comercio Exterior)

AI Industrial Area (Área Industrial)

AIE Area of Infrastructure (Área de Infraestructura)

BCE Central Bank of Ecuador (Banco Central del Ecuador)

BESMP Basic Environmental and Social Management Plan

BIC Bank Information Center

BNDES Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social)

CAF Andean Development Corporation (Corporación Andina de Fomento)”

CAMEX Foreign Trade Council (Consejo de Comercio Exterior)

CATI Independent Technical Advisory Committee (Comité de Asesoría Técnica Independiente)

CCS Coca Codo Sinclair Hydroelectric

CDB China Development Bank

CFN National Financial Corporation (Corporación Financiera Nacional)

CICAM Institutional Committee of Protective Forest Reserve of the Upper Basin of the Rio Mocoa (Comité Institucional de la Reserva Forestal Protectora de la Cuenca Alta del Río Mocoa)

CNC Committee of Corporate Business (Comité de Negocios Corporativos)

COFIG Finance and Export Guarantee Committee (Comité de Financiamiento y Garantía de exportación)

CONAM National Environmental Council (Consejo Nacional del Ambiente)

Corpoamazonía Regional Autonomous Corporation of Amazonas (Corporación Autónoma Regional del Amazonas)

CPI Loan and Investment Committee (Comité de préstamos e inversiones)

CSO Civil Society Organizations

CVIS Southern Interoceanic Road Highway (Corredor Vial Interoceánica Sur)

DEFAM Amazon Fund Management Department (BNDES)

DEMAM Environment Department (BNDES)

DEOPE Environment Operations Department (BNDES)

DEPRI Department of Priorities (Departamento de Prioridades)

DGASA General Direction of Socio-Environmental Affairs

DMI District of Integrated Management

EAR Regional Environmental Study (Estudio Ambiental Regional)

EIA Environmental Impact Study

EIAD Definitive Environmental Impact Assessment

EIS Social Impact Study (Estudio de Impacto Social)

ESG Environmental Safeguards Group

ESMP I Environment and Social Management Plan – Fist Stage

ESMP II Environment and Social Management Plan – Second Stage

FGE Export Guarantee Fund (Fondo de Garantía de Exportación)

GHG Greenhouse Gas

ICIM Independent Consultation and Investigation Mechanism

IDB Inter-American Development Bank (Banco Interamericano de Desarrollo)

IFC International Finance Corporation

IGAS Environmental Management Report (Informe de Gestión Ambiental)

LisT Of aCrONyms

IIRSA Initiative for the Integration of the Regional Infrastructure of South America (Iniciativa para la Integración de la Infraestructura Regional Suramericana)

ILO International Labour Organization

ILSA Institute for Alternative Legal Services (Instituto de Servicios Legales Alternativos)

INCODER Colombian Institute of Rural Development (Instituto Colombiano de Desarrollo Rural)

INRENA National Institute of Natural Resources (Instituto Nacional de Recursos Naturales)

INVÍAS National Roads Institute (Instituto Nacional de Vías)

JUAMA Gerência Executiva Jurídica de Meio Ambiente (BNDES)

LAC Latin America and the Caribbean (América Latina y el Caribe)

LOTAIP Organic Law of Transparency and Access to Public Information (Ley Orgánica de Transparencia y Acceso a la Información Pública)

MEF Ministry of Economy and Finance

MF Ministry of Finance

MICSE Ministry Coordinator of Strategic Sectors (Ministerio Coordinador de Sectores Estratégicos)

MINAM Ministry of Environment (Ministerio del Ambiente)

MRECI Ministry of Foreign Affairs, Trade and Integration (Ministerio de Relaciones Exteriores, Comercio e Integración)

MTC Ministry of Transport and Communications

OP Operational Policy

PAMO Annual Payment for Maintenance and Operation (Pago Anual por Mantenimiento y Operación)

PAO Annual Payment for Works (Pago Anual por Obras)

PGEE Attorney General’s Office of the State of Ecuador (Procuraduría General del Estado de Ecuador).

PMASIS Program Environmental and Social Management (Programa de Manejo Ambiental y Social)

POD Proposal for the Development of Operations (Propuesta de Desarrollo de Operaciones)

POMCAS Planning and Watershed Management Plans (Planes de Ordenamiento y Manejo de Cuencas)

PPP Public Private Partnership (Asociación Público-Privada)

PROEX Financing Program for Export (Programa de Financiamiento de las Exportaciones)

PROINVERSIÓN Agency for Promotion of Private Investment (Agencia de Promoción de la Inversión Privada)

REDD Reduction Emissions from Deforestation and Degradation

RFPP Protected Forest Reserve

RFPCARM Protected Forest Reserve in the Upper Basin of the Rio Mocoa (Reserva Forestal Protectora de la Cuenca Alta del Río Mocoa)

SEA Strategic Environmental Assessment

SENAGUA The National Water Secretariat

SENPLADES National Secretariat of Planning and Development (Secretaría Nacional de Planificación y Desarrollo)

SER Social environmental Reporting (Informe Ambiental y Social)

SNIP National Public Investment System (Sistema Nacional de Inversión Pública)

TIPNIS Indigenous Territory and Isiboro-Secure National Park (Territorio Indígena y Parque Nacional Isiboro-Secure)

UNASUR Union of South American Nations (Unión de Naciones Suramericanas)

WB World Bank (Banco Mundial)

WWF World Wildlife Fund

ZRFACRM Zone of Protective Forest Reserve of the Upper Basin of the Rio Mocoa (Zona de Reserva Forestal Protectora de la Cuenca Alta del Río Mocoa)

Highs and Lows on Safeguards. How do BNDES, China ExIm Bank, IDB and CAF work?12

fOrEWOrD

Highs and Lows on Safeguards. How do BNDES, China Exim Bank, CAF and IDB act?” This is the result and effort of several organizations in the Amazon region that, from their experience and track specific projects, show the application of environmental

and social standards of the major investment banks in Latin America in relation to the state, business, civil society and social movements.

In effect, rather than a theoretical analysis of the importance of the application of safeguards and securing and formal implementation of these banks, this book allows us to verify in practice whether such standards are accomplished or not. This is where the importance of the document presented lies, defined as well by the current context of investments in Latin America.

In this sense, although the World Bank is not included in this analysis, the process of revising its environmental and social safeguards contributes to the performance of the analyzed banks and the structure and functioning of new financial institutions like the BRICS Development Bank . In recent years, there has been a worrying trend towards the flexibility of social environmental standards and its weak enforcement. Moreover, not only from international financial institutions, but also from the states themselves that suit their own internal rules to promote investment. To complete the circle, there are no binding international standards for businesses in their development in the market.

In addition, a point that is important to note in this study, and that will be verified throughout the chapters, is the approach focused on the analysis of the application of safeguards from the project cycle with the differences and conditionalities found by the authors throughout the development of the analysis. In fact, an issue we need to emphasize is the need to know who make decisions regarding the continuation or not of a project and when they make it. Therefore, making those involved in the background of the impact (positive or negative) visible to strengthen the position in relation to the personification of responsibilities, which slides as an option throughout the document.

The organizations that participated in this analysis are part of the Regional Coalition for Transparency and Participation formed by Asociación Ambiente y Sociedad (AAS) of Colombia,

Highs and Lows on Safeguards. How do BNDES, China ExIm Bank, IDB and CAF work? 13

Centro de Estudios para el Desarrollo Laboral y Agrario (CEDLA) of Bolivia, Centro de Derechos Económicos y Sociales (CDES) of Ecuador, Derecho, Ambiente y Recursos Naturales (DAR) of Peru and Instituto Brasileño de Análisis Sociales y Económicos (IBASE) in Brazil.

The Coalition aims to generate good governance and social and environmental standards from the regional architecture and nationally, in order to reduce environmental and social impacts and generate a better model of management of natural resources (transparency and citizen participation) in the Amazon and in the South American region. We believe that this publication contributes to the fulfillment of such goals.

We would like to thank the support of Vince McElhinny and Christian Donaldson, members of the Bank Information Center (BIC), an organization which we have been working with steadily since the moment we became part of the BICECA initiative, which allows to exchange information and initiate processes which impact on the regional multilateral banking.

Finally, we would also like to thank several friends, institutions and experts who joined in the preparation of this document and Charles Stewart Mott Foundation, Avina Foundation, Global Witness, Open Society Foundation and Rainforest Foundation Norway.

We hope this study contributes to the strengthening of the environmental and social standards in national, regional and multilateral development banks to protect the environment and the most vulnerable populations.

Cesar Gamboa BalbinExecutive Director

Derecho, Ambiente y Recursos Naturales (DAR)


EXECUTiVE sUmmary

Environmental and social safeguards are changing for public and private investment in Latin America. At the multilateral level, we are seeing the first major review and update of the safeguard policies of the World Bank (WB) in over a decade, as similar changes

are contemplated by Inter-American Bank of Development (IDB), and the evolution of norms continues along with the increasing presence of the Development Bank of Latin America (CAF). At the same time, the Development Bank of Brazil (BNDES) and the Bank of Exports and Imports of China (Exim Bank) - two anchors of the recently formed BRICS Bank, are both introducing new environmental and social policy or guidance for both domestic and international investments. Finally, sweeping reforms of environmental and social standards are occurring at the national and subnational level across Latin America.

To take stock of the effect and direction that these multiple processes of safeguard reform may be having, a coalition of civil society organizations have conducted a comparative analysis of the application of environmental and social standards applied by IDB, CAF, BNDES and China Exim Bank in four emblematic infrastructure projects in the Andean - Amazon region. The study focuses on similarities and differences in how safeguards are applied in the context of the project cycle of several financing institutions. In doing so, the study provides insight into how key decision points in the safeguard process may be the basis for understanding the direction of ongoing harmonization among the social and environmental practices of these institutions.

Objectives of the study

The present study compares the safeguards of environmental and social risk management applied by four international financial institutions - Inter-American Development Bank (IDB), The Brazilian Development Bank (BNDES), Export-Import Bank of China (Exim Bank) and the Andean Development Corporation (CAF) - in four flagship infrastructure projects in the Andean-Amazon region. The focus of this analysis has been the project cycle of each institution, in order to do so the case studies were used as tools to understand - according to specific project - how each institution applies its socio-environmental safeguards regardless of whether or not they have an explicit policy.


This analysis is divided into three chapters. The first chapter presents the formal definition of safeguards and assesses the application of these throughout the project cycle. The second chapter discusses the project cycle available to each international financial institution and how the tools of safeguards were applied in the specific project. The third chapter comparatively evaluates - based on eight criteria analysis – how each bank has been applying its socio-environmental safeguards, identifying similarities, differences and gaps in implementation thereof. Finally, recommendations will be outlined with the aim of promoting debate about greater harmonization and consistency in the applicability of safeguards according to the highest international standards, regardless of the origin of the project-financing source.

Analyzed Infrastructure projects

Four infrastructure projects were chosen as case study: a) San Francisco – Mocoa Alternate Road Construction Project (Colombia), b) Villa Tunari - San Ignacio de Moxos Road (Bolivia), c) Coca Codo Sinclair Hydroelectric (Ecuador) and d) The Southern Interoceanic Highway (Peru), as each of these means a high-risk project, interest and importance to national development vision. Each project belongs to greater regional integration plans or development, which take high direct and indirect social and environmental risks. A different financial institution funds each project, therefore depending on the financial institution’s criteria, the application framework of safeguards and requirements for the borrower shall apply differently. The common denominator that allows us a comparative link between each institution is the project cycle. This, in turn, helps us to glimpse the gaps and overlaps between the instruments used by each institution in the management of social-environmental risk, and thus explores the implications of implementing adequate safeguards.

The analysis of the specific projects - through the project cycle - allows us to identify where the trends in harmonization of environmental and social management practices between these financial institutions and its partners in the region should aim.


San Francisco – Mocoa Alternate Road Construction Project (Colombia) (IDB)

The IDB decided to finance the construction of San Francisco – Mocoa alternate road in Colombia, flagship project of this Bank due to the social and environmental provisions discussed in several studies, the IDB provided a total of US$ 53 million for this work. The construction of the San Francisco- Mocoa anternate road was rated as highly complex (Category A according to the classification of the IDB) for its operation would generate significant negative environmental and social impacts, as the route of the road goes through the Protected Forest Reserve Of The Upper Mocoa River Basin (RFPCARM). The latter houses a large water wealth of fauna, flora and ecosystem, and in turn it is indigenous territory of the Kamentza and Inga, and other indigenous people who recognize the importance of this area for their cultural existence.

Villa Tunari - San Ignacio de Moxos Road (Bolivia) (BNDES)

The case of the highway that was never built, between Villa Tunari and San Ignacio de Moxos – which would cross the Isiboro Sécure National Park and Indigenous Territory (TIPNIS) - is an example of how the BNDES acts in projects outside Brazil.

The process that the governments of Bolivia and Brazil, BNDES (with a financial commitment of 80%) and OAS, S.A. constructor, continued to finance and build the project demonstrates a particular and different form of acting of the BNDES in connection with its operational policies (including environmental and social safeguards policies). The decision to build this project had great rejection of indigenous organizations that had the support of large sectors of the Bolivian population (environmentalists, academics, human rights defenders and public opinion in general). This decision, also, brought to the fore the need for transparency and broad participation to discuss the process of project planning and decision making prior to the adoption of such enterprise.

Coca-Codo Sinclair Hydroelectric Plant (Ecuador)(China ExIm Bank)

The Analysis of the Coca - Codo Sinclair hydroelectric project (located on the Ecuadorian Amazon and currently running with an advance of 55%) lets identify five stages in the project cycle of the China ExIm Bank according to the Environmental Management Plan of the Project: a ) origination; b) preparation or due diligence; c) negotiation, approval and procurement; d) implementation; and e) operation and closure.

On the other hand, although the existence of an important regulatory framework for Chinese investment abroad, expressed as a set of social, labor and environmental policies in Chinese law as well as in institutions responsible for monitoring, there is little clarity about the specific mechanisms available to ensure compliance with these regulations. Thus, the analyzed case suggests that independent mechanisms for assessing social and environmental risk were not implemented by the bank prior to the procurement of funding for the project, but the credit approval was supported by the fulfillment of the requirements provided under Ecuadorian law.


The Southern Interoceanic Highway - CVIS (Stretches 2, 3 and 4) (Peru) (CAF)

One of the flagship projects that promotes regional integration, co-financed by the CAF and the Peruvian government, was the Southern Interoceanic Highway (hereinafter CVIS). The CVIS is part of Peru-Brazil-Bolivia axis road and it was concessioned through five (05) stretches covering 5,404 km in its entirety. This analysis refers to the 1,009 km that make up Stretches 2, 3 and 4, which directly involve the Amazon; and that were facilitated by several co-financing of the CAF. The process of awarding the award of this project was accelerated, being declared a public1 need in 2004 and granted as a concession in 2005. By 2006, the CAF funding was obtained (the total CAF funding of the three stretches amounted to $ 700 million, disbursements were made in 2006, 2008 and 2010). The CVIS has been considered an iconic and innovative project in terms of the challenges of managing social and environmental risk for both Peru and the CAF.

Hypothesis

The purely comparative analysis of the safeguards of the four institutions begins from a number of hypotheses.

First, the project cycle of each financial institution reflects the specific application framework of safeguards in each project - thus being this our focus.

Second, the project cycle is similar for each bank, covering five sequential stages, project identification, preparation, negotiation, implementation and operation - each stage with its particularities.

Third, within each stage of the project cycle there are certain decision-making times that are the most important to define the key characteristics of an effective application of safeguards. These decision milestones indicate the comparison link between project cycles for each institution.

Methodology

The base of research evidence is the available documentation on the project cycle, supplemented by information based on interviews, analysis of secondary materials and experiences of research organizations. For each project, a historical time frame of the project cycle was built to display the sequence of decisions, identify milestones and the decision makers, so documents deadlines can be traced and analyzed, and finally, to examine the impact of political events . The schedules (time frames) are attached to the end of each case.

Variability in access to information of each financial institution was the main limitation of the study and one of the clearest gaps that suggests differences in the practice of safeguards.

1 On April 29, by act no. 28214, the implementation of the southern interoceanic highway Peru – Brazil - IIRSA is declared as a public necessity of national interest. Among other rules that evidence the willingness to expedite the implementation of the project, it can be seen the DS No. 022-2005 exempting sections included in the CVIS application of rules of the National Public Investment System (SNIP), referring to the pre-investment stage. Likewise, regional Emergency Decrees No. 008-2005 and No. 011-2005 seeking to facilitate the financing of public works concessions of infrastructure and public services and facilitate the start of construction.


Key questions the report tries to answer

• What are the turning points in the implementation of safeguards and if there is consistency between the most critical moments for each institution?

• What can be learned from each of the patterns of alignment of each institution, as to the application of safeguards, commonalities and institutional priorities for risk management?

• What are the most significant gaps between the practices of each institution and ordinary moments?

• What might be the first steps to close these gaps?

Results from the study

The results that we want to highlight are focused on the financial institution within the context of each project - and not the project itself - obtaining information on risk management actions undertaken by each institution. This approach indicates the moments and factors that determine the quality of implementation of safeguards.

The comparative framework between the financial institutions has been its project cycle - a long process that can last up to 40 years. Each of the four Banks has similar project cycles, but the differences may lie on the time limits used in each cycle, the sequence of each cycle, the decision-making process, and the level of informed participation of the parties involved. These are some of the factors analyzed to compare the quality of applicable social and environmental safeguards to each stage. It should be noted that these criteria are not taxative. When raising them, we aim to elucidate trends in the decision-making throughout the project cycle in each of these institutions and glimpse the downward or upward trend in the application of safeguards.

The identified criteria and results were as follows:

1. Theorganizationalframeworkoftheprojectcyclemaintainsacommonpatternamongthefourbanks,butvariesintermsofthelevelofflexibilityandtheuseof national risk management systems. We note that the project cycle is quite similar for each bank, covering five sequential stages, identification, preparation, negotiation, and implementation and operation, which are grouped according to the particularities of each Bank.

The project cycle varies according to the financial institution in terms of its mandatory safeguards policy instrument. Variability was observed also in the duration of certain periods and levels of dependence on national systems for managing social and environmental risk. In some institutions the project cycle will be explicitly defined in any of its Operational Policies (for the IDB) However, in other cases it is observed that the identification of the project cycle is given through the analysis of the specific case being guided by the standards of the CAF including its Environmental Strategy , Guidelines on environmental and social aspects , social and environmental safeguards and Manuals and Guides of Evaluation and Monitoring, Guidelines for China Exim Bank or defined by a political and commercial


negotiation strategy of governments in the case of BNDES. Preparation deadlines range from 05 months (for Exim Bank) to 23 months (for the IDB).

The four financial institutions Safeguards frameworks maintain a close relationship with

the internal legal system of the countries where the projects are implemented. Each bank trusts, supports and uses national environmental and social risk management systems to varying degrees as a principle of its policies or strategies, but also as a central element in the design and implementation of the project.

The balance can be tilted on one side to expressly apply the Bank’s Operational Policies

(such as IDB), or, on the contrary, decide to apply the national legislation on social and environmental issues (such as BNDES and ExIm Bank). However, it may be the case of institutions like the CAF that considers the social and environmental safeguards of the borrower along with the standards it has as a financial institution and both of which must also be complied by the borrower.

2. Delays are observed in the development of the project that result from permeability of the safeguard framework and political interference in the initial stage of the cycle. The duration of the project cycle can be influenced and even determined by external factors to the administrative or technical processes of the financial institution - as the political aspect - that determine the acceleration or delay in project implementation. Several gaps are observed in the normal cycle sequence, where some important decisions were made before the end so as to have the results of the previous stages. In the case of the CVIS, the indirect impact assessment came after the start of the project on Stretches 2, 3 and 4; in the case of Villa Tunari - San Jose Moxos, the process followed to approve the financing differs from the project cycle (Processing Operations for BNDES) which is defined in operational policies. Tendering and contracting of the construction company were performed before initiating the risk analysis. Besides, the construction began before completing this analysis and before economic, social and environmental viability studies of the project were made. In the Coca-Codo Sinclair project, negotiations began before a brief preparation phase. While in Pasto Mocoa, the quick progress of the work construction is observed despite delays in implementing the mitigation program.

3. Differencesinthequalityoftheassessmentprocessandenvironmentalandsocialmanagement are evident in procedural issues and mitigation programs. although eachfinancialinstitutionhasitsowninstrumentsformeasuringandmanagingenvironmentalandsocialrisks,identifiedkeydifferencesareobservedduringthedecision-making. The most significant gaps in practice are related to the effective use of appropriate evaluation instruments, the level of incidence of the Environmental Impact Assessment (EIA) and Strategic Environmental Assessment (SEA) in the planning and design of the project. As well as in the level of independence of the Bank due diligence, the level of access to necessary information and timely consultation of the affected population.


The main product of the assessment process is the risk management program, in which a large variability in their size, budget, governance and local ownership are noted. The large variation in these criteria helps explain, in some cases, gaps, conflicts and other problems encountered in the implementation of the project. Late and not very transparent actions may negatively affect the decision-making in the environment and the communities involved in the project; in some cases, they generate conflicts affecting governments and even financial institutions.

The biggest gaps in the implementation of safeguards are manifested mainly in the deficiencies of access to information during the project cycle. Transparency and access to information allows us to obtain an in-depth knowledge of the institution, the funded projects, and their risk management capabilities and concepts.

Large differences are observed in access to project documents, for instance in the case of Pasto Mocoa about 60 documents of the project cycle are accessible - several of them translated into different languages – in comparison with only three in the case of Coca-Codo Sinclair project, as well as the preciseness of this information in relation to the time of decision-making, the quality of the documents, among others. While in the case of CAF, the information of the project cycle is not public, it should be noted the wide availability of its officials to provide relevant information to this document in all meetings that were requested. A very different situation in the case of Villa Tunari - San Ignacio de Moxos, in which the BNDES has not allowed access to any document related to the project.

Prior Consultation. In the two projects that are part of the analysis and in which you can apply the ILO Convention 169, Consultation has been conducted after the decision-making. In the case of the project financed by the BNDES, the so-called “prior consultation” made to the indigenous people and made after funding decisions, construction and commencement of work, was implemented in a context of questioning its legality, timeliness, institutionality, embodiment and respect for indigenous collective rights. In the other project, it is shown that it cannot be really considered as a consultation process for several reasons: they are informative workshops, the affected population is not involved, and they are meetings held by the companies and not by states who are required to implement the query.

Public Consultation. Established in the environmental legislation of the countries as a tool for participation and to address the concerns of society in relation to projects and their impacts on the population and territory. Although in the early days of its implementation in many cases it came to meet objectives in terms of improving the management and implementation of projects in addition to involving people in the planning and execution, it has evolved into a simple bureaucratic process which is fulfilled to meet the standards of the country and / or funding requirements. It has had a tendency to become informative and propaganda project benefits workshops or the collection of public concerns about the investment that is intended to run and other needs without responding to these concerns and reach consensus. That is, without ensuring broad and effective participation. In this sense, failing to constitute a space for analysis and discussion on investment and the project. Besides, the concerns of people rarely come to influence the decisions of authorities and funders.


Generally, financial institutions contribute to the flexibility of this instrument and reducing public participation and quality of the decision-making because the trend is the formal verification of completion of the process (the existence of records and lists of participants) instead of verifying the quality of it and that it has reached the full and effective participation. In cases such as the project funded by the BNDES, public consultation was the responsibility of the company entrusted with the construction of the project and whose main priority and goal was at all times do the job that corresponds to its specialty (infrastructure construction) and not to respond to the concerns of different actors involved in the process, even less to involve indigenous communities of TIPNIS that for years expressed their concerns and opposition to the project.

4. Mechanisms available in each bank for processing complaints are particularly different. However, it is important to note that, regarding one exception, thegeneral rule is that banks explicitly do not provide with a policy in this regard and theonlybank thatdoeshaveadefiniteand clearparametersmechanism,idb,lacksconfidence.In the particular case of the IDB certain weaknesses can be seen with concern in key aspects, such as the independence of their functions, access to the complainants, the transparency of its proceedings, and effectiveness to remedy identified problems. In 2014 the policy governing the operation of MTI in the IDB entered a review process to strengthen the mechanism in these areas, showing the Bank’s commitment to improve the existing mechanism. A fact that contrasts with the experience still evident in BNDES and Exim Bank where improvisation, denial and/or total dependence on national bodies to respond and remedy complaints regarding consulting projects have prevailed. In the case of the CAF, although there is no formal complaints mechanism policy, internally they do have a process to address any complaint, grievance or report.

Recommendations

The trend towards the reduction of social and environmental standards as evidenced by the review of the World Bank Operational Policies should alert other international financial institutions - including those studied in this analysis - and prevent the adoption of minor standards as this will adversely affect the populations of the area of influence of funded projects and the environment. Therefore, in order to strengthen safeguards and policies based on the cases analyzed in this paper it is proposed to the international financial institutions to adopt the following recommendations:

• Contribute to harmonize their Transparency and Access to Information policies, this will allow a better understanding of the financial institution itself, the projects it funds, the criteria they consider for investment, and environmental and social management that applies to its project portfolio.

• Exercise active transparency and ensure the availability and accessibility of the greater amount of information on their websites and spaces available, without waiting for it to be requested. In the case that there is information that may not go public, sustain the position on objective reasons. Although the National Development Banks claim to make use of national laws on access to information, it does not detract that they can create and implement their own policies on Transparency and Access to Information.


• Create opportunities for participation that promote the exchange of information and dialogue with the civil society affected (national or international) and communities involved in projects that they fund.

• Establish a formal, accessible and effective mechanism of complaint that assists requests for any breaches during the execution of the project, regardless of the existence of similar mechanisms within the sponsoring companies or contractors of the projects or those provided by public institutions from the host country.

• Its safeguard policies should strengthen the assessment criteria at each stage of the project cycle (environmental impact study, social impact assessment, environmental management plan, prior consultation, etc.) It is vital to have internal and independent mechanisms of assessment of those requirements and not only rely on the assessment made by the official institutions of the host country. A transparent, representative and effective social participation process should accompany the independent assessment carried out by financial institutions.

• Make accountability public and accessible. In addition to making documentation visible for each stage of the project cycle, it should pinpoint those responsible for the decisions made at each stage.

• Have clear mechanisms for development assessment of the process of the prior consultation, free and informed in the countries where the investments are executed. According to the requirements established by most of these institutions as part of its project cycle, the compliance with the provisions of Convention No. 169 of the ILO and the specific constitutional requirements of each host country should be monitored, ensuring that it is carried out prior to the signing of any credit agreement and / or project.

• Identify, prior to the commencement of works, the direct and indirect social and environmental impacts that could be caused by the operation to be financed. The budget allocation for both cases should be proportional to the total investment in the project.

• Condition disbursement of loans to the fulfillment of its social and environmental safeguards. The loan may be suspended depending on the severity and social and environmental impacts arising from the noncompliance of the safeguards.

• In the case that the financial institution holds an Operational Policy of safeguards, it should have a manual and / or guide defining and establishing the specific methodologies to be followed by the borrower to achieve satisfactory compliance with the policies and requirements of the institution. In the case that the financial institution administers the “Country System”, this should ensure through mechanisms of internal and independent assessment that the borrower comply with the current national legislation on environmental and social issues applicable to the project.


• Implement an institutionalized Ex - post monitoring system and supervision to assess the achievement of objectives and performance indicators of the project (economic, social and environmental) throughout the complete period of life of this, and not only in the early years of its implementation and operation.

• Contribute to the institutionalization of alternative ex post monitoring involving other players in environmental management, including communities and civil society. Evaluation reports of the state regulatory agency, or concessionaire should not only be considered but also those cast by the communities.


iNTrODUCTiON

Global/regionalcontextandflowoffinancingfordevelopment

This analysis document aims to have a look at the safeguards applicable to each project cycle of international financial institutions and the most important development banks considering

the current context of financing and the emergence of new players such as Chinese financing banks, the BRICS Development Bank, among others.

In the case of the BRICS Development Bank, whose launch was announced in mid-July of 2014 in the city of Fortaleza (Brazil) – the creation means a financing alternative besides the long-standing financial institutions as studied here. Such Bank aims to mobilize resources for infrastructure and development in its member countries (Brazil, Russia, India, China and South Africa) and other emerging and developing economies. The creation of the Bank and the Reserve Fund represents an alternative to the limitations of participation and leadership in the World Bank (WB) and the International Monetary Fund (IMF), so it would be expected that the measures being taken by the WB to improve competitiveness are deepened by 2016 (the year the BRICS Bank is expected to come into force).

With the emergence of the BRICS Development Bank, new concerns arose; what are the policies of transparency, participation and accountability are almost no mention, as well as those related to the implementation of social and environmental safeguards of the financed projects, and left a gap with regard to liability for the risks of their future projects. The BRICS countries are not necessarily known to have a democratic tradition and leadership on respect for human rights and the environment, which could be a negative precedent in the creation of this new bank and the measures taken by traditional banks regarding to its safeguard policies.

All of this means a reconfiguration of the policies of international, regional and national financial institutions that will be presented in this comparative analysis, in order to cope with the new changes in the structure of economic power to keep space in financing projects in Latin America.


Revision of The World Bank safeguard policies

W e cannot fail to mention in this document the current revision of the World Bank safeguard policies. While it has been noted that the WB is not part of this analysis, it is important to note that this institution has long been a benchmark for other

financial institutions and development agencies and, therefore, the result of this review may have a significant effect on the policies other institutions seek to implement.

The review of the World Bank safeguards dates from 2012. It has to be kept in mind that the incorporation of these policies was the result of pressure exerted by civil society during the 1980s to criticize the omission of operational safeguard policies and the Bank negligence in relation to social and environmental damage caused by its financed projects.

In that sense, the current revision could be seen as an opportunity for the Bank to strengthen and make more effective safeguards against their projects with potential social and environmental risks. However, that has not been the result we see currently. The recent publication of the document draft of the new “Policy of Social and Environmental Safeguards” shows that the major changes expected have not been adopted; on the contrary, basic requirements of the Bank for the assessment and management of risks and social and environmental impacts of projects to be funded have been made more flexible.

The reduction in the safeguards requirements will surely set a bad precedent for other existing international financial institutions, multilateral development banks (MDBs) and new development banks such as the BRICS Bank. As a result, they could weaken their standards or do not consider strengthening an environmental institutionality system, thus affecting first and foremost to people affected by the projects they decide to finance and the environment in general.


Chinese funding in Latin America

One aspect that cannot fail to mention and that is increasingly becoming important in the economy of Latin America is the increase in the Chinese financing to several countries in the region and the appearance and positioning of Chinese enterprises in key sectors

of development.

Trade and economic relationship between China and Latin America have strengthened since 2010, when several Chinese companies made their entry into countries like Brazil in the mining sector. It is precisely because of the outbreak of the economic crisis of 2008 that China became a major player as an investor throughout the world. Their presence in the region is visible through the insertion of large Chinese companies in the hydrocarbons and mining sectors. Its way of entering the Latin American market is through acquisition or empowerment- obtaining majority ownership- in private companies or consortia where the State takes part in.

In countries like Argentina, Venezuela, Brazil, Colombia and Ecuador, Chinese companies are listed as the most important. For example Venezuela, which has become the main destination for Chinese investment, has received about US $ 50 billion in loans that will be repaid with oil. In 2013, Venezuela signed an agreement with China National Petroleum Corporation (CNPC) –a parent company of Petrochina that is ranked 10 among the largest public companies in the world2 - to promote an investment of US $ 28 billion in a project in Orinoco Oil Belt. To this operation, it is added an agreement signed with China Petroleum & Chemical Corporation (Sinopec) for US $ 14 billion sum.

Likewise, the Chinese company Sinopec is also present in Argentina, where it acquired the US company Occidental Petroleum in 2010 for US$ 2,450 billion. Another major oil company in Argentina is China National Offshore Oil Corporation (CNOOC) that -after the nationalized YPF (Yacimientos Petrolíferos Fiscales)- it has achieved to position itself as the country’s second largest oil company due to the successive operations of acquisitions that has been running. In 2010 CNOOC acquired 50% of the oil Bridas corporation (Argentina) for US$ 3,1 billion,


months later - by that time it already had Chinese majority – it acquires 60% of Pan American Energy for US$ 7 billion and the following year the latter acquires 100% of the shares in Esso Argentina for US$ 800 million.

Another example of the economic power of Sinopec can be found in Brazil, where the company acquired 40% of the Spanish Repsol for US$ 7,1 billion in 2010, a year after it acquired 30% of GALP (Portugal) for an amount of US $ 5 billion. A year earlier, Petrobras received a loan of US $ 10 billion from China Development Bank for the development of its offshore oil production, discovered in 2007.

In Ecuador, CNPC enters the Ecuadorian market in 2003 and it has invested about US $ 199 million since then; the same company is present in Peru from 1994 with an estimated US $ 326 million investment3. Another mode of entry for Chinese companies in Ecuador has been the loans to the government for the construction of infrastructure pieces under the condition that Chinese companies are the ones who construct them4.

2 The Forbes ranking: The World’s Biggest public companies. Available on http://www.forbes.com/global2000/list/

3 Ídem, p. 14.4 Ídem, p. 16.


For their part, Chinese mining companies are concentrated in two countries: Peru and Brazil5. According to estimates by the China Chamber of Commerce of Peru (Capechi), China currently controls 33% of the Peruvian mining sector, Shougang, Chinalco and Minmetald Ltda. being the Chinese mining companies the most important. The only one that entered the market twenty-two years ago was Shougang, the other two joined in 2007. In that year, Chinalco acquired Toromocho copper project from the Canadian Peru Copper. Recently, Minmetald Ltda. (Subsidiary of China Minmetals) acquired the whole copper mine Las Bambas (Apurimac) from Strata Glencore (Switzerland) for US $ 7 billion. In Brazil, the major companies are Wuhan Steel, East China Mineral Exploration and China Niobium, which has entered the Brazilian market only since 2010.

5 ECLAC. “Chinese foreign direct investment in Latin America and the Caribbean. China-Latin America cross-council taskforce”. Summit on the Global Agenda World Economic Forum, Abu Dhabi, 18-20 November 2013, p. 12.

Company Country Year of entryEstimated invcestments

(cumulative)

CNPCPeru

VenezuelaEcuador

199419982003

3261 140199

SinopecBrazil

ArgentinaColombia

201020112006

11 9112 4501 081

SinochemBrazil

Colombia20112009

3 070877

CNOOC Argentina 2010 3 100

Company Country Year of entryEstimated investments

to date

ShougangChinalcoZijin (45%), Tongling (35%) y Xiamen (20%)Minmetals (60%) y Jiangxi (40%)Nanjinzhao

PerúPerúPerúPerúPerú

19922007200720082009

4532 762190730100

Wuhan SteelEast China Mineral ExplorationChona Niobium

BrazilBrazilBrazil

201020102011

4001 2001 950

TABLE 1: MAJOR INVESTMENTS BY CHINESE OIL COMPANIES IN LATIN AMERICA (1994-2012) (Millions of Dollars)

TABLE 2: MAJOR INVESTMENTS BY CHINESE MINING COMPANIES IN LATIN AMERICA (1990-2012) (Millions of dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of company reports, Bloomberg, FDI Markets, Official data from the countries and Heritage Foundation.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of company reports, Bloomberg, FDI Markets, official data from the countries and Heritage Foundation


Source: Authors’ calculations based on official data from the there instituions. Chinese funding is for CDB, China Exim and ICBC until mid-2011 estimated by Gallagher et al. (2012) of which China Exim represents 20% of the total.

As noted, the economic position of China in Latin America has been strengthened in the last decade and it is likely to remain as an important partner in the region, despite the slowdown its economy has been suffering in recent months. Its level of interest and the disbursements to finance various projects in the region are growing. Now, with the recent launch of BRICS Bank-of which China is part along with Brazil, it appears that the relationship between the two countries will strengthen not only at the political level but also in trade and economic fields.

As stated above, it is important not only to analyze the strategic role of China in relation to neighboring countries, but also the impact on social and environmental scale that Chinese financing projects in our region can have either through the form of lending by its main banks or through the acquisition of companies in important sectors of the Latin American economy.

In this context, the banks that are part of this analysis are as followed:

Inter-American Development Bank (IDB):

Founded in 1959, the IDB is recognized as the largest and the world’s oldest regional bank. It is the main source of multilateral financing for economic, social and institutional development in Latin America and the Caribbean. It focuses its action on achieving greater integrity, transparency and accountability in the region through a reform program by which it aims to increase the impact and level of development in the region.

The IDB carries out various activities: in addition to financing projects through loans, it promotes grants, technical assistance and research in different areas of interest. It is currently composed of 48 members, of which 26 are in Latin America and the Caribbean (LAC) and have a majority stake. Its current president is Luis Alberto Moreno.

GRAPHIC 1: IFI FINANCE IN LATIN AMERICA (2005-2013) (Millions of Dollars)

0

20000

40000

60000

80000

100000

120000

140000

160000

2005 2006 2007 2008 2009 2010 2011 2012 2013

BNDESIDB GroupCAFWBGChina*


The Bank is composed of different organs, among which the Board of Governors is the highest authority; a governor who has voting power according to the country’s capital subscribed by the Bank represents each member country. The Board is the body responsible for leading the Bank’s operations and exercises the powers given by the Board of Governors. It consists of fourteen executive directors. The president elected by the board of governors coordinates IDB presidency and is who leads the daily affairs of the Bank, likewise he formulates the proposals on the general policy of the IDB subsequently analyzed by the Board.

The Bank is comprised of approximately 2,000 employees according to official data provided in its official website. Its main headquarter is based in Washington D.C. and representatives in twenty borrowing countries as well as a regional office in Asia and one in Europe6.

Regarding investment, it recognizes central governments, provinces, municipalities, private companies and NGOs as clients of interest. “In late 2013 the Bank had approved US $ 231, 704 billion in respect of loans and guarantees to finance projects with investments which amounted to US $ 481,034 billion in addition to US$ 5,702 billion in grants. IDB financial resources come from the 48 member countries, from borrowings obtained in financial markets, trust funds it administers and cofinancing operations. Currently the IDB credit rating is triple-A, the highest there is7.

Brazil’s National Bank for Economic and Social Development (BNDES)

The BNDES is a public bank funded in 1952. The Bank has established its mission: “Promoting sustainable and competitive development of the Brazilian economy, generating employment and reducing social and regional inequalities8” They constitute the main instrument of implementation of the investment policy and long-term financing in Brazil. The BNDES support is given by financing of investment projects, equipment acquisition and export of goods and services. In addition to this, the Bank acts strengthening the capital structure of private companies and non-reimbursable financing is allocated to projects that contribute to economic, social and technological development.

The BNDES9 has three wholly owned subsidiaries: FINAME, BNDESPAR and BNDES PLC. The FINAME is the Special Agency of Industrial Financing created to support the production, import, export and marketing of industrial machinery and equipment; BNDESPAR and BNDES Participações SA aims to strengthen operations and capitalize investments managed by private groups. And the BNDES PLC is a subsidiary of BNDES incorporated in the United Kingdom

6 Official IDB webpage. http://www.iadb.org/es/acerca-del-bid/informacion-basica,6550.html7 IDB (2011). Acceso a la información y política focalizada. Available on http://publications.iadb.org/bitstream/

handle/11319/5350/Acceso%20a%20la%20Informaci%C3%B3n%20y%20Pol%C3%ADticas%20de%20Transparencia%20Focalizada%20%20%20%20%20.pdf?sequence=1

8 Available on: http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/O_BNDES/A_Empresa/missao_visao_valores.html

9 According to information obtained at: http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/O_BNDES/A_Empresa/sistema_bndes.html


10 “In the case of South American integration, recent trends suggest the reduction of such processes to their logistics dimension (infrastructure, energy, transport). The defense of integration expressed more desire for insertion of countries into the global economy than the interest of building a community of states in the political and social sense”. South American integration from the perspective of a national development bank - the case of BNDES. XXVIII International Congress of Wings 6 to September 11, 2011, UFPE, Recife-PE. Working Group: Globalization, regional and subregional integration. Dias dos Santos Airton, Lessa do Flavia Barros, 2011.

11 Fonseca B., Mota, J. BNDES: financiamentos a empreiteiras no exterior crescem 1.185%. November, 2013. http://economia.terra.com.br/bndes-financiamentos-a-empreiteiras-no-exterior-crescem-1185,52f5f701cbe92410VgnVCM4000009bcceb0aRCRD.html

with the aim of acquiring shareholdings in other companies, make the Bank visible within the international financial community and support more effectively Brazilian companies that are in the process of internationalization or seeking to participate in the international market.

From 2002, the BNDES incorporated among its objectives to finance the integration of South America10, standing as a key player in processes and proposals in this regard. BNDES financing to projects outside Brazil is aimed primarily at the Initiative for Regional Integration in South America (IIRSA), currently known as South American Council for Infrastructure and Planning -COSIPLAN-, part of the UNASUR. A study by IBASE Institute, between 1998 and 2012 the Bank financed 48 infrastructure projects in Latin America, in all cases, linked to Brazilian companies.

From 2003, with the change of their social status, the BNDES started supporting direct investment by Brazilian contractors abroad. But it was only in 2005, when direct financing standards internationally were approved that the bank became a major player in the process of internationalization of companies. According to the study conducted by the Institute IBASE in international export area, the bank finances the export of existing goods and services of a Brazilian company to another country (Exim Post-Shipment), about 87% of investments in the last ten years have been aimed at infrastructure in Latin America and to purchase capital goods. In 2012, the Bank totaled US $ 2,17 billion in disbursements aimed at post-shipment11.

Export-Import Bank of China (China ExIm Bank)

The Import and Export Bank of the Republic of China, or China ExIm Bank, was founded in 1994. It is a state-owned bank under the leadership of the State Council and supervised by the Ministry of Finance of the Republic of China. Its main objective is “to support economic and trade policies of the government to provide financing, guarantees and credit insurance for export, helping companies to expand foreign trade and foreign investments” (China ExIm Bank, 2013).

The Bank has a Board, a Supervisory Board, a director / president and it is composed of a number of offices and departments such as the Department of Human Resources, Office of Oversight, Department of Economic Research, Department of Financing for Transportation, Risk Management Department, Department of Internal Control and Compliance, Department of Legal Affairs, International Business Department, Party School (Chinese Communist) and Union of Workers among the main ones. The Bank is headquartered in Beijing, it has twenty two domestic branches and three abroad branches: a branch in Paris, a representative office in Africa and a representative office in St. Petersburg.


According to the Annual Report 2013, in that year the China ExIm Bank reported total revenues of ¥ 19 546 098,92 and total expenses for ¥ 14 826 152,46. Its risk rating according to Standard & Poor’s is AA-, the same as the sovereign rating of the Republic of China (China ExIm Bank, 2014).

In the international sphere, senior executives of the Bank participate in a series of diplomatic activities organized by the Chinese government and meet important foreign visitors, often signing credit agreements that contribute to economic cooperation between China and other countries. Bank President, Mr. Li Ruogu, is a member of the Business Council of BRICS, whose creation was officially announced in March 2013. In the same year, the Bank held the rotating presidency of Asian Exim Banks Forum (AEBF), which was comprised of institutions of Australia, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Thailand and Vietnam.

Finally, in 2013, the Bank deepened its relations with multilateral financial institutions agencies such as the Asian Development Bank, the African Development Bank, the IDB and the Caribbean Development Bank. He also signed a memorandum of understanding for cooperation with the World Bank, a letter of intent with the IDB on the Chinese-Latin American Investment Fund, among others (China ExIm Bank, 2014).

Andean Development Corporation (CAF)

The CAF is comprised of eighteen shareholding countries (in Latin America, Central America and Europe) and fourteen private banks in the region. It promotes a model of sustainable development through credit operations, grants and support in technical and financial structuring of projects in the public and private sectors in Latin America. The main headquarter is in Caracas (Venezuela) and has offices in Argentina, Bolivia, Brazil, Colombia, Ecuador, Spain, Mexico, Panama, Paraguay, Peru, Uruguay and Trinidad and Tobago.

The CAF has become an important source of financing in the region. As an institution, it surged with the Cartagena Agreement (1969) - Constitutive Treaty of current Andean Community- in order to promote the process of Andean subregional integration. Currently, it provides significant amounts of funding in the short and medium term, to both public and private banks in the region being its total approvals in the past five years up to US $ 51,146 billion.

In this regard, only in 2013, the CAF disbursed US $ 12, 101 billion - 31% more in relation to the previous year of which US$ 5,1 billion was allocated to loans (sovereign and non-sovereign risks), US $ 5,484 billion were directed to private sector (companies and banks) and the remaining


US $ 1,517 billion were divided between partial credit guarantees, shareholdings, contingent credit lines and cooperation funds. Of total approvals, 29.9% (US $ 3,616 billion) was intended primarily to the infrastructure sector, prioritizing mass transport and national development plans of the energy sector.

So far, the countries that have mostly received funding from the CAF have been: Peru (US $ 10,558 billion), Brazil (US $ 8,822 billion), Colombia (US $ 6, 903 billion), Argentina (US $ 554 million) and Ecuador (US $ 4,154 billion)12.

In the last year the CAF has improved its risk rating of the Japan Credit Rating (JCR) agencies, which went from AA- to AA, and Fitch Ratings, which went from A + to AA-, maintaining Moody’s Investor Service Standard & Poor’s in Aa3 and AA- respectively.

Disclaimer. The environmental risk is just one of the criteria considered in making decisions that are part of the design of an investment in infrastructure. We recognize that other risks (financial, political and operational) and opportunities are also part of the final decision. However, the focus of this analysis is the process of identifying, assessing and managing social and environmental risk in four financial institutions.

12 Estimated amounts made between 2009-2013 according to the CAF’s 2013 Annual Report 2013.


Practices and commitments that are now referred to as safeguards mean a social conquest that redefined the concept of development in the late twentieth century. But in recent years, financial instability and the various global crises such as climate change, food security, energy crisis, among others, are creating new challenges and difficulties surrounding the pursuit of sustainable development. Additionally, the emergence of new mechanisms such as REDD (Reducing Emissions from Deforestation and Degradation), and especially of new economic players like China, Brazil and India and their rapid expansion and influence, does not only provide more options to access new financing sources for development, but also creates even greater challenges and perhaps opportunities regarding the implementation of social and environmental safeguards. . In this changing context, this report seeks to analyze profound implications for communities and civil society organizations in relation to the monitoring and accountability for the implementation of safeguards and the use of public and private funds.

1. WHAT ARE THE SAFEGUARDS?

Initially, safeguards were created mainly due to a class action request from communities and concerted pressure from different social organizations and CSOs in view of impending negative impacts, environmental destruction and population displacement due to several development projects. In the 1980s and 1990s, due to strong public criticism of communities and CSOs regarding the participation of WB and other investors in several controversial projects, the Bank began to formulate for the first time a series of safeguard policies to ensure that its operations do not engage in unintended damage13. Through the adoption of a system of safeguard policies, the Bank was the first international financial institution that began to identify and manage social and environmental risks and avoid or minimize harm to people and the environment from its lending operations.

After more than two decades of gradual adoption and implementation of social and environmental safeguards by multilateral banking and adoption of policies within national banks in the same sense, overall it has not been achieved their full implementation to

DEfiNiNG THE safEGUarDs imPLEmENTaTiON

framEWOrK

CHaPTEr i

13 Trans-Amazon Highway in Brazil, the Yacyreta in Argentina hydroelectric dam, or the Sardar Sarovar hydroelectric dam on the Narmada River in India, which displaced more than 200,000 people.


achieve goals of environmental and social prevention and protection of communities and populations where projects are carried out.

What is stated means that it is necessary that financial institutions assume greater commitments to advance the performance of the projects involved, overcoming practices that turn safeguards instruments into bureaucratic processes or mechanisms for negotiating mitigation and compensatory measures that aim implementing programs and projects, neutralizing questions and concerns rather than prevent risks and protect populations from negative impacts.

The safeguards policy development has often been a propaganda tool to improve the public image of banks without showing results of, in many cases, an effective commitment by an appropriate social and environmental performance of their activities. The existence and implementation of rules governing the financing of projects is an obligation of banks towards society and an important tool for communities in their struggle to prevent that a particular intervention adversely affect and even destroy their life.

At present, a tendency to refer to the term safeguards are observed to mean a series of regulations, requirements and procedures governed by a financial institution to ensure minimum social, environmental and governance standards. Other institutions and multilateral banks, including several countries began to follow the steps of the World Bank adopting similar policies.

The most basic components of a system of safeguards include some kind of environmental and social policy, another policy for the dissemination of information, a complaint mechanism and institutional capacity to implement these three commitments. Over the course of time, these components have evolved to respond to managing impacts on every aspect of development and the demands of various partners14. Traditionally, in international financial institutions, these regulations and requirements are called safeguards.

14 See Operational Policies (OP) World Bank 4.0, 4.01-4.12, 4.36, 4.37, currently undergoing reformulation. Available at: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/EXTPOLICIES/EXTOPMANUAL/0,,menuPK:64701763~pagePK:64719906~piPK:64710996~theSitePK:502184,00.html


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In the case of national systems, the institutions, regulations and requirements are part of environmental and sectoral laws and legislations and / or natural resource management laws, as well as land use, social protection, participation and consultation, corruption and the office of the Ombudsman among others. Finally, at international level, there are also a number of international agreements and treaties governed by principles and criteria for environmental protection and human rights that provide a level of protection safeguards.

Finally, at international level, also a series of international agreements and treaties governed by principles and criteria for environmental protection and human rights that provide an additional level of protection safeguards are featured.

Since its origin the national and international systems of safeguards have tried to articulate each other and at different relevant levels to manage the social and environmental risk and promote sustainable development. Similarly, and at different times, each system underwent a process of evolution with their respective particularities and contexts.

TABLE 3: SAFEGUARDS - NATIONAL SYSTEMS - INTERNATIONAL SYSTEM

IFIEnvironmental

protection safeguards

Social protection safeguards

Access to Information

Policy

Policy for the acquisition

of goods and services

Complaint mechanisms and conflict resolution

Accountability policies

Anti-corruption mechanisms

Other policies to support

implementation

National systems

Environmental laws and

regulations

Laws and regulations

of social protection

Laws and regulations on freedom

of expression and

information

Law on environmental

protectionand natural resource

management

Anti-Corruption Laws

Laws and regulations on planning and use of land

Laws and regu-lations on con-sultation and participation

Office of the Ombudsman

International agreements and treaties

Agreements and treaties on civil and

political rights

International Convention on

Biodiversity

United Nations

Declaration on the Rights of Indigenous

Peoples

Agreements and treaties on economic,

social and cultural rights

Convention on access to information and public

participation in decision-making and access to justice in

environmental matters

Transparency initiative in extractive industries

ILO

These different levels of safeguards, as commonly called now basically require borrowing countries or investor clients to identify, plan and manage specific activities to avoid, minimize or mitigate social and environmental risks and negative impacts of projects before they can receive funding and proceed with the execution and implementation of any initiative15 (now with the change of policy in the WB, it will be during the project implementation).

One of these developments for some financial institutions, particularly those with private sector clients, is the flexibilization of the deadline to comply with the criteria for protection during the project implementation. Associated with adaptive management practices, several trends to apply safeguards are seen as a process of progresive compliance rather than actions to comply before approving the funding among institutions supporting private enterprise and the international banks that prefer to rely on national systems of risk management.

15 This logic to avoid, minimize, mitigate only when there is no alternative in certain circumstances, offset the social and environmental impacts, refers to the mitigation hierarchy.

Source: Elaborated by the authors


These regulations and requirements are often grouped into different areas of protection or precautions that identify global trends of priority for protection from potential negative impacts caused by different types of investments

2. SYSTEM AND FUNCTIONING INSTITUTIONALITY OF SAFEGUARDS

A system of safeguard policies, for proper and effective implementation, does not only depends on requirements and regulations relating to specific areas of protection: equal relevance is the establishment of an institutional framework to ensure compliance with those requirements and regulations. For example, a regulation of a safeguard policy is the prohibition of any intervention in critical natural habitats, for which the policy establishes a definition of what the critical natural habitats are.

In relation to requirements, the safeguard policy includes what procedure to follow. The investor or country must conduct an environmental and social impact assessment to identify potential negative impacts on investment, as well as elaborate the possible corrective measures that should follow the mitigation hierarchy (avoid, minimize, mitigate and compensate). Together these regulations and requirements are responsible for informing about the different decisions throughout the design process of the project as not to pursue investment, change the project site, using alternative technologies, develop a mitigation plan among other examples. The same applies with regard to national systems.

However, in order to make this all work, there must necessarily be an institutional framework for the trained staff necessary for the effective application and implementation of such rules and requirements. Many IFI’s have units and / or departments with specific personnel responsible for different levels and elements of the system of safeguards. Regarding country systems, the same applies, as it can be seen in Table 4.

IFIs

Safeguards Unit

Quality Control Unit

Monitoring and

Supervision Unit

Assessment Unit

Access and Information

Requirement Unit

Complaints and Conflict Resolution

Unit

Among others

Environmental specialists Social specialists Legal specialists Project leaders Regional Councillors Sector managers Administrative staff among others

National Systems

Ministries of Environment

General divisions of biodiversity

Ministries of Indigenous

Affairs

Congress of the Republic

Office of the Ombudsman

Labor protection agencies

Among others

Environmental specialistsSocial specialistsLegal specialistsDirectors and / or SuperintendentsTechnical specialistsSector managersAdministrative staffamong others

TABLE 4: SYSTEM AND INFRASTRUCTURE FUNCTIONING OF SAFEGUARDS



In combination, these regulations and requirements, along with institutions, form what is called a system of safeguards, which aims to be applied in all phases of the project cycle. System tasks are to identify and anticipate potential risks and negative impacts of social and environmental order, plan and manage measures following the mitigation hierarchy, control and monitor the effective implementation of these measures while responding to new challenges that emerge during the implementation of any development project.

3. PROJECT CYCLE AND IMPLEMENTATION OF THE SAFEGUARDS SYSTEM

The best way to understand the functioning of a system of safeguards is through the project cycle. The project cycle is a framework that brings together a series of sequential phases or activities interlinked and designed to achieve a specific objective at a time determined using different resources. The project cycle usually has seven phases: (i) identification, (ii) preparation, (iii) ex ante assessment, (iv) negotiation, approval, (v) implementation, (vi) closing and finally (viii) ex post assessment.

FIGURE 2: PROJECT CYCLE AND THE SYSTEM OF SAFEGUARDS

Identification

Preparation

Ex ante assessment

Closing

Negociation/approval

Ex post assessment

To respond to new challenges

To control and to monitor

implementation

To identify/ anticipate risks and

impacts

To plan to manage mitigation measures

Implementation

System of safeguards



Each of the phases of project is aimed at developing a series of specific activities with the intention to generate the necessary inputs to move from one phase to another making effective and efficient use of the resources available. Each of the phases of the project cycle, in turn, is overlaid with the different levels and elements of the system of safeguards in a synergistic and structured form.

During the identification and preparation of the project cycle, the safeguards system function is to anticipate the potential social and environmental risks of the project and its possible alternatives. This phase also identifies and defines the negative impacts, as well as the planning and management of necessary mitigation measures, including the option of not making the investment. For this purpose, the safeguards system requires the use of different types of instruments in order to categorize the project according to their potential risk - high, medium or low risk among other variants - and in parallel to determine the area of influence of the project and the affected population taking into account the scope and magnitude of potential direct and indirect impacts within a geographic area.

For the first milestone of the project cycle, which is the conceptual review, the areas of protection and enforcement of safeguards are identified, and through an institutional structure of safeguards different specific requirements are generated according to the categorization of the project as well as different documents used as inputs for decision making and so it is possible to proceed with the next phase.

Each phase of the project cycle and the elements of the safeguards system generates different types of documentation (which should explain the decision-making process, as well as those responsible and the parameters considered). It is important to identify and differentiate the documents produced by the IFI as part of its internal due diligence process from the ones produced by the customer or borrower country as part of its own procedures.

The planning and management of mitigation measures within the system of safeguards is performed as part of the preparation phase of the project cycle, and its scope depends on the determination of the area of influence, the affected population and the specific requirements according to the categorization of risk within the phase of Identification. During this phase, for example, a requirement of safeguards is holding consultations whose scope and methodology are defined by the regulations of the safeguards. The main result of this phase and element of the safeguards system is the plan of management of social and environmental impacts.

The second milestone of the project cycle is the phase of ex ante assessment, where a quality control of not only the findings and recommendations of the analysis in the phase of preparation and planning, but also the process is performed through which the different requirements are carried out such as consultation and participation, feedback mechanisms and accountability, among other variables.

Another milestone of the project cycle is during the phase of negotiation or approval, where legal and contractual issues to formalize agreements for financing the project are defined according to the results of the previous phases. This is where the decision-making and approval of the project are carried out; and, similarly, it generates its own set of documentation.

The implementation phase of the project cycle is closely linked to elements of monitoring and supervision of the implementation of the safeguards system. At this stage, the implementation phase of the project cycle is closely linked to elements of monitoring and


supervision of the implementation of the safeguards system. At this stage deployment status reports not only of the project but also of safeguards components are produced and divided into two parts. The first coincides with the period of disbursement of the Banking, typically between four and eight years for investment projects and ending with the completion of construction and start of operation of the project. The second coincides with the operation and maintenance of the project, after the last disbursement and the start of debt payments or payments of the grant. The monitoring of the Banking coincides with the first part, but does not go on. While the country or company repays the debt according to the agreed schedule, the Bank does not usually monitor the project when the disbursement period ends.

Finally, in the closing and ex post assessment phase, achievements, problems encountered and lessons learned are analyzed once the project ends, in order to generate greater knowledge and lessons learned for future interventions.

FIGURE 3: DURATION OF THE PROJECT CYCLE (AVERAGE TIME VS. CURRENT PROJECTS)

0 5 10 15 20 25 30

WB

IDB

CAF

BNDES

China ExIm Bank

year

s

IdentificationPreparationNegociation & ContractExecution during the disbursementOperation



aNaLysis Of ENVirONmENTaL aND sOCiaL PErfOrmaNCE Of BaNKs iN

TErms Of iTs PrOJECT CyCLE

CHaPTEr ii

A.

CASE OF THE INTER-AMERICAN DEVELOPMENT BANK (IDB) AND SAN FRANCISCO-MOCOA ALTERNATE ROAD CONSTRUCTION PROJECT

(COLOMBIA)

This chapter’s main focus analyze the implementation of social and environmental safeguards of the IDB in the context of San Francisco-Mocoa Alternate Road Construction Project, flagship and innovative project in the region given the implications for the management of social and environmental risk in the affected area for both Colombia and the IDB.

It seeks to establish how the IDB has implemented and applied its safeguards, through recognition of some milestones in the course of the project by means of which the most important moments of Pasto Mocoa project cycle are identified.

It can be understood from the analysis conducted that the Bank maintains its own policy on implementation of safeguards, which allows it to obtain an independent analysis to national standards of social and environmental risks on a determined project.

To identify and understand the similarities and gaps between protection standards established by the IDB and national standards, the ability of the IDB and the country benefited from the loan - framed to the highest standards internationally in environmental matter-, the analysis will focus on: (i) early implementation of a Regional Environmental Assessment (EAR) as part of the due diligence stage; (ii) consultation on the Environmental Management Report (IGAS) in November 2010, which incorporated the decision to finance the Environmental Management Program (PMASIS) to US $ 11.4 million in 2010; (iii) the complaint made by indigenous communities to the Independent Consultation and Investigation Mechanism (ICIM) in 2012 during the implementation phase, and (iv) the lag in implementing the PMASIS and construction of the project, including the extension of the RFPCARM.

The identified deficiencies can recognize the inconsistency between policy safeguards created by the IDB and the highest international standards in environmental matters.


1. SAFEGUARDS TOOLS ESTABLISHED BY THE IDB

The IDB adopted the Environment and Safeguards Compliance Policy (OP-703) in 2006 to consolidate environmental sustainability goals through investment in Latin America and the Caribbean16. This policy defines “environment, along with poverty reduction and social development as priority areas to be supported by the Bank17. The policy mandates are divided into two guidelines: (i) environmental mainstreaming and (ii) the protection of the environment: towards managing environmental risks and impacts.

Thus, the policy on safeguards implemented by the IDB is designed to integrate two main goals, namely the prevention of damage and promotion of economically sustainable results. This policy applies to all public and private financing instruments.

The Bank has established that “if a project does not comply with national and local laws on the environment or standards safeguards of the IDB, or any of them, the Bank must work with the borrower to develop a procedure to follow which can include a modification of the design and / or the inclusion of mitigation measures in the legal agreements. If our assessment reveals serious problems without reasonable remedy, the IDB postpones financing until an acceptable plan for these issue is agreed”18. The policy is implemented through a series of sectoral guidelines for managing environmental and social risk, that identify the characteristics of the territories, and the sectors of high greenhouse gas emissions, biodiversity, water and sanitation and disaster.

In the Sustainability Report 2013, published annually by the IDB accountable for the implementation of the OP-703 policy, it is reported that 2% of the projects approved in 2013 are of high environmental and social risk - Category A (three projects for US $ 340,5 million), 41% at moderate risk (51 projects and US$ 5709,5 million, 13% lower risk (30 projects and US$ 1862 million) and 43% of projects categorized as being channeled by financial intermediaries (84 projects FI worth US$ 5986 million)19. Net emissions of greenhouse gases (GHGs) in projects financed by the IDB approved in 2013 are approximately -1.02 million tonnes of CO

220 .

Policy on access to information to increase transparency

In 2010, the IDB approved a new policy on access to information in order to increase the margin of transparency in its operations. The main objectives are to increase access to information on projects and activities of the Executive Board, accountability for the implementation of norms and institutional mandates, establish a new system of classification of documents and a review mechanism looking for quick access to key documents21.

16 This policy contained a broad mandate for the institution to ensure the environmental quality of all operations performed in the framework of support for various projects in the region and, likewise, managed to support environmental projects.

17 Policy of environment and safeguards compliance with IDB. 2006, page 1. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=665905.

18 IDB Sustainability Report (2013: 41). The Sustainability Report covers in detail the progress and performance of the IDB on sustainability during fiscal year 2013. Link: http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=38266644

19 Op. cit., p. 42. 20 Op. cit., p. 43. The estimated net emissions considered investments as renewable energy and forest protection

that resulted in avoided emissions.21 Official website of the IDB. Available at http://www.iadb.org/es/noticias/comunicados-de-prensa/2010-05-12/

nueva-politica-de-acceso-a-la-informacion-del-bid,7133.html


22 IDB (2013). Sustainability Report, p. 41.23 IDB, CO-T1038: Preparation of the Regional Infrastructure project of Pasto-Mocoa Road Corridor; Available

at http://www.iadb.org/es/proyectos/project-information-page,1303.html?id=co-t1038#doc. INVÍAS - Construction of Alternative San Francisco - Mocoa. Available at http://www.varianteinterventoria.com/descripcion.php.

24 Information about the ICIM is available at http://www.iadb.org/es/mici/inicio,7736.html25 Available at http://www.iadb.org/es/mici/quienes-somos,1792.html26 http://www.iadb.org/es/mici/inicio,7736.html27 The timeline of the project is contained in Annex 1.

The IDB has updated a page for each approved project, providing access to several project documents ordered according to the different stages of the project cycle. As for safeguards, “The Bank summarizes and publishes its analysis including the requirements that will become part of the contractual agrement, once the bank gives its approval.” Those are also disclosure requirements that are the responsibility of the borrower, especially in relation to the environmental assessment and other documents throughout the preparatory phase”22.

In the specific case of the analysis of the San Francisco-Pasto Mocoa Alternate Road Regional Corridor Infrastructure Project, the official web of the Bank and the pages of the competent national entities contain the majority of the relevant documents23. For other documents, requests were made to officials of the Bank and various interviews with them. It is noteworthy that national institutions and IDB officials were willing to create opportunities for dialogue (see Annex 3 - Section BID).

Independent consultation and investigation mechanism (ICIM)

For the IDB, there is a complaint mechanism known as Independent Consultation and Investigation Mechanism (ICIM), which seeks to respond “to the concerns regarding any substantial, adverse and direct damage as a result of any failure by IDB any of its operational policies in a Bank-financed operation”24. The ICIM makes direct reports to the Board of Executive Directors and its main objectives address the concerns of communities affected by IDB-financed operations and improve social and environmental outcomes of operations financed by the Bank25.

Applications submitted to the ICIM are public, like the condition in which they are found thanks to the principle of transparency. For San Francisco-Mocoa Alternate Road Construction Project, we should highlight the application submitted in July 2011 (application ICIM-CO-2011-021) whose explanation will be subsequently extended26.

In August 2013, the public consultation process was initiated to modify this mechanism. Currently the second phase of public consultation is open, with which the Bank seeks to understand the experiences and comments on current policy to modify and improve the ICIM. In this process, a new text to replace current policy will result as an outcome.

2. PROJECT PROFILE27

The San Francisco-Mocoa Alternate Project (hereinafter Pasto-Mocoa road) is one of the most emblematic of the IDB, due to social and environmental provisions discussed


in various studies. The stretch of 45.6 km between the municipalities of San Francisco and Mocoa, Department of Putumayo, is part of multimodal corridor Tumaco - Belém do Pará.

Given the complexity of the space where the project is being developed and the expectations generated as “standard for sustainable transport projects” at national and international levels, it was necessary to specify the measures taken by the Bank to monitor and strictly comply with activated safeguards policies. The strategic location of this led to the construction of a tri-national route, from which cheaper access to oil and mineral and forest resources of the region derives. This allows commercial articulation on a regional scale, reducing transportation costs and heavy oil cargo between Brazil and Colombia and those countries that are in the land route28. It is noteworthy that mining and hydrocarbons account for almost 25% of the regional economy29.

The construction of this road has a total funding of US $ 203 million, of which US $ 53 million are provided by an IDB loan and the remaining US $ 150 million are funded by the Colombian government30. An upcoming funding for additional costs involved in changes to the original design for the stretch that crosses the reserve is contemplated31. The contract was tendered in 2010 to Consorcio del Sur32 road consortium.

28 Flórez, Margarita (2007). Selva abierta: Vía Pasto - Mocoa e hidrovía del Putumayo. ILSA; BICECA, Corredor Multimodal Pasto-Mocoa e Hidrovía del Putumayo; Mauricio Mesquita Moreira (2011). Tumbando la pared: comercio e integración entre Brasil y Colombia. BID: Sector de Integración y Comercio. Guzmán, David (2009). Plan de Desarrollo Departamental (PDD) 2008-2011 “Oportunidades para todos”.

29 TAU (temporary union PROINTEC Environmental Consultant and Environmental Consultants). EAR Regional Environmental Assessment. (2008). Bogotá DC Volume IV, pp. 60-66. Report data extracted description via San Francisco - Mocoa, DIN Consortium - SEDIC. Study on magnetic supplied by engineer Blanca Hernández, Environment Subdivision of INVÍAS medium. 06/16/08

30 On 3 May 2010 the loan 2271 / OC-CO between the Ministry of Transport, the Ministry of Finance, the INVÍAS and IDB was signed. The loan is for twenty-five years, with a grace period of eight years of disbursement.

31 CATI report, July 201432 The Consorcio del Sur is a partnership agreement which comprises five companies: Sonacol S.A., Cass

Constructores & Cia. S.C.A., CSS Constructores S.A., Construcciones El Cóndor S.A. y Puentes Torones S.A. the above assume joint responsibility in the execution of a contract; The first three companies are part of the business strategy of Solarte Group, whose main partners are Carlos Alberto Solarte Solarte and Hector Solarte Solarte. Almost all of these companies are analyzed by the Comptroller of Bogotá, as they represent a high degree of concentration in contracting the district (2004-2009). This situation can be comparable with awarding of public works in the nation, as evidenced in the award of this project.


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In 2006, IDB carried out an analysis of the main environmental and social threats affecting this road and coming from direct and indirect impact on the 100 000 ha of RFPCARM (the road went across it) and community lands and indigenous reserves belonging to Inga, Kamentza and Quillacinga indigenous peoples. The Forest Reserve is home to a rich variety of flora, fauna, ecosystems and water resources and it is also the land of indigenous peoples who recognize the cultural value of this place. It is important to state that free transportation into the interior of the department of Putumayo can cause hazardous economic effects to this fragile piedmont ecosystem and the most vulnerable communities inhabiting it.

IDB participation allowed the approval of an innovative mitigation program, which included several social control measures. As part of IDB’s financing, US$ 11, 4 million was allocated to the implementation of an PMASIS33. Additionally, IDB has covered the costs for the development of the Environmental Management Plan of construction work (US$ 2, 5 million) and four non-refundable technical cooperations34.

The implementation of the project initiated in January 2012 and was to be finished within six or eight years35, time during which the National Institute of Roads (INVÍAS) performed as an executing organization. The environmental permit for the project was granted by the Ministry of Environment on 5 December 2008 through Resolution 2170, in which the loss of 94 465 ha. of forest in the Forest Reserve was approved36.

The Autonomous Regional Corporation of the Amazon (Corpoamazonía) was chosen as the organization in charge of the execution of PMASIS and it was outsourced by INVÍAS. Corpoamazonía is a group of approximately five members who carries out duties different from those regularly done in this institution as it mainly centers on the project.

It is important to point out that, as this environmental authority has duties different from those regularly done, its performance in the project has been highly criticized, given that there is no autonomy in terms of control with regard to the institution bringing PMASIS to fruition, as it is Corpoamazonía itself that controls its behavior, hence playing a twofold role (control and execution)37.

It is about to be three years since the construction work initiated. At present, 72 % of the IDB’s financing has already been disbursed (during 2013), but less than 10 % of the resources allocated to PMASIS has been spent, which reveals Corpoamazonía’s lack of capacity for execution38.

IDB agreed with INVÍAS to authorize construction work in the areas of two stretches of road, 139 and 440, since they are not stretches belonging to the Forest Reserve and,

33 Out of US$ 40,1 million from IDB for work construction, US$ 37 million is allotted to civil works and US$ 2,1 million is allotted to compensate families located in the right of way,

34 See IDB CO-T1038: Preparation for the Pasto-Mocoa Regional Road Corridor Infrastructure Project; projects approved between 2007 and 2011 aimed to strengthen Corpoamazonía in order to explore the application of a compensation project for compensation of the Forest Reserve, come out with indigenous proposals for locally economic development, and negotiate an agreement among local and national authorities who shall commit to follow recommendations from the Regional Environmental Assessment.

35 See project’s span.36 IDB (November 2009). Environmental and Social Management Report (IGAS). It is known as the best forest use

of specifically 15 905 m3 of wood, resources that must be given to communities, social organizations, councils recognized in the area of work or Corpoamazonía. These resources shall be allotted to social works and recovery of vegetable material. Likewise, right of way for 143, 9 ha. is recognised in the permit.

37 In an interview with INVÍAS environmental management area, in April 2014, officials insist that it is important to recognize Corpoamazonía as an environmental authority and entity that represents the special group that works in PMASIS, which works hand-in-hand with the group created by INVÍAS.


38 IDB, Monitoring Report, CO-L, 1019, 26 September 2013.39 Located between San Francisco and Postachuelo up to the crossing over Minchoy gorge on K6 + 700, which

displays mountainside topography. This stretch’s length is 6,7 km.40 Located on x-coordinate K3 + 450 up to the crossing over Campucana gorge on K10 +598, with undulating

topography and a length of 7,15 km.

therefore, they would be a sample for actual construction in the rest of these areas. According to data supplied by INVÍAS, these stretches were supposed to be finished by September 2014. On 3 July 2014, INVÍAS launched a report about the progress of the construction of the San Francisco-Mocoa road. In the report, it is stated that stretches 1 and 4 are in execution, although detailed percentages of the end of the construction are not established. The following chart shows the last report publicly known.

Source: INVÍAS.

SECTOR 5SECTOR 3SECTOR 2

SECTOR 2

SECTOR 1 SECTOR 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

SAN FCO MOCO A

K0+

466

k7+1

80

P. P

UTU

MA

YO

PU

EN

TE 2

PU

EN

TE 3

PU

EN

TE 4

PU

EN

TE 5

PU

EN

TE 6

PU

EN

TE 7

P. M

IMC

HO

Y

P. C

AM

PU

CA

NA

P. C

ON

EJI

TOP

. CO

NE

JO

k21+

900

k10+

395

k3+3

95

ROAD

ROAD CORRIDOR’S LENGTH 46,6 KM

SAN FRANCISCO - MOCOA ALTERNATE ROAD

SECTOR 1 SECTOR 3 SECTOR 5SECTOR 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

SAN FCO MOCO A

k3+5

52k3

+992

k4+5

58k4

+987

k5+6

31k5

+761

k6+0

78k6

+620

k7+1

80

k21+

900

k23+

700

k10+

993

k10+

390

k8+6

40k8

+540

k3+4

50

BRIDGES

Investment Distribution in each Department

San FranciscoMocoa

60%40%

San FranciscoMocoa

K0+000 - K21 + 904

IN EXECUTIONNOT BUILTADJUSTMENTS TO DESIGNS-FOREST RESERVE AREASECTORES WITH IDB NO OBJETIONK0+000 - K23 + 754

Delimitation of RoadCorridor in each Department

FIGURE 5: CONSTRUCTION OF THE SAN FRANCISCO MOCOA ALTERNATE ROAD


It is also crucial to pinpoint that, according to inspection of the alternate road construction carried out by the San Francisco Mocoa Environmental consortium, by September 2014 in the area of San Francisco and by authority of local and indigenous officials in San Francisco and Sibundoy and the whole community, the South Road Consortium subcontractor initiated activities to remove silt in Putumayo river in advance ,since June 26 2014 until August 30 2014, so that material for construction work in the alternate road and in the restoration and maintenance of Tumaco-Pasto-Mocoa road would be obtained. “River crude was obtained to carry out work with concrete, removal of earth and building of the San Francisco-Mocoa alternate road”41. It is to highlight that progress of construction in this area in percentage has not been specified.

As for the area of Mocoa, it is important to state that 21 out of all the activities in the Environmental Management Plan supposed to be completed until September 2014 were done, which means 68% of the whole project42.

It is important to point out that exact percentages of progress in each stretch of road are not indicated in this monitoring, according to the plan established for the completion of the work based on the financing accepted by IDB so that in this monitoring the scope of the construction begins from San Francisco and Mocoa and not in the five stretches as it was outlined and recognized by INVÍAS.

Sector 5 or the urban area of Mocoa shall be aligned by INVÍAS with the Land Use Planning (POT) in Mocoa, which was already presented to IDB and in which a few amendments are being made, given that INVÍAS is currently not allowed to make investments in the town center as this is the city hall’s duty.

According to the six-month report Agreement 682 in 2010 between Corpoamazonía and INVÍAS about the PMASIS’s monitoring from 1 January to 30 June 2014, it was during this period of time that meetings for the monitoring of the Plan between INVÍAS and IDB were held. By virtual means, IDB consultants monitoring the Project Environmental Management System were listened and several meetings with the organizing unit were held, where the Plan of Action for PMASIS 2014 - 2024 was discussed.

41 Work monitoring page. Link: http://www.varianteinterventoria.com/situacion-san-francisco.php42 http://www.varianteinterventoria.com/situacion-mocoa.php


43 Author’s own data coming from project database available on IDB website and Sustainability Report. Between 2011 and 2013, IDB approved 168 new projects on average for a total amount of US$ 12 million and kept an active portfolio of 708 projects. Approved projects breaks down as follows: on average six of them belong to Category A, 60 to Category B, 31 to Category C and 70 to Category B, and 13 to budgetary aid and investment in financial intermediaries.

44 IDB Budget FY13.45 This research went further by using primary and secondary sources coming from interviews with IDB officials,

State institutions and social organizers, as well as project information from various sources. See Attachment 3 (interviews) and Attachment 4 (bibliography).

Designing in stretches 2 and 3 is being reviewed and it is expected to be completed by the end of 2014, according to data supplied by INVÍAS, in order to obtain the renewal of the environmental permit necessary to start works in 2015. Accurately official information on this process is not available; it is only known that consultation with the community has already been initiated.

Institutional Capacity

For the preparation of about 120 new projects and the supervision of a busy portfolio of 450 projects classified into high and medium environmental and social risks, IDB has a domestic capacity of 32 experts from the Environmental Safeguards Unit (ESG), an organization comprised of over 10 consultant43. ESG’s annual budget amounts to US$ 7 million44, and most experts of this group are found in the Washington D.C. branch and they work on team projects along with other technical experts so as to guarantee the very best implementation of safeguards policies. ESG’s approval of a project is mandatory for it to be appealing to the Board of Directors.

On account of its recent creation in 2007 and as a result of an institutional reorganization in IDB, the safeguards unit has grown double in size. Initially, it consisted of 12 members but, according to recent research conducted by IDB, working conditions shall get workers under ‘considerable pressure’ and the growth of high risk project exceeded the increase of resources and technical capacity to security control.

The research reveals that efforts to reduce document processing periods for projects as well as the increase of the financing aims seem to have taken priority over “fundamental warranties, proceeding requirements made in the monitoring stage. Still, the Bank’s current system for the monitoring of safeguards is not well-prepared to deal with that change.” As IDB says in its last Sustainability Report, ESG has not been able to provide with a complete backing and support to public works of high and medium risk in the private sector, which are in ongoing growth, particularly those considered belonging to Category B.

3. PROJECT CYCLE

For a better understanding of the implementation and monitoring of safeguards demanded by IDB to devise Pasto-Mocoa Road project, it is necessary to focus on the project cycle45.

According to IDB’s social-environmental Policies, the project cycle is as follows: (i) identification and eligibility; (ii) analysis and due diligence; (iii) negotiation and credit acceptance; (iv) first disbursement approval; (v) execution and monitoring (see annex – IDB section). A stage of ex-post evaluation and learning is necessary.


In Colombia, public institutions recognize IDB’s direct control over social and environmental risks generated in the implementation of projects. Note that the Bank is an autonomous entity independent from the regulations implemented in the country, as INVÍAS states it when it admits that:

“IDB demands that a few requirements should be met for INVÍAS to obtain the credit. Once the credit was obtained, planned activities were initiated and the right of way had to be released and, as for social-environmental matters, PMASIS contract for the execution of works had to be established, etc. However, given that these requirements were so demanding, there was trouble with the release of right of way because it was difficult to release all stretches at a social and environmental level. The whole area was divided into five sectors, so while social-environmental document processing in each sector was being fulfilled, the Bank’s no objection in each sector was requested, which is true for Sectors 1 and 4’’46.

IDB borrowers shall respect and submit to, firstly the requirements stipulated in its Environment and Safeguards Compliance Policy (OP - 703). The Bank also introduced the following safeguards policies in the San Francisco Mocoa Alternate Road project: (i) Operational Policy on Indigenous Peoples (OP-765); (ii) Involuntary sesettlement Policy (OP 710); and (iii) Natural Disasters Policy (OP-704).

46 Opinions of INVÍAS Great Projects Deputy Director’s office in AAS interview conducted in March 2014.

1Identification/

Eligibility

2Analysis/due

diligence

3Negotiation/

Credit acceptance

4First

disbursement approval

5Execution and

monitoring I-disbursement

period

6Execution II – loan

repayment period

Estimated duration

6 months 8.5 months 10.8 months 1 months 5-7 years 12-18 years

Duration for Pasto

Mocoa

January 2006 – November 2007

(23 months)

December 2007 –

October 2009 (23 months)

November – December

2009 (2 months)

January 2010 –

December 2011

(24 months)

January, 2012 – 2020 (8 years)

January 2030

– 2046 (16 years)

TABLE 5: CHART WITH THE DESCRIPTION OF EACH STAGE OF THE PROJECT CYCLE APPLIED TO SPECIFIC CASE



3.1 IDENTIFICATION / ELIGIBILITY (JANUARY 2006 – NOVEMBER 2007)

Although the Project for the Construction of San Francisco Mocoa Alternate Road was not originally considered to be environmentally complex mostly due to not acceptance from the Environment Ministry, it earned this reputation in the first years47. Eventually, IDB ranked the project in Category A because its operation would pose significant environmental and social threats, as the road layout damages an area of highly environmental and social sensibility, for it crosses RFPCARM.

IDB project team started discussions on the project with the Ministry of Transportation in Colombia and INVÍAS at the beginning of 200648. This project team developed the diagnosis studies, outlined specific objectives, carried out the alternative analysis and selected the financing tool for the project.

After the publication of a draft of project profile in August 2006, INVÍAS, with IDB’s financial support, issued a document on which it included comments about the content in the draft of some terms of reference in order to conduct three studies to guarantee the project’s viability. Comments shall be acknowledged within 30 days: (i) the EAR; (ii) EIA updating, and (iii) the Basic Environmental and Social Management Plan (PBMAS)49.

One of the requirements for this type of project is the definition of an Environmental and Social Strategy of greater relevance and at least two consultation sessions with the identified affected communities, etc. It is important to point out that the document with comments from the three studies was considered the first instance of formal consultation. In order to inform the affected communities, Institute for Alternative Legal Services (ILSA)50 convened a meeting with Mocoa local leaders about the importance of Pasto-Mocoa Project for IIRSA on 8 November.

Results of these duties were included in the final project profile, document approved in November 2007 and published later. This draft has basic information such as its aims, technical specifications, proposed environmental and social safeguards, the scope of the environmental and social assessment, proposal for financing, and an initial execution timetable. This document is examined in a meeting for review of eligibility, which is held by a team appointed by the Bank to test the viability of the project through an analysis of its environmental and social aspects51. Decision to proceed with the project preparation is made by the Operations Committee, consisted of several Bank managers including ESG manager.

Thus, we can conclude that the comprehensive Pasto-Mocoa project lasted almost two years.

47 The Ministry of Environment, by means of Decree 125 issued on 10 March 1997, terminated application for reconsideration demanded by the National Institute of Roads (INVÍAS) against Decree 857 issued on 23 December 1996, disallowing the alternative to Construction of San Francisco-Mocoa Alternate Road, which was necessary to present the Environmental Impact Assessment for progress and rehabilitation of current road corridor.

48 IDB team comprises ten members from IDB headed up by an expert on transportation who is the boss’s team and who is accompanied by experts in the transportation, environment, social, legal fields and other operating aspects. Most members come from the branch in Washington D.C.

49 In September 2006, IDB made a non-reimbursable contribution worth US$ 1,3 million for the preparation of two environmental and social assessments: (i) EAR, and (ii) PBMAS. For further information, see IDB, CO-T1038: Preparation for the Pasto-Mocoa Regional Road Corridor Infrastructure Project.

50 www.ilsa.org.co51 It refers to the Meeting for Quality Review.


3.2 ANALYSIS AND DUE DILLIGENCE (DECEMBER 2007 – NOVEMBER 2009)

In this stage, IDB team and the borrowers evaluate the project in terms of quality and the risk to identify current threats at an environmental and social scale and strengthen its design. In the due diligence stage, the Bank evaluates EIA, which is another tool used to analyze the environmental and social impact of the project.

Furthermore, comments and remarks made by IDB were gathered to establish future issues. Several workshops on guidance and analysis were held, all of which resulted in the Operations Development Proposal (POD)52. As for the analyzed project, several workshops on analysis and due diligence were held from December 2007 to October 2009 in order to know and evaluate the environmental and social risks and mitigation alternatives, all of which were included in an IGAS issued in October 2009. Afterwards, POD was discussed in the Loan Committee in November 2009 before being presented to the Board of Directors.

Analysis process for IDB lasted almost two years, which shows the geographical and social complexity of the region and the necessary tools to understand risks. Two points in this stage of the project cycle define IDB’s focus of safeguards: (i) consultation and development of an EAR (ii) creation of the IGAS, which encompassed an ambitious Environmental Management Plan and was necessary for the acceptance of the loan.

EAR’s process (January 2007 – July 2008) and agreement with PMASIS, IGAS and the Loan Proposal (June 2008 – October 2009).

The three assessments (EIA, EAR and PBMAS) initiated in 2006 and finished at the end of July 2008. In the two following years, World Wildlife Fund (WWF) in Colombia, the ILSA, Seeds, Professors in the University of Rosario, ECOTONO Foundation, ADC, and several local officers in Sibudoy as well as other leaders from the Inga and Kamentsa communities in collaboration with BIC strived to obtain more transparency in the accountability, the preparation of studies and the loan.

Consultants for each study conducted consultation in the region whereas the organizations of the civil society held regular meetings with INVÍAS and IDB to obtain information on the progress so that different viewpoints of the project could be given. Despite the limitations in the consultation design (access to previous data, time, call of people, etc), the process chose a space for local participation.

In February 2008, ILSA, WWF, and BIC conducted a case study on the project that highlighted risks due to the lack of a historic plan in the region and the importance of the project in the integration framework, but recognizing the strong support for the alternate road53.

The independent analysis performed by the civil society posed criticism to the content of EAR, which apparently underestimated risks in the Forest Reserve and the affected community, particularly indigenous peoples with regard to the project. Additionally, the definition of a very restricted area of influence was questioned on account of possible investments and Corpoamazonía’s institutional capacity to deal with these risks.

52 “It outlines activities, resources and the timetable necessary to prepare and monitor the project. POD also includes the Development Effectiveness Framework, Monitoring and Assessment Plan, Internal Return Rate” Source: http://www.iadb.org/es/proyectos/glosario,1276.html?#anchorERM

53 Flórez et al. (2007). Selva Abierta


54 IDB, Regional Environmental Assessment (16 June, 2008), Vol. 9th Report on Consultation Process. Matrix 2, p. 66.

55 Mayra Tenjo. Pasto Mocoa Road – Colombia: IDB Commitment to Target Sustainability, BICECA Bulletin (October 2008).

56 Involved particpants were Putumayo’s governor, INVÍAS’s general director, Mocoa’s mayor, San Francisco’s mayor, Corpoamazonía’s general director, national director of National Parks, commander of the Putumayo’s Police Department, commander of the Rainforest 27 Brigade, Putumayo INCODER’s regional director, Putumayo IGAC’s director. Results of these aims are as follows: (i) institutional agreements to make adjustments to Basic Land Use Programs (PBOT) in Sibundoy Valley and Mocoa’s town halls. Expansion of Forest Reserve had to be included; (ii) involvement of PMASIS’s resources in development strategies proposed by the council and government (ecoturism and sustainable productive projects).

An instance of the criticism is the growth of mining spread by the road, which has become a threat to the sustainability of environmental liabilities and security of the people in the community. These occurrences are not listed in the content of EAR. Thus, it is clear that mitigation measures did not look at the daily increase of traffic flow of nearly 200 heavy trucks54. In an assembly in 2008, organizations of the civil society that conducted this study spoke their mind about EAR55.

From the three assessments or studies finished in August 2008 and the feedback from the organizations of the civil society, the PMASIS was made and-although, this plan is not the ideal-it tried to take management and compensation measures by means of five strategies:

1. Environmental land management

2. Conservation and sustainable development

3. Connections between communities and conservation of protected areas

4. Sustainable road construction

5. Cooperation, control and surveillance

Between October 2008 and May 2009, negotiations prior to PMASIS were promoted by means of workshops about various environmental and partaking activities in the short, medium and long term. Participant institutions made accurate agreements on PMASIS’s viability for each local, regional and State institution56. Although all EAR’s results in social and environmental subjects are not recognized, this process culminates with the “Institutional Wills Agreement for San Francisco – Mocoa Alternate Road,” whose agreements are as follows:

1. Inspection, monitoring and control of land occupation.

2. Information and communication program on the new road and proposal for the extension of the reserve.

3. Control system to avoid future illegal occupation in the right of way and forest reserve.

4. Management program of participants settled in the reserve and of those pretending to take part.

5. Program to raise community awareness


It can be concluded that the stage of analysis and due diligence of the project lasted approximately two years, during which twenty various meetings among society civil organizations, INVÍAS, IDB representatives and consultants were held where three assessments of environmental and social risks were carried out.

3.3 NEGOTIATION AND CREDIT ACCEPTANCE (NOVEMBER – DECEMBER 2009)

Between October and November 2009, IDB set a period of thirty days for society civil organizations to send their comments and suggestions on IGAS document (published before).

The importance of IGAS lies in the fact that it describes the construction plan of the San Francisco – Mocoa Alternate Road and the establishment of PMASIS, IDB commitments to the project monitoring and in terms of finances.

In November, WWF, BIC and ILSA provided IDB with some recommendations to strengthen the content of IGAS, thereby defining contemplated guarantees and conditions in the final loan design. The focus of the recommendations was on the four most important aspects of a region (territorial, environmental, of society and economic), insisting on a suitable access to the existing progress documents57.

As for implemented participation aspects, many faults were detected. During EAR consultation sessions, it was highlighted that there was not access to useful documents and clarity in the scope of assessment due to omissions of few previously suggested topics.

Lack of coordination between EIA and EAR caused the latter – grounded on the former – to be finished two months earlier without clarifying the process for the next integration. It is to point out that, though demanded by many organizations, drafts for the Plan of consultation activities were not known, nor were those of EAR before its final publication in March 2009.

The comment document mainly entailed making questions about the budget, its execution and the running of the Committee for Independent Technical Consultancy (CATI). Moreover, previously made comments on EAR sent or not included in the studies were recalled. Organizations centered on submitting a proposal to foster social participation by setting an citizen oversight for the project to be included in PMASIS and IGAS within the first three years after the implementation of the project, which is already in motion in accordance with the information provided by the Bank and as it was previously stated.

IDB summoned the author organizations of IGAS’s recommendations to a meeting in order to discuss them in November 2009.

Although not all of the comments were included in IGAS’s final report, some basic conditions to strengthen PMASIS implementation and avoid or minimize most worrying consequences like the expansion of the Mocoa River Protected Forest

57 Bank Information Center (BIC), Latin American Institute for an Alternative Society and an Alternative Law (ILSA), & World Wildlife Fund, “IGAS’s remarks and questions about Pasto-Mocoa Road Corridor (CO- L1019) and Request for Clarification of Environmental Inspector’s office (5 November 2009).”


58 PMASIS supports expansion of forest reserve in the upper Mocoa river basin (RFPCARM) on the way to Blanco river, in order to link the north with Doña Juana Volcanic Complex, which entails a transition from the current 34 600 ha. reserve to 65 300 ha., representing a 90 % increase in the conservation field. In this initiative, construction of a 121 700 ha. biological corridor which links the southern area of Macizo Colombiano with the northern Amazonia has been envisaged.

59 CO-T1145: Conservation of Biodiversity avoiding Deforestation ($US 100,000), http://www.iadb.org/projects/project.cfm?id=CO-T1145&lang=es; Cooperación Técnica para $US 100,000 (CO-T1166: Apoyo a Desarrollo Productivo - Población Indígena: Valle del Sibundoy) http://www.iadb.org/projects/project.cfm?id=CO-T1166&lang=es

60 CATI was created through Resolution 4493 on 30 September 2010. Its constitution is mainly the result of pressure caused by civil society organizations (OSC). Therefore, the Social and Environmental Management Report (IGAS) included the constitution of an Independent Technical Assessment Committee (CATI) for the project. Its aim is to support and assess PMASIS’s progress periodically and establish social and environmental threats for IDB, INVÍAS and Corpoamazonía to take corrective measures. The committee is financed with US$ 180 021 from the project’s funds for eight years. This was a special condition required for IDB’s first disbursement to INVÍAS. CATI comprises three experts in: (i) environmental management and protected areas; (ii) road infrastructure, and (iii) sociocultural; experts’ concept is oriented to PMASIS’s compliance with the provisions in the environmental permit and IDB safeguards policies.

Reserve58 were seen. IDB also approved two technical cooperations to obtain REDD funds from the voluntary carbon market to finance protection activities and for the creation of an indigenous mining business59. Loan conditions to ensure the effective implementation of PMASIS included various mechanisms: (i) CATI; (ii) review and approval through No Objection, and (iii) citizen oversight60.

The incorporation of a PMASIS worth US$ 11, 4 million with some conditions demanded by the civil society for the environmental and social risk management as a result of the preparation process of a four-year project marks a turning point since it implies the country institutional framework’s recognition and it is complies with IDB safeguards for the project.

PMASIS’s total budget is 6% of the total road cost – one of the routes in the highest ratio of cost/km in all Latin America – which renders it a project with the most commitment to construction sustainability in the region (project’s cost is measured in percentage). This was an important institutional decision because it let identify PMASIS’s financing facilities and amounts, its validation in IGAS and its incorporation in the final financing proposal.

With EAR’s contributions, PMASIS’s certain approval and IGAS, IDB negotiated the final proposal for the loan, which guaranteed that PMASIS’s cost (US$ 11, 4 million) would be included in the IDB’s funds. The Bank is interested in supporting studies and other original initiatives to complement and guarantee financing sustainability of activities that require a bigger investment in the long term. The loan was approved in December 2009.

3.4 FIRST DISBURSEMENT APPROVAL (JANUARY 2010 – JUNE 2011)

In this stage, the Bank signs a loan contract after the borrower has complied with the provisions stipulated in the document, which are mandatory conditions to proceed with the loan.

Likewise, the operation Handbook about the basis of the studies previously made was approved. In this stage, CATI is refined by establishing which experts will comprise it and what their working areas will be, as well as other conditions.

In this stage, something particular happened because the first disbursement approval took two years, which usually takes IDB one month at the most. This


was the result of a few setbacks in the adaptation of the Colombian government and its institutions to conditions demanded by the Bank, specifically regarding PMASIS progress, in order to guarantee protection standards at environmental and social levels. One of the arguments made by INVÍAS officials working in the environmental field claims that it is very difficult to aim at an institutional harmony when many of the country’s institutions do not understand the high standards demanded by institutions like IDB61.

It is important to point out that this stage took place in the transition of the second government of Álvaro Uribe Vélez and the first government of Juan Manuel Santos, who focused on a development policy and national plan which encouraged foreign investment and development of fields like infrastructure and mining.

3.5 EXECUTION AND MONITORING (DURING THE DISBURSEMENT PERIOD) (2012-2020) AND OPERATION (2020-2036)

This implementation stage starts once the loan contract has been signed and provisions to allot the first disbursement have been complied. Indeed, the implementation stage can be divided into two phases. The first phase takes place during the disbursement and construction period (nearly 8 years) and the second one during the project development and the loan repayment (16 years until 2036) and without contemplating a new loan. IDB participation in the monitoring and decision making during the first phase is consistent with the leverage, which is still associated with non-disbursed resources that are yearly decreasing.

Before the third year since the project was implemented comes to an end, it is possible to discuss the progress and challenges of the original plan. According to IDB or INVÍAS, by October 2013, 71, 60%62 of IDB resources had been disbursed and 44, 44% of the project had been done. Although the project is half-way through the end, it is possible to spot important efficiency tendencies and alternatives to tackle clear issues.

Reviewing and approving by means of the No Objection are measures taken by project leaders in the Bank, which are recognized for the approval of procurement plans. These measures are not grounded on precise methodologies but they are defined in accordance with officials’ criteria; therefore, they are difficult to monitor and assess.

In this stage, the Bank monitors the progress of the project through IDB’s regular commissions and its review and approval of procurement and changes by means of its no objection, as well as through the publication of monitoring reports every six months. There are two additional monitoring mechanisms agreed on in the loan negotiation: a CATI and a citizen oversight. They have failed to guarantee the level and quality of implementation and monitoring of IDB’s safeguards despite monitoring mechanisms.

61 Interview with Luisa Narváez, environmental engineer in charge with PMASIS monitoring in INVÍAS in April 2014.

62 Progress monitoring report. COL 1019 –San Francisco Mocoa Alternate Road Construction Project Phase 1 until October 2014


a. Design changes: Adaptive management or faults in the project preparation?

At present, the construction of stretches in sector 1 and 4 that link each side of the Forest Reserve. . Established in the Environmental Permit and in accordance with the information supplied by INVÍAS, the design of the road construction was updated so that the most vulnerable area inside the reserve endured the least possible environmental impact. INVÍAS is reviewing the designs so that they will include viaducts and tunnels in order to reduce construction impact at an environmental level. For the application of this strategy, there are not funds stipulated in the loan contract; however, the Colombian State takes charge of these expenses, although the source for its execution is not very clear.

Additionally, Mauricio Bayona, an IDB expert claims in an interview that every environmental and construction action necessary to comply with the environmental guidelines demanded by the Bank has been defined on the basis of the experience gained in sectors 1 and 4. He even states that the environmental management system is being defined with the help of Brazilian banks, which are adjusting these actions so that construction work in the Forest Reserve will be completed in 2015.

i. Expansion of RFPRM

In the Environmental Permit issued from Resolution 2170 in 2008 by the Ministry of Environment, Housing and Territorial Development, specific commitments were established to be made in the course of work. One of them, in the second article, is the development of a new working plan that technically and legally supports the expansion of the Forest Reserve area, although it should find compensation in its management, that is, in accordance with the socioeconomic, legal and biophysical reality of the area63. Another commitment is the establishment of an integrated management district, green corridor of protected areas where the road becomes its protector. Protection of reserve areas takes into account plans that support conservation of biodiversity and strengthen governance.

As for PMASIS implementation, it is to bear in mind that the Alternate Road goes across a forest reserve; thus, stipulated offsets must be implemented. PMASIS execution is only 10% of the budget and has delayed compared with the deadlines originally set for the construction of the Alternate Road. Nonetheless, IDB says that once prior consultation to the indigenous communities has been conducted as well as technical studies on the extension of the Forest Reserve, and depending on the outcome, the execution of the program will be finished in 2015.

With regard to the links between local communities with this rehabilitation program, INVÍAS is undertaking consultation with inhabitants in the region to know which productive projects they can develop (payment for environmental services, ecotourism, among others)64. INVÍAS asserts that the process of preliminary consultation is taking place in the area where the reserve is expected to be

63 Six-month Report agreement 682 in 2010 between Corpoamazonía and INVÍAS. “San Francisco Mocoa Alternate Road Construction” Project Phase 1 Integrated and Sustainable Environmental and Social Management Plan. Period reported from 1 January to 30 June 2014, p.6.

64 Results from this process will be included in studies that will be presented soon, both CATI’s report from July and the project progress report from 2014.


enlarged as well as consultation processes of good faith with the communities inhabiting land limits planned to be enlarged. A community is defined, firstly, as a group of people living inside the area of the Forest Reserve and who cannot carry out extraction and construction activities, but who have settled in this land for a long time, even before the reserve was named so.

According to information given by INVÍAS, recognition of spaces to be rehabilitated in the areas of work has been part of the dynamics of the project implementation. Areas of work mean those that will welcome production projects oriented to communities that will be categorized for them to change their main economic activity; therefore, research on repopulation of the area to obtain recognition of an integrated land has been conducted.

Technical and legal supporting extension document has been drawn up and established in the Ministry of Environment on 30 August 2012, with response from the Ministry in March 2013 where it approves of the timetable of proposed activities; the preparation process of the document, according to provided information in the PMASIS Monitoring Report in 2014, was crucial for the approval of the proposal, given that it was the result of work between the community and PMASIS unity of implementation of Corpoamazonía, which required technical contributions as well as the community’s empirical knowledge about cartographic information of the area65. This shows exercise of collective construction from a research methodology that includes and makes participant all the people involved in the Alternate Road construction.

Owing to the size and complexity of the area, a six-month monitoring system was devised in order to get a clear view of the land and locate deforestation sites- if there are some- so that Corpoamazonía would identify them later on.

According to information given by INVÍAS, all studies and research demanded to comply with the environmental and social safeguards inside the project have initiated, thereby guaranteeing compliance with offsetting measures.

Furthermore, relocation of the water intake in San Francisco council aqueduct, which belongs to sector 5 according to the order in the project but has not occurred yet, was foreseen as well as training to the indigenous communities with regard to exploitation in the mining area existing in the land, which has not been carried out so far.

Research with communities includes activities of use and management of natural resources for the development of local and indigenous peoples. Although the research inserts the aid program in the Comprehensive Life Plans, it is uncertain if it concerns all ethnic groups in the area where the corridor makes any direct and indirect impact. Also, association between this program and the so-called priority projects in the suggested strategy is unclear. Likewise, it outlines compensation to families stricken by the right of way, although authentication state of local communities’ holdings is still noticeable and ambiguous.

Bank managers affirm that groups are currently being formed everywhere for the execution stage, which is the least arduous in the whole work. One of the groups formed in this stage is the interinstitutional group, which will receive all

65 Six-month Report agreement 682 in 2010 between Corpoamazonía and INVÍAS. “San Francisco Mocoa Alternate Road Construction” Project Phase 1 Integrated and Sustainable Environmental and Social Management Plan. Period reported from 1 January to 30 June 2014, p.6


PMASIS achievements for the reserve’s sake. Similarly, ecological groups are being formed by members of the community; a protected area association inside Corpoamazonía was created.

It is important to highlight that because of the need to expand the project design of the Forest Reserve giving it a new delimitation, workshops for communities located inside the current Forest Reserve like in the limits of Expanded Protected Forest Reserve have been set. According with agreements in the six-month monitoring Report on PMASIS between January and June in 2014, the implemented participation process has been of much importance as the communities in the border – among Campucana, San Martín and San Antonio and Monclart – have had lots of participation. This is “a good quality sign that shows that better levels of governance have been attained during this process.66”

Specifically six workshops on information and design of methodology for the updating of studies previously conducted regarding the expansion of the Reserve with each community and one of them with the Comptroller General of the Republic were set. These workshops were held based on a contract signed by the firm Manejar Futuro Ltda. on 10 December 2013, starting on 20 December 2013 and ending in May 2014.

According to this contract, the following activities were done:

“Workshops with communities in the limits of the Extended Forest Reserve held after the delimitation of the Reserve by knowledgeable experts appointed by the Community Action Group; adjustment to the initial proposal for the extension of RFPCARM with regard to the toponymy in the area, information about holdings in the area, which shall be reclassified lasting until 2008 and about the area to be enlarged in 2014.”67

It is of much importance to point out that proposals established in PMASIS seek to recognize lands inhabited by communities as a specific area of 5700 ha. called Producer Protection Forest Reserve (RFPP) belonging to San Francisco’s council, under which its inhabitants can carry out sustainability activities and they are not restricted to anything regarding the aim of protecting the Forest Reserve. Although communities were in agreement, this entity was removed from the Colombian legal system; as a result, a process involving local groups is currently in motion in order to find a similar institution.

Thus, a great number of proposals have been submitted in different meetings such as the creation of a local reserve, a buffer zone, a local rural development area and an integrated management district in San Francisco. The community’s desired scheme can be described as follows: “during the period between 1 January and 30 June 2014, meetings with communities in five neighborhoods and local authorities were held in advance, where the progress of each Program was discussed as well as legal, social, economic, etc. provisions, which represent the implementation of the new alternative, highlighting that this is a process agreed

66 Six-month Report agreement 682 in 2010 between Corpoamazonía and INVÍAS. “San Francisco Mocoa Alternate Road Construction” Project Phase 1 Integrated and Sustainable Environmental and Social Management Plan. Period reported from 1 January to 30 June 2014, p. 5.

67 Ibídem, p. 6.


on and discussed among people in the five neighborhoods and local authorities.”68 This process resulted in the creation of the Integrated Management District (DMI), which was known in a meeting between the Forest and Biodiversity of the Environment in the Ministry of the Environment, INVÍAS Environment Deputy Director’s Office and the environment and social expert from the Unity of Implementation of PMASIS in Corpoamazonía. This presentation was made thanks to a forest reclassification of the five neighborhoods in the upper Mocoa river basin.

DMI was approved and the declaration and consolidation program of the scheme was developed from the land studies in the limits of the Forest Reserve, which must be reviewed and improved. At present, as an initial result, data on DMI western limits and cartographic frame on the land information from Agustin Codazzi Geographic Institute effective until 2014 is available69.

Approaches in the context of free and informed prior consultation

INVÍAS has come in contact with indigenous peoples for preliminary consultation on the expansion of the Reserve Zone during the first six months in 2013 or implementation stage according with the project cycle set up by IDB. So far participants have been the IDB, indigenous peoples in Putumayo, INVÍAS, Colombian Institute of Rural Development (INCODER), Corpoamazonía, the Ministry of Interior and different social and international organizations.

ZRFACRM’s participation is linked with various actions: (i) beginning of the execution of road infrastructure in stretches 2, 3 and 5 of the project, which represent the areas with the highest environmental impact, and therefore, IDB shall approve of its No Objection; (ii) expansion of ZRFPCARM in compliance with the commitment to mitigation stated in the project Environmental Permit, and (iii) to implement such mitigation commitment, a preliminary consultation process with indigenous peoples in Putumayo should be started, for the expansion affects directly and indirectly indigenous lands legally recognized by the Colombian State.

Moreover, IDB shall monitor the preliminary consultation process within the framework of indigenous peoples’ policies. According to information from the Bank managers, preliminary consultation process is currently in motion.

Expansion of the Area of the Forest Reserve is the best offsetting measure established in the development of the project, obtaining true meaning once implemented when it is linked with other protected areas. An integrated management district, an ecological corridor for protected areas where the road becomes its protector is desirable to be established.

It comprises the regional ecological integration plan, consolidation of 121 700 ha. conservation corridor and support to the environmental land management plan in Mocoa and San Francisco’s council, preparation of Use Planning and Basin Management (POMCAS), as well as design and construction of the Theme Park.

68 Ibídem, p. 8.69 Six-month Report agreement 682 in 2010 between Corpoamazonía and INVÍAS. “San Francisco Mocoa Alternate

Road Construction” Project Phase 1 Integrated and Sustainable Environmental and Social Management Plan. Period reported from 1 January to 30 June 2014, p. 10.


It is important to mention that the first biological consolidation plan includes indigenous warranties and requests for expansion before the INCODER, which is the competent authority. Although indigenous peoples have stood against this action’s big vulnerability so many times, the situation has not been overcome yet.

According with INVÍAS Deputy Director’s office of Environment and Social Management with regard to the purchase of holdings and plant restoration, 90 ha. have been purchased beyond reserves’ limits at present, whose restoration process has not started due to Document Processing (Document Processing for Management Plan and Use planning of a POMCA Basin is pending).

According with PMASIS’s monitoring report from January to June 2014, to the present the methodology and mechanism of statistical validity have been established to qualify and assess offered holdings for sale, and potential holdings were previously selected, the community has been consulted to know their viewpoint of the project’s expectations and official records were drawn up in agreement with lands’ owners to develop market appraisals to estimate holdings’ costs70.

At present, the reserve is officially registered and all demanded social, legal and land document processing has been done; however, as the reserve was designed in the decade of the 1980’s, there are still communities living in the area, so reclassification is expected in order to give these communities a protection category and allow them subsistence activities, except for extraction ones since preliminary consultation is firstly required.

At this moment the previous consultation is realized for the extension of the zone of reserve. Though this zone does not stay where they live the indigenous communities, is necessary, because they are located in the limit. In 2013 she became the previous consultation (by governors’ change in the communities the term was extended) and is expected finish it in December, 2014. Through the certification 913 of the Ministry of Interior, there was established the presence of the community “ Yanakona Villa Maria de Anamú “ (recognized by DAIRM with Resolution 067) 20/08/09), in the project “ Contract 407 of 2010. In October, 2013 the indigenous communities and the Road Consortium of the South had their first approaches, as a result of that the methodology was obtained for the accomplishment of the process of previous consultation on the extraction of materials of the river. This constitutes the first approximation for the process of extension of the Zone of Forest Reserve.

ii. CATI

The IDB provides a form of direct control over project implementation through the creation of an independent advisory committee to oversee the PMASIS (CATI). The CATI consists of three experts on infrastructure, protected areas and social issues. This group has conducted semi-annual visits in the area of project construction to monitor implementation and provide recommendations

70 Six-month Report agreement 682 in 2010 between Corpoamazonía and INVÍAS. “San Francisco Mocoa Alternate Road Construction” Project Phase 1 Integrated and Sustainable Environmental and Social Management Plan. Period reported from 1 January to 30 June 2014, p. 13.


for corrective actions71. The result is two reports per year of observations and recommendations which are not of strict compliance but are essential guidelines with an independent look.

Regarding the availability of institutional policy information, it is stated that all contractual documents are public, like all reports that are generated. However, reports of public monitoring does not provide much detailed information and the more positive aspects are usually privileged. CATI reports are for use of INVÍAS and IDB, as they are internal documents that are released in a discretionary manner, as schedules of activities for meeting the objectives set out in PMASIS.

There is a contradiction between the objective and the scope of the committee, since the concepts and semiannual reports of these advisors should be public and useful for the community. However, it has been left to the representative of INVIAS and the Bank the access to those documents, which has generated a direct restriction, a situation which to date has resulted in complete disregard of such reports72.

b. Control Mechanisms

INVÍAS specified that the monitoring of the project were to be implemented in two forms. The first one should be direct, that is through contract park rangers, there are currently three but in the construction phase they will be increased to five and then in the operation stage, to twenty. The second is through an indirect monitoring through analysis of satellite that is purchased annually. Corpoamazonía also handles both forms.

Currently the only measure being implemented is on the issue of satellite images. There is significant progress through analyzes that allow control over the area, in coordination with the work done by the park rangers who help identify which species are endangered and the particularities of financial guarantees for the development of their work73. It is questionable the level of independence that this mechanism of social control of the project can have if the INVÍAS executes and it is itself who performs the task of monitoring. It stresses that it is currently not clear its role as judge and jury in the project.

According to the monitoring report PMASIS to June 2014, the eastern sector of the Forest Reserve on 5097 acres in the town of Mocoa has been tracked and monitored terrestrially. It is then established from the monitoring performed, that within the period 2005-2015 a percentage of 3.2% of deforestation in 997.3 hectares of forest reserve area is evidenced.

71 The committee is composed by engineer Juan David Quintero, infrastructure expert; Rodrigo Botero, an expert in protected areas, and Constance Ussa, an expert on social issues.

72 Until 2014, CATI reports are not public.73 Interviews conducted on 25 and 26 February 2012, to the overseers of the “ San Francisco – Mocoa alternate

road” project. In addition, a report by the informational Journal of Putumayo specifically against the development of the project and in which the position of both veedurías until early 2013 can be set.


74 The veeduría of Mocoa was officially formed on September 9, 2011 by a meeting between the construction firm of the project and citizenship of Mocoa. This veeduría was made up of twelve people who offered themselves voluntarily.

75 Ibídem.76 Ibídem.77 Interview with Mauricio Bayona, responsible for Pasto Mocoa Project by the IDB in April 2014.

i. Citizen Oversight

The citizen oversight of the Upper Putumayo and Mocoa have developed differently74. The Upper has its own space to operate, unlike Mocoa, where ombudsman say they have no resources, have been more critical to the project and have requested constant information, but unfortunately, they have not received any response75. Currently terms of reference for promoting these spaces, according to information provided by the IDB are being developed.

The main action of the citizen oversight of Mocoa has focused since its establishment in seeking opportunities for dialogue with key players against the execution of the project, to which there was no direct answer, as in the case of INVÍAS, who gave a response until 2012, when different changes within the company were given. This year the citizen oversight met the first report of the Comptroller of the project. Currently there have been two reports to the citizen oversight of Mocoa by this actor in 2012; it is not known if there have been reports between 2013 and 2014.

The main observations from the citizen oversight of Mocoa focus on the difficulty to provide spaces for direct dialogue with key players who are carrying out the Project; and as a result, a lack of support and approach arises from the commencement of the project implementation by regional authorities such as the comptroller, the attorney or union status and the government of Putumayo, which are the entities in Colombia to ensure that these opportunities for citizen participation are materially implemented. It is recognized that there is no formal space where they can hold meetings or keep a constant track of information about the project. The resources have been provided by members of the citizen oversight themselves.

On November 28, 2011 the citizen oversight in San Francisco was officially established, composed similarly of twelve members of the community, including community leaders, indigenous leaders and delegates of the community are located in the layout of the pathway. This citizen oversight claimed to have received three reports on the progress of the project and three reports on the progress of PMASIS by the end of 2012. The citizen oversight stated that the project was running smoothly. Similarly, it emerged that it performs its functions with the support of “the Municipality of San Francisco that provides citizen oversight office and the Municipality of Columbus who supply office furniture and minimum equipment for the activity”76.

For its part, the IDB goes beyond the figure of citizen oversight to materialize citizen participation, recognizing that within PMASIS strengthening citizen participation is sought, so as to stablish monthly meetings with the community are generated where the status of the project is shown. The Bank recognizes that while there are highs and lows in the processes, progress has been made77. However, greater emphasis is not placed on the processes developed with both existing citizen oversight .


It also states that these offices are not the only mechanisms that are being formed, because with the support and advice of INVÍAS, environmental groups formed by the population of the village are being integrated and not just by the leaders, who play a role in preservation. Likewise, community action boards and local boards that are within the reserve area, the institutional committee and a specialized unit within Corpoamazonia, which already exists, are being integrated.

According to the monitoring report of the PMASIS from January to June 2014, the formation of the two citizen oversight is reiterated, which took place from an open public competition held in Sibundoy Valley and the town of Mocoa in 2011. It is stated in the report that in the period of 2014, monthly meetings to present progress of the implementation process of PMASIS to the members of citizen oversight of San Francisco and Mocoa have been developed. The Coordinating INVÍAS unit accompanies and supervises these activities78.

Project Implementation Units have led these meetings, specifically in the proposals of environmental management in the area of the forest reserve. Similarly, activities related to strengthening governance, citizen participation and environmental citizen oversight are discussed. Thus, in the report, it is established the participation of institutions related to the project with requests for clarification of the community in different aspects of the project as well as the attendance to the events organized by the community is established. In total fourteen community meetings, one of the institutions and eight meetings of the citizen oversight were performed.

The Institutional Committee of Protective Forest Reserve of Upper Mocoa River Basin (WCCAC) is responsible for promoting the goal of strengthening community participation established in the PMASIS. Thus, through individual consultation 0319, in 2013, the committee is structured with delegates from the communities of Mocoa and San Francisco as well as institutions participating in the project. Registration of the Committee was formalized on 24 June 2014. Currently, technical specifications of the Committee contained in the Operation CICCAM are being processed.

Establishment of complaint to the Independent Consultation and Investigation Mechanism (ICIM)

The space set by the Bank seeks to create a scenario of control versus financed projects from the point of view of the affected communities. In this case the communities did not fully participate in the process, since they did not see an effective recognition of their participation in the development and project planning stage.

In August 2011, indigenous peoples sought the opening of a process before the ICIM IDB, with its two instances: (i) the Ombudsperson, and (ii) the Review Compliance Panel. The ICIM determined through the Ombudsperson that the project could be violating the Environmental Safeguards (OP-703), Involuntary Resettlement Policy (OP-710) and the Policy on Indigenous Peoples (OP-765) of the IDB.

78 Semi-Annual Report, 682 agreement from 2010 between Corpoamazonía and INVÍAS. Project “Construction of the San Francisco Mocoa alternate road Phase I” Plan of Integrated and Sustainable Environmental and Social Management PMASIS. Reported period from January 1 to June 30, 2014, p. 19.


The process requested by communities aimed at determining the transgressions of the IDB towards their operational Environmental Safeguards policies(OP-703) policies, Involuntary Resettlement Policy (OP-710), the Policy on Indigenous Peoples (OP-765) and the policy on disaster risk management (OP-704) in the “Construction of San Francisco-Mocoa alternate road” phase 1 (2271 / OC-CO), and urged the IDB to urgently take the necessary measures to suspend transgression and repair damage to the indigenous peoples of Putumayo. The reasons why the project was evaluated in both phases are:

• Theprojectwoulddirectlyaffectthetraditionallandsofthecommunities,who have not had a voice in the project design, and produce an additional indirect pressure on adjacent lands.

• Involvementof thesystemofself-government: the lackof informedpriorconsultation and consent to the communities, the pressure produced by the project on certain community sectors and non-recognition of the position of certain community leaders have violated and continue to violate the decision- making system of Inga and Kamentsa indigenous communities

• Impactontheenvironment/motherearth:SanFrancisco-Mocoaalternateroad will directly affect fundamental natural resources existing in the area of influence of the project. Impacts generated by the rapid change in land use due to access to trading centers (illegal logging and the proliferation of monocultures in communal lands) have been anticipated.

• Thehealthimpact:detrimentinthehealthofcommunitymembersbytrafficon the road.

• Socio-economicdamages:theconstructionandoperationofthealternateroad will increase competition and pressure on community lands.

The request to the Ombudsperson ICIM first established that the request was eligible, since the project would violate the Environmental Safeguards (OP-703), Involuntary Resettlement Policy (OP-710) and the Policy on Indigenous Peoples (OP -765) of the IDB. On 27 July 2011 the request was submitted to the Project Ombudsperson, who declared it eligible for the consultation phase on August 16, 2011. On March 27, 2013 the Project Ombudsperson ended the consultation phase due to the consideration of nonexistent “necessary conditions for a process of dialogue.”

In the determination of eligibility for the phase of verification of compliance related to Construction Project San Francisco – Mocoa alternate road, the President of the Panel, Mr. Werner Kiene, declares the request ineligible for verification of compliance. With such determination, the ICIM process is finished for this request (08/29/2013).


B.

CASE OF THE BRAZILIAN DEVELOPMENT BANK (BNDES) AND VILLA TUNARI - SAN IGNACIO DE MOXOS HIGHWAY

(BOLIVIA)

The National Bank for Economic and Social Development (BNDES) is a public bank established in 1952. It is the main instrument for implementing the investment and long-term financing policy in Brazil. Since 2002, the BNDES incorporated within its objectives financing the integration of South America79 positioning itself as a key player in processes and proposals in this regard. The financing of the BNDES to projects outside Brazil is aimed primarily at the IIRSA, now known as South American Council for Infrastructure and Planning (COSIPLAN), part of the UNASUR.

79 “In the case of South American integration recent trends point to the reduction of such processes at its logistic dimension (infrastructure, energy, transport). The defense of integration expressed more desire for integration of countries into the global economy that the interest of building a community of states in the political and social sense “. South American integration in the context of a national development bank - the case of BNDES, XXVIII International Congress of Wings 6 to September 11, 2011, UFPE, Recife-PE. Working Group: Globalization, regional and subregional integration. Dias dos Santos Airton, Lessa do Flavia Barros, 2011.

Source: L. Coutinho BNDES, “Financiamiento al comercio exterior”. UNASUR - GTIF - GT - October 3, 2012.

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8Others sectors

Infrastructure

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Disbursements for Infrastructure in Latin America

US$ 1 billion

GRAPHIC 2: DISBURSEMENTS FOR INFRASTRUCTURE IN LATIN AMERICA


According to the Bank’s operations outside Brazil, they do not get to be direct loans to projects in countries, but they are given through the financing of the internationalization of Brazilian companies and promoting exports of goods and services. For this purpose, in 2003 the Bank established the Department of Integration of South America as part of the Foreign Trade Area80.

The BNDES support to exports and internationalization of companies is done through various programs, each of them with mechanisms and targets. The main lines of funding are: BNDES Exim (Pre and Post-shipment), which supports through two mechanisms: Exporter Financing and Importer Financing; BNDES Exim Automatic81, by opening credit lines to financial institutions abroad, and the BNDES Finem, with lines to support the internationalization of companies and acquisition of capital goods. Moreover, the creation, in 2005, of the Bank Representative Office in Montevideo complies with the aim of encouraging more business outside Brazil, especially in the countries of Mercosur. The creation in 2009 of the London office BNDES PLC would aim to raise funds and strengthen the Bank’s investments outside Brazil, and the Africa BNDES office, created in December 2013, would boost the Bank’s actions in that continent.

With these mechanisms, the BNDES has positioned itself as a major player in boosting Brazilian foreign investment abroad, the penetration in other countries of industrial groups specialized in natural resources (ethanol, metallurgy, construction, hydroelectric industry, etc.)82 and the expansion of international economical resources to all regions of Latin America83. At the same time, the Bank has been publicly questioned for several years, being responsible with governments and companies for the results of their activities and operations in terms of the development goals they promote, to be part of social and environmental conflicts and generating greater social injustice, both within Brazil and in the regions where it operates84.

80 “The BNDES creates department to support South American integration.” Economic Value, August 8, 2003.81 Created in Novermber, 2013. Circular 38/13. NBESD, 2013.82 BNDES: New forms of access and control of transnational capital to natural resources of Bolivia. S. Molina

27/11/2009. http://www.fobomade.org.bo/art-33183 “In late 2011, the Brazilian government authorized the Bank to support processes of acquisition and mergers of

Brazilian groups abroad. Also in 2011, BNDES closed under the BRICS (Brazil, Russia, India, China and South Africa), a cooperation agreement with development banks in the bloc. In it, the facilitation of transactions and joint projects are estimated and the formulation of a framework that can provide financing to projects of common interest, aiming at the establishment of an interbank entity in the future. “Environmentalization of Banks and Marketizing in Nature, debate on environmental policy BNDES and accountability of financial institutions. Pinto, Joao Roberto Lopes, ed. Brazil Network on Multilateral Financial Institutions Supervision, Brasilia, 2013.

84 There is a lot of information, studies, reports and news made. In the links: http://www.plataformabndes.org.br and www.ibase.br/ can find many of these documents and references to others.


1. SAFEGUARDS TOOLS OF THE BNDES

1.1. SOCIAL AND ENVIRONMENTAL SAFEGUARDS POLICY AND GUIDELINES

Since 2010, the BNDES system has a Social and Environmental Policy85 substituting the Environmental Policy of 2008 which was part of its operational policies. The main objective of the new policy has maintained the same compared to the previous one:

“Promoting sustainable development proactively in all supported ventures, with a vision of an integrated concept of economic, social, environmental and regional dimensions and commitment with the present and future generations, in accordance with the rules and corporative policies of the BNDES, particularly stressing the Social and Environmental Responsibility Policy”.86

The Bank notes that “The Social and Environmental Policy defines tools and guidelines that support the BNDES in fulfilling its mission: promoting sustainable and competitive development of the Brazilian economy through job creation and reducing social and regional inequalities” .

For the Bank, the social and environmental aspects and impacts of projects financed in their direct, indirect and automatic forms are identified and treated at different stages of the process of granting financial support in accordance with the guidelines of the Operational Policies especially of the Socio Environmental Policy. It further notes, “projects are classified according to their environmental risks of adverse impact and in compliance with industry or activity type, location, size and attributes inherent in the enterprise environmental impacts. Based on this set of data, social and environmental recommendations of the Committee of Supervised Credit (CSC) are discussed and will be observed during the analysis phase of the request for financial support, noting the socio-environmental compliance and promoting sustainability in the projects supported”.

According to the Social and Environmental Policy, the BNDES performs an analysis of the social and environmental features of the program or project to provide financing; in that sense, the Bank would be committed to observe, among the most highlighted aspects:

• Publicpoliciesandlegislations,especiallyenvironmentalpolicy.

• Considering the treatment of social and environmental dimensions as astrategic issue in the analysis of granting financial support.

• Continuouslydevelopingandrefiningmethodologiesand toolsofanalysis,monitoring and evaluating that they incorporate social and environmental criteria.

85 Resolution 2025/2010 - NBESD. Approval of the Socio- Environmental Policy of the BNDES system, replacing the current Environmental Policies, part of the Operational Policies.

86 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_es/Institucional/Responsabilidad_Socioambiental/politica_ambiental.html


• TheimpactsonemploymentandBNDESpoliciesonhumanrights.

• Promotingandguidingtheadoptionofpreventiveactionsandmitigationofsocial and environmental adverse impacts.

Also, according to the Socio Environmental Policy after the analysis of the intervention, the Bank may take other measures such as additional studies, recommending the reformulation of the project, define resources to strengthen mitigation measures and making social and environmental investments and even not granting additional financing when not agreed based on social and environmental risk.

However, the existence of a Socio Environmental Policy of the BNDES does not necessarily mean adequate consideration of the adverse effects that a funding could potentially have. While the Socio-Environmental Policy establishes criteria for financing investments, these are not clear and definitive. They could not ensure that the Bank’s decisions are taken in consideration of the negative implications of financing, both economic, social and environmental for populations and regions in which they are held. The policy states generic terms without defining parameters or conditions for approval or rejection of the financing of a project, even less they establish the obligation for the operations to have performance goals and indicators of social and environmental development.

The BNDES Social and Environmental Policy turns up to be an instrument meant to encourage investment promoters (companies) to the implementation of good practices and promotes the Bank’s actions to be based primarily on company statements. What comes to mean that the Bank does not assume a commitment and responsibility for their actions to society and populations where it operates. This is recognized by the BNDES itself when reporting that an evaluation of sustainability is still in the process adoption (called Logical Framework and Theory of Change) that aims at measuring the degree of contribution of the BNDES in sustainable development87. This process is performed with limited information and even less active participation of society and communities where the projects are developed.

The practical application of the Socio-Environmental Policy of the BNDES would seem to show that there is an instrument defining the approval or rejection of new financing. The Bank is receiving information from the company or proponent and it is limited to verifying whether environmental guidelines defined in policy and legislation, such as conducting public consultation and EIA, among others, were fulfilled by the relevant environmental agencies and the promoter of investment (enterprise). Therefore, the BNDES alone would perform formal verification of compliance without actually assessing the quality and depth of the studies and would establish performance indicators of the company and the project to help monitor the impact of investments financed.

Additionally, since 2008, the BNDES compulsorily incorporated in the financing contracts a social clause to combat racial and gender discrimination, child labor and slave labor in Brazil. However, the Bank is not clear on criteria regarding human rights, indigenous and vulnerable populations and preservation of the environment.

87 http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Documentacao/Arquivos_excluidos/Relatorio_Anual_2012/Capitulos/1_O_BNDES/1_2_Organizacao_processos_governanca/1_2_4_monitoramento_avaliacao_projetos.html


Doubts regarding the actions of the Bank outside Brazil are even greater. The BNDES establishes respect for the sovereignty of countries and thus fulfillment of the law of the country where it operates. It does not define the framework for implementation of its Socio-environmental Policies nor the social clause in contracts for financing operations abroad.

1.2. TRANSPARENCY POLICY, ACCESS TO INFORMATION

The Bank does not have a policy of transparency and access to information. The Policies of Social and Environmental Responsibility of the BNDES system mention “ethics and transparency with the public, ensuring dialogue and reporting back its decisions and activities”88 without any guidelines for access to information.

In 2007 the Bank established its portal BNDES Transparent89 to the disclosure of operating results and statistics. The information disseminated on this site is limited and does not allow access to project information. It also has an Access to Information portal BNDES90 and the Citizen Information Service (CIS / BNDES), created under the Access to Information Act 12.527 / 2011 and Supreme Decree 7.724 / 2012.

According to the Bank, from its creation in May 2012 to August 2014, the CIS received 204046 requests regarding various topics, among the ones “Economy and Finance” stands out. Of total applications, 98.1% were answered without detailing whether the information was provided or denied and only 1.12% are pending in time, the remainder would be processed later91.

In these instruments, information on funding for projects is limited and insufficient; further, the BNDES only provides basic information about the Exim Post-shipment line without disclosing the amount of funding or disbursements, nor investments in programs and projects related to infrastructure construction outside Brazil.

1.3. ACCOUNTABILITY POLICY

The BNDES system does not have a policy and clear and efficient mechanism for accountability and attention to complaints and grievances of society, even though Brazilian law, among them the National Environment Policy (1981) and environmental Crimes (1998) state that banks are jointly responsible for environmental damage caused by the projects they finance.

The mechanism called Ombudsman92, created in 2003, according to the corresponding site of the BNDES, has to receive suggestions, complaints, and claims and adopt a role of mediator in conflicts between the population and the institution. In fact, it is rather a form of care to claims related to the difficulties of access to information, consultation on the Bank’s performance and general information that care demands regarding impacts of projects and other operations.

88 Resolution 2023/2010-BNDES. Creation of Policy of Social and Environmental Responsibility of the NBESD system.

89 www.bndes.gov.br/SiteBNDES/bndes/bndes-pt/Institucional/BNDES_Transparente/90 www.bndes.gov.br/SiteBNDES/bndes/bndes-pt/Institucional/acceso_a_informacao/91 http://www.acessoainformacao.gov.br/sistema/Relatorios/Anual/RelatorioAnualPedidos.aspx92 www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Navegacao_Suplementar/Ouvidoria/


1.4. INSTITUTIONAL CAPACITY

Until December 2012, the BNDES had 2853 employees93, without any form of public distribution of staff (see Annex 1 - Section BNDES, a simplified flowchart of Banco shown).

In 2009, BNDES created the Division of Environment structured from a Superintendent in charge of four departments94, of which only the first two are responsible for the internal socio-environmental management; the other two are more related to the promotion of projects:

• Environment Executive Management Legal (JUAMA) verifies compliancewith environmental laws and legal implications.

• PoliciesandEnvironmentalStudies(DEMAM):responsibleforenvironmentalsupport, development of guides and studies.

• EnvironmentOperationsDepartment (DEOPE): responsible foroperationsand the development of financial instruments for environmentally sustainable initiatives.

• AmazonFundManagementDepartment(DEFAM):responsibleformanagingthe Fund.

Application of Safeguards Policy of BNDES in the project cycle (Processing Operations)

The guidelines of the safeguards policy of BNDES note that its application is made during the stages of processing operations (Figure 7). This process is the formal path that follows a Bank financing from dispatch of the order of a company. The stages are defined under the concept that it is a company or project promoter required to obtain bank financing to run.

93 Management Report - BNDES, December 31, 2012.94 BNDES y la Agenda Verde. Yabe, A, Moreira, T. Curacao, 2009.


95 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/Apoio_Financiero/Politicas_Transversais/Politica_Socioambiental/analise_ambiental.html

96 Operational areas are those that make the analysis and structured transactions for financial support from BNDES, responsible also for the support of projects funded. Therefore, they are divided by strategic sectors such as Foreign Trade Area (AEX), the Infrastructure (IEA) and Industrial Area (AI).

FIGURE 6: STAGES OF PROCESSING OPERATIONS IN BNDES

According to Bank information, the process and steps followed are the following95:

Query letter: It is the first step that the entrepreneur or project sponsor (can be a financial institution) takes for funding. This is a document with preliminary project details and background information that the company presents to the Bank for evaluation based on their suitability to the Department of Operational Priorities (DEPRI) of the Planning Policy.

Framing. At this stage the Bank performs the pre-evaluation of the project and the company. Participating the Planning, Credit and Operational Areas96 that would be responsible for carrying out a preliminary assessment of the social and environmental aspects of the beneficiary (company or promoter) and the project as well as an investigation of the recipient that includes a consultation on its performance in relation slave labor. For this stage, it belongs to make recommendations for the next phase and classification of Environmental Category according with basic guidelines that would come to define the project in one of three categories, from A to C, being the first one of higher risk of adverse impact and the last one classified as having no risk of adverse impact.

Presentation of the Project: It is the development phase of the project according to guidelines of the Bank for the presentation and subsequent stages.

Source: Official Website of BNDES

Monitoring

Medium Term

COMPANY

QueryLetter

ProjectPresentation

60Days

30Days

60Days

30Days

30Days

180Days

COMPANY

Framework Projectanalysis

Approval Hiring Disbursement

PROJECT


Analysis, approval and contracting operations: They are processes performed by the competent operational area that emits an Analysis Report Project passing to BNDES Board decision. If the transaction is approved, it is communicated to the promoter for the submission of documentation and contract signing. In these stages the Bank would conduct a socio-environmental assessment of the beneficiary, its policies, practices and management regarding BNDES Operational Policies and Project in relation to social and environmental impacts, mitigation measures, compliance with legislation, attention to social action, and so on.

Disbursement and monitoring of operations: It corresponds to the release of funds under the contract and in compliance with requirements. It is a step of verifying compliance with mitigation measures and follow-up financing. When the project has been completed, the Project Completion Report is prepared.

2. PROJECT PROFILE

The road between Villa Tunari - San Ignacio de Moxos, about 306 kilometers long, would be located in the central part of Bolivia and is planned to link the departments of Cochabamba and Beni through and dividing this route the TIPNIS97.

The design and construction of the road was awarded to the construction company of Brazilian capital Constructora OAS Ltda. In August 2008 for $ 415 million in a questionable98 tendering process turnkey (the company is responsible for feasibility studies, final design, construction and presents an offer of funding). After several efforts, in 2009 the presidents of Bolivia and Brazil agreed to the Brazilian finance of US $ 332 million (80%) to the project through BNDES and 20% of Bolivian counterpart.

97 The TIPNIS was declared a National Park in 1965 and in 1990 was recognized as Indian Territory, through laws achieved through mobilization of indigenous peoples of the Bolivian Amazon. It is a region of Andean Amazon of transition from 3000 m to 180 m, between the subandino and Beni plain header rivers of the Amazon basin, classified as Pleistocene Refuge (characteristic for the abundance of endemic places). Its forests regulate water to the plain (avoiding large runoff), regulate the climate in highly productive surrounding valleys, and it is in turn territory inhabited by indigenous peoples, moxeño, trinatario and yuracaré long before colonization.

98 The bidding process, procurement and contracting of the Construction OAS Ltda. was the subject of complaint to the General Comptroller. The result of the Special Audit on Hiring Process Highway Villa Tunari - San Ignacio de Moxos provides detailed “facts of breaches of the country’s administrative legal system.” Charter GPAE / 847/2010 of 14/06/2010, CGE.


FIGURE 7: SAN IGNACIO VILLA TUNARI MOXOS HIGHWAY THROUGH THE TIPNIS

Source: SERNAP


In 2011 the administrative and legal to carry forward the financing agreement or protocol with the signing of 10219991 Financial Collaboration between BNDES and the Plurinational State of Bolivia with the intervention of the OAS Ltd. construction contract actions were implemented. And the Bolivian Manager of Roads. Bank credit to the Bolivian state was divided into three sub-credits, the first relating to mobilization activities for the construction of the road, the second for the construction of the northern stretches and south, and the third for the construction of the central stretch that cross the TIPNIS.

The project, promoted by the government of Bolivia and agreed between both countries, the BNDES and OAS Ltd was, from its planning, rejected by the indigenous peoples of the TIPNIS99 supported by lowlands and highlands indigenous organizations of the country. The progress of governments and the Bank, parallel to indigenous questioning the project, led to the VIII Indigenous March and later IX Indigenous March with massive public support, which marked a period of great conflict in the country and appeal to governments of both countries and the Bank itself by Bolivian, Brazilian and other countries’ indigenous and social organizations. Governments and the Bank were made responsible for violation of human and collective rights. They are publicly pointed out as responsible for the violation of the Constitution of the Bolivian State and international agreements, national environmental legislation, public procurement rules, BNDES policies and others, which has generated legal processes, which are in progress, in national courts and international organizations.

The decision of the Bolivian state to settle the contract with OAS Ltd., on grounds of non-compliance and administration, together with the making of a “prior consultation”100 held posteriorly to the decisions and actions of the government to build the project and that at all times was rejected by the indigenous peoples holders of TIPNIS, paralyzed the construction of the road and left uncertain the status of financing agreements with the BNDES and the Financial Collaboration Contract.

The development of the project has been a long process since the idea of linking Cochabamba and Beni departments. At the same time, it is part of a series of political and social processes in the country. To facilitate understanding in relation to the participation of the Brazilian government, the BNDES and the OAS Constructor, it has been divided into major stages (A project timeline highlighting important milestones related to financing and participation of BNDES is in Appendix 2):

2.1 PRE-PLANNING OF THE ROAD (1964-1997)

It corresponds to the period since the TIPNIS is created, the declaration of Park and ancestral territory of Mojeño, Yuracaré and Chimán towns and the granting of the property title of Communal Land TCO (Provisional) is created. In this period the construction of the road Cochabamba – Trinidad is declared national priority.

99 Since 2004, the substation Indigenous Peoples: Mojeños-Yuracare-Chimane Territory National Park Indian Isiboro Securte (TIPNIS) backed by the Central Ethnic Peoples Moxeños of Beni CPEM-B and the Confederation of Indigenous Peoples of Bolivia CIDOB, sent letters and cast votes operative indicating concern and rejection ads actions for the construction of the road Villa Tunari - San Ignacio de Moxos.

100 Prior consultation is based on the Constitution of the Plurinational State of Bolivia, Articles: 2; 11 Para. II, no. 1; 13, Para. IV; 30, no. II, 15; 256, 352, 403, I; 410; Convention 169 of the International Labour Organization ratified by the Bolivian State by Act 1257; in the Declaration of the Rights of Indigenous Peoples of the United Nations Organization ratified by Act 3760 and the American Convention on Human Rights (Pact of San José).


101 The deputy minister and the director of the Environment quit. July 27, 2010. http://www.bolpress.com/art.php?Cod=2010072601

102 The government authorizes open road in the Isiboro Secure. August 13, 2010.http://www.la-razon.com/index.php?_url=/sociedad/Gobierno-autoriza-camino-Isiboro-Secure_0_1229877033.html

2.2 IMPLEMENTATION OF THE PROJECT (2003-2011)

Period that goes from the introduction of the Villa Tunari-San Ignacio de Moxos road to the Fundamental Road Network (2003) of national competence and the declaration of national and departmental priority of the preparation of studies and construction of the Villa Tunari-San Ignacio de Moxos road (2006).

At this stage, the negotiations and political and administrative agreements between the governments of Bolivia and Brazil to finance studies and road construction are made, concluding with the Call for International Competitive Tendering for “Construction of the road Villa Tunari - San Ignacio Moxos under the turnkey modality with funding managed by the proponent” on March 4, 2008. The signing of the contract for the construction of the road was held in August of the same year. Later, Presidents Evo Morales and Luiz Inacio Lula da Silva signed the Bolivia - Brazil Financing Protocol in the town of Villa Tunari.

The rejection of the construction of the road was strengthened with the completion of the XXIX Extraordinary Meeting of Aldermen of TIPNIS. However, the government’s decision to go ahead continued with the presentation of EIA studies of stretches 1 and 3 to the National Environmental Authority by the Bolivian Highway Administration. The resignation of the Environmental Authority for refusing to grant environmental permits to these stretches makes even more visible the questioning of the project101, but with the appointment of a new state official, the two stretches obtained the Environmental Permit102. Not long afterwards, the government signed the Financial Collaboration Contract between BNDES and the Plurinational State of Bolivia and achieves its legislative approval Contract.

2.3. PROJECT IMPLEMENTATION (JUNE 2011-2012)

It begins with the issuance of the Notice to Proceed and disbursement of 20% corresponding to the Bolivian counterpart advance on June 3rd, 2011. These events are followed by the beginning of the VIII Indigenous Peoples March of the East, Chaco and Amazon in defense of TIPNIS in Trinidad in August of the same year, the march arrived in the city of La Paz after the government repression in Chaparina and the enactment of Act 180 of Protection to TIPNIS in October 2011. Later, the enactment of Law 222 Consultation with the Peoples of TIPNIS as a result of a march of the colonizer sector of the Chapare coca producer marks the beginning of a new stage of conflict leading to the Indigenous March IX and the Government’s decision to make the so-called consultation.

The government’s decision to finish the contract with OAS Ltda., agreed definitively in November 2012 with the final reconciliation between ABC and OAS Ltda., allowed the Bolivian Highway Administration recover $ 6.8 million and would define the ending of a stage between BNDES and the company OAS Ltda. participation. It does not mean halting the construction of the project.

The BNDES failed to disburse resources to the project, although in repeated occasions the Brazilian ambassador to Bolivia Marcel Biato stated to the press


that “the Bank and the Brazilian State ratified the commitment of project financing, awaiting for the resolution of conflicts arising with the VIII and IX Indigenous March and Bolivia sovereign decision regarding the project”103.

3. PROJECT CYCLE

3.1. FINANCING EXPORT OF GOODS AND SERVICES

The financing of the construction of the road Villa Tunari - San Ignacio de Moxos shows a very long process of negotiations between governments that conclude with the signing of the financing agreement between the Bank and the government of Bolivia, with the participation of the Construction Company OAS Ltda. and ABC. Regarding the Bank’s performance abroad, Brazilian authorities and the Bank itself indicate that it is not about direct loans to countries or money going to governments: those are loans to Brazilian companies with projects or export services outside Brazil104105. However, the loan agreement states that the borrower is the Bolivian State, which provides payment guarantees of the Plurinational State of Bolivia through the mechanism of Reciprocal Payments and Credits Convention (CCR), of LAIA.

The BNDES committed the financing to the export of goods and services for the construction of the Villa Tunari road - San Ignacio de Moxos by BNDES-Exim Post-Shipment line. Under this figure, the operation is part of the Department of Foreign Trade Bank.

The Financing Agreement (Financial Collaboration Agreement dated 15/02/2011 1021991) was signed between the Government of Bolivia and BNDES involving the Bolivian Highway Administration as an importer intervener and OAS Ltda. as an exporter intervener. As provided herein, the loan does not reach the borrowing country, but should be released in Brazil to the exporter intervening through a financial institution acting as agent bank.

The concept of BNDES of “export goods and services” and not financing infrastructure projects abroad seems to be a way for the Bank to free itself of the implementation of its Safeguards Policy noting that “it does not fund projects” . Thus, in addition to evade the effects that the project would generate, since it is financing negotiated between governments, the Bank would leave the decisions in other state agencies, as shown in this case.

The Bank is limited to enforcing the Bolivian legislation only in verifying the existence of documents and legislation relating to environmental permits. In the

103 http://www.eldeber.com.bo/nota.php?id=111025185047, http://noticiasdesdebolivia.blogspot.com/2012/01/brasil-ratifica-que-financiamiento-para.html

104 “When the BNDES finances projects outside Brazil, there are no direct loans to countries. Loans are offered and are intended solely to Brazilian companies that install or have projects in other countries. “Rubens Barbosa, Brazil’s former ambassador who chairs the Foreign Trade Council of the Federation of Industries of Sao Paulo (FIESP).

105 Coutinho lembrou than ever houve nenhum calote nesse type of Empréstimo eo dinheiro não vai para os Governos, and sim for Brasileiras produtos companies to buy and pay no Brasil Serviços e, depois, export-los. “Não can gerar no exterior emprego. Ha uma Produtiva cadeia expressiva small business that is beneficiam disso [empréstimos]”.http://www1.folha.uol.com.br/mercado/2014/05/1460806-nao-podemos-gerar-empregos-no-exterior-diz-presidente-do-bndes.shtml


process that culminated with the signing of Financial Cooperation Agreement, the BNDES would not even come to assess compliance with the State Constitution, Rules and Procedures of Public Investment, State Procurement Standards and full compliance with the environmental legislation

The Financing Agreement also excludes the so-called “Social Clause”.

3.2. PROCESSING OPERATION BNDES INVESTMENTS OUTSIDE BRAZIL

The development of the actions show that the path followed by the Bank for projects outside Brazil is not necessarily the formally established as “Processing of Operations”. It would be rather financings which follows an informal way; decisions would result from processes of political and trade negotiation in which the role of countries diplomacy is relevant and involves governments through presidents and ministers. Tables 1, 2 and 3 detail the “informal” path taken by governments and the Bank for planning and implementation of funding for road construction. Each stage has a description of the legal and administrative instruments that make possible the commitment of funding and project implementation.

From the knowledge of project development, which is supported by existing documents, it has been established that there is a process that maintains a logical sequence as follows:

A. Preparation of loan

It consists in the negotiation period of funding from government to government, stage in which the presidents of both countries and the Ministries of Foreign Affairs play an important roles. At this stage the implementation of the Bank Safeguard Policies is not evident and even less a process of analysis and evaluation of social and environmental implications of the project. It is primarily a political and commercial negotiation on the terms and conditions of project financing in the context of other negotiations and agreements that are not necessarily related to or involving the BNDES.

At this stage it has not been possible to establish whether any instance of the Bank get to participate directly in the decision-making of the project financing and export of Brazilian goods and services. However, the project documents state that there is a clear relationship between the decisions of the Brazilian government financing exports of goods and services, the BNDES and the companies providing the services supported by the Brazilian policy to support the internationalization of companies


TABLE 6: INFORMAL PROCESS OF PROCESSING OPERATIONS OF BNDES LOAN PREPARATION STAGE

STAGEGOVERNMENT

DOCUMENT AND/OR BNDES

DATE DETAIL OF THE DOCUMENT

Preparation of loan (government to government agreements with intervention of BNDES)

Joint Declaration ‘Brazil-Bolivia: Moving towards a strategic partnership’

December 17, 2007

Presidential statement that said that” they agree on the need to establish conditions for Brazil to make viable a loan for the infrastructure projects of the National Development Plan of Bolivia, considering the best financial conditions within the formal mechanisms of credit and guarantee Brazilians, and guarantees payment of the Plurinational State of Bolivia through the Convention mechanisms payment and Reciprocal Credit - CCR, LAIA.

Document Base of International Public Tendering LPI 001/2008 “Construction of the road Villa Tunari- San Ignacio de Moxos of Route F-24 under the turnkey modality with funding managed by the proponent”

March 4, 2008

A document that establishes the conditions and requirements for participation of companies in the tendering, including TDR’s general project description and the conditions that the contract would be conducted, along with details of the way they qualified and sample contract. During the tender this document was modified by 23 amendments. It states that the proponent must submit its financing offer, one Original Financing Commitment Letter of third parties from the institution or institutions that will grant the financing and clearly stating the commitment of the Financial Institution or Institutions to grant Bolivia the offered credit. Funding should be offered in US dollars for a total amount of 100% of the value of the project (later modified to 80% of the value of the project).

Joint Statement of the Presidents Evo Morales and Luiz Inacio Lula da Silva in Riberalta

July 18, 2008

Presidential Statement where it is mentioned “the importance of continuing and expanding bilateral financial cooperation in the area of infrastructure through the review in the shortest time possible financing other road stretches prioritized by the government of Bolivia in the National Development Plan”


Source: Elaborated by the authors from the analysis of the process and documents

STAGEGOVERNMENT

DOCUMENT AND/OR BNDES

DATE DETAIL OF THE DOCUMENT

Preparation of loan (government to government agreements with intervention of BNDES)

Resolution of Award of contract of the “turnkey” construction of the Villa Tunari- San Ignacio de Moxos RPC No. 0154/2008 road.

August 1, 2008

Document granting tender dated August 2008, which states that the works of design and construction of the Villa Tunari- San Ignacio de Moxos road were awarded to the Construction company OAS Ltda. For 415 million dollars, from which 332 million (80%) would be financed by BNDES and the remaining 20% by the Bolivian State. OAS Ltda., the only company.

ABC Contract No. 218/08 GCT- OBR-BNDES “Construction of the road Villa Tunari- San Ignacio de Moxos Route F-24”

August 4, 2008

It consists in a contract between the Brazilian construction company OAS Ltda. (Bolivia Branch) and the Bolivian Highway Administrator for the preparation of the Feasibility Study, Study to the level of Final Design, realization of the IAES and obtaining permits, road construction and delivery of the paved work, conducting quality control of the part of the road and materials and the launch of it. The company is responsible for managing 80% of the total amount of the contract US $ 415,000,425.39. Includes a “suspending clause” which establishes the suspension of the legal effect of the contract until the approval of credit by the governing board of the Public Treasury and Credit.

Joint Statement of the Presidents Evo Morales and Luis Inacio da Silva in Puerto Suarez / Ladario

January 15, 2009

Presidential statement in which they agreed that the Brazilian funding for road infrastructure projects in Bolivia will be held with the guarantee that Bolivia will give through the mechanisms of Payment Agreements and Reciprocal Credits- CCR LAIA. President Luiz Inacio Lula da Silva reiterated the Brazilian willingness to finance priority infrastructure projects of the National Development Plan of Bolivia, besides those already agreed on the scope of the project “To the north”. In this context, they highlighted the progress made for the next signing of financing Tunari- Villa San Ignacio de Moxos project.

Joint Statement of the Presidents Evo Morales and Luis Inacio da Silva in Villa Tunari

August 22, 2009

Presidential Statement in which among other things, welcomed the signing of Brazilian funding Protocol for Villa Tunari-San Ignacio de Moxos road, noting “allowing greater integration between the departments of Cochabamba and Beni, specifying more border interconnection that helps boost the economy of the peoples of this region.


B. Evaluation, approval and funding agreement

According to the Financial Collaboration Agreement106, the only assessment for loan approval and funding agreement known was made by the Committee on Finance and Export Guarantee (COFIG) in his 56th. Regular Meeting on March 27, 2009 approving the issuance of Insurance Export Credit in order to pay the resulting credit of the financing contract.

The COFIG is a Brazilian institution created on February 18, 2004 by Decree 4993. It is an integral member of the Board of Foreign Trade (CAMEX) with the authority to formulate and monitor the operations of the Export Financing program (PROEX) and export Guarantee Fund (FGE), setting the parameters and conditions for granting financial assistance for exports and providing guarantees107.

Subsequently, the funding agreement is defined by the signing of the Financing Protocol among the top government officials from both countries (presidents). This document sets out how to implement the Protocol through the signature of the Financing Agreement between the Borrower State and the BNDES, defining the program of export financing from BNDES and the conditions for disbursement of resources.

The Financial collaboration agreement establishes the need for the “declaration of effectiveness of the contract” both requirements for financial management of resources and social environmental obligations (see details in Table 1, implementation of the loan Stage). It also determines that the project for which the goods and services financed under the contract are intended to comply with all applicable environmental regulations in force in the borrower State and obliges the borrower to state that “the signing of the contract and compliance obligations arising from it will not cause conflict or result in violation of treaty, agreement, contract or other instrument of which the borrower is a party “.

The requirements for the disbursement of resources show the knowledge of the Bank and the Bolivian Government of the characteristics of the region and the social and environmental conditions108 in which it was intended to build the project, as well as the complexity, adopting contractual clauses that require the preparation and presentation of documents on which a minimum degree of depth of analysis, nor transparency and participation in its realization is not guaranteed.

106 Paragraph (D) in whereas section.107 The COFIG is composed by representatives of the following institutions: Executive Secretary of the Ministry

of Development, Industry and Foreign Trade, who is the chairman of the Committee; Ministry of Finance, represented by the Office of International Affairs, acting as executive secretary of the Commission; Ministry of Foreign Affairs; Ministry of Agriculture, Livestock and Supply; Ministry of Planning, Budget and Management; Civil House of the Presidency and the National Treasury of the Ministry of Finance. Representatives of Banco do Brasil SA; BNDES; IRB - Brasil Reaseguros S.A., and Insurance Brazilian Export Credit SA – ESCB also participate without vote.

108 The TIPNIS has a Strategic Plan and Management Program of “Indigenous Land Isiboro Secure National Park” (made in 2004) and Strategic Environmental Assessment for Sustainable Integrated Development of Indigenous Land and Isiboro Secure National Park (made in 2011).


TABLE. 7: INFORMAL PROCESS OF PROCESSING OPERATIONS BNDES STAGE OF EVALUATION, APPROVAL AND CONTRACTING THE LOAN


STAGEGOVERNMENT

AND/OR BNDES DOCUMENT

DATE DOCUMENT DETAILS

Evaluation, Approval and Contracting of the Operation

Protocol between the Federative Republic of Brazil and the Plurinational State of Bolivia on financing Tunari- Villa San Ignacio de Moxos road.

NOVEMBER 22, 2009

The document states that the Committee on Financing and Guarantee export- COFIG (1) the granting of credit in favor of the Government of the Plurinational State of Bolivia approved on March 27, 2009,, for a maximum amount of US $ 332,000,000.00, to finance the project. The credit will be used to finance 100% of the value of Brazilian exports of goods and services through the Brazilian company (s) selected by the Ministry of Public Works, Services and Housing, through the Bolivia Highway Administration, in representation of the Plurinational State of Bolivia, to work on the project “Villa Tunari- San Ignacio de Moxos”. The protocol will be applied by signing contracts between the Plurinational State of Bolivia and the National Bank of Economic and social Development -BNDES, with the intervention of Brazilian exporters, within its program of financing of exports of BNDES-Exim.

Law No. 005 for the adoption of the Financing Protocol Tunari- Villa San Ignacio de Moxos road.

APRIL 7, 2010

Law approval of the Protocol between the Republic of Brazil and the Plurinational State of Bolivia on financing Villa Tunari-San Ignacio de Moxos road.

Financial Collaboration Agreement by discounting credit titles No. 10219991 agreed by BNDES and the Plurinational State of Bolivia with the intervention of the construction company OAS Ltda. and the Bolivian Highway Administration.

FEBRUARY 15, 2011

Contract between the BNDES and the Plurinational State of Bolivia (Borrower) with intervention of the construction OAS Ltda. (Intervening Exporter) and the Bolivian Highway Administration (Intervening Importer) in order to support exports of goods and services performed by the Intervening Exporter to the Borrower taking as a precedent the commercial contract signed between OAS Ltda. and ABC. It establishes the conditions for disbursement requirements for both the financial management of resources and socio-environmental obligations. It states that the project for which the goods and financed services are destined in the contract will observe all applicable environmental regulations in force in the State of Bolivia Plurinational.

Law No. 112 of approval of Financial Collaboration Agreement.

MAY 7, 2011

Approval of Financial Cooperation Agreement by discounting of credit instruments No. 10219991 celebrated by the BNDES and the Plurinational State of Bolivia with the intervention of the OAS Ltd. constructing company and the Bolivian Highway Administration.


C. Program Implementation

For the implementation phase of the program the parties agree to the preparation and submission as requested by the Bank of various related conditions and social and environmental obligations documents. The financing agreement does not identify the instance of the Bank which analyzes the operation and it is part of the decision to adopt these obligations, nor identifies the responsible instance for the receipt and approval of documents related to social and environmental obligations.

The obligation to comply with environmental regulations of the borrowing country not referring to BNDES Safeguards Policies would define the “social and environmental obligations” of the Bank loans outside Brazil as different for each program and borrower country.

TABLE 8: INFORMAL PROCESS OF PROCESSING OPERATIONS OF THE BNDES - LOAN IMPLEMENTATION STAGE

STAGEGOVERNMENT


DATE DOCUMENT DETAIL

Implementation

Complying of social and environmental commitments that may become required by the organs of the Plurinational State of Bolivia

Prior to the disbursement of the credit component of stretch 2.

Receipt records and acceptance document of environmental and social Annual performance reports.

The borrower and / or intervening importer must produce it to the satisfaction of BNDES and the presentation of this document is a mandatory condition oprevious to disbursement of resources.

The contract states that these reports should have indicators to be proposed by the competent environmental authority, accepted by the BNDES and performed to the satisfaction of the Bank during the period of construction and operation of the project until the total debt has completely paid off to the BNDES.

Receipt Records and acceptance document proving the constitution and implementation of the Environmental Fund.

Up to 12 months from the issuance of the environmental permit for stretch 2 (which crosses the TIPNIS)

The Competent Environmental Authority must constitute the Environmental fund according to determinations and its objectives are to support the activities of monitoring, control and inspection in the TIPNIS.

Document confirming the delivery of Annual Reports of Environmental Fund activities

During the construction of the stretch 2 and until the period of the contract has expired.


STAGEGOVERNMENT


DATE DOCUMENT DETAIL

Implementacion

Receipt records and acceptance Document of the Strategy for Integrated Management of TIPNIS

Prior to the disbursement of the credit component to the Stretch 2.

Receipt records of the Declaration of Environmental Impact and respective studies of Stretch 2.


Acceptance in Social and environmental matters in reference to the requirements established in the corresponding Environmental Impact Statement


A specialized company with international experience must issue it.

Document receiving of monthly reports from socio-environmental monitoring of each stretch of the project.

The monthly reports must have the respective acceptance approval issued by the competent environmental authority must be submitted to BNDES up to 45 calendar days after the end of the semester.

Receipt records on legal, institutional and environmental conformity related to the process of obtaining environmental permit of stretch 2.

Prior to the disbursement of the credit component to this Stretch.

According to the contract, a specialized company with international experience to be hired by the Intervener Exporter (OAS Ltd.) according to objective to be defined by the BNDES must issue the consent.

Receipt documents in relation to the social and environmental Compensation implemented in the project.

Approx. 30 days after the completion of the works in each stretch.

OAS Ltd. must submit the list of compensations to the Bank with acceptance of ABC until 30 days after the date of completion of the works in each stretch.

Receipt records and conformity acceptance of BNDES on Social and Environmental Compliance regarding compliance with the requirements of the DIA and documents referring to each of the stretches of the project.

The Social and Environmental acceptance approval hired by OAS, must be issued by a specialist company with international experience, according to objective defined by the BNDES prior to disbursement of the last 5% of the value of the credit.



109 Law 1493 of September 17th, 1993.110 Letter of Transmittal evaluation of the recruitment process for the construction of the road Villa Tunari - San

Ignacio de Moxos turnkey financing proponent. Charter GPAE / 847/2010, 14/06/2010 and Technical Report. Comptroller General of the Plurinational State of Bolivia, 2010.

3.3. BOLIVIAN LAW ENFORCEMENT

3.3.1. Public investment system in Bolivia

Public investment goes through a planning process operations or interventions. As part of this process, projects are planned to take place as a sequence of activities known as the investment project cycle, which involves a gradual process of defining solutions, alternatives and scenarios to solve an identified problem.

Bolivian law states that the Ministry of Finance is the Governing Body of the National System of Public Investment109. It is responsible for the rules and procedures of the National Public Investment System (NPIS) that regulate the processes of allocation of resources for investment projects in all public sector entities. The basic rules of the NPIS state that the “cycle of public investment projects is the process that a public investment project goes through from its birth as an idea, is formulated and evaluated, comes into operation or abandonment is decided, and fulfills its life. “All public investment project must comply with this cycle and the following phases: Pre investment, comprising studies of prefeasibility and feasibility of technical alternatives, investment and operation; establishment of investment costs, assessment of project benefits and Final Design; execution, ranging from the decision to execute the Project for Public Investment and extends until implementation is completed and it is ready to start its operation; Operation, which involves actions concerning the operation of the project.

The construction project of the road Villa Tunari - San Ignacio de Moxos was tendered contracted and agreed funding without public investment standards being met. Feasibility studies and Final Design were commissioned to the company OAS Ltd. as part of the turnkey contract. The government of Bolivia and BNDES had no pre-investment studies when the loan was agreed, what would mean that funding decisions were taken without evaluating possibilities, effects, alternatives, financial options, nor having the reference price to advance the tender.

3.3.2. State contracts

The subsequent evaluation report by the General Comptroller110 to the process of Tendering and contracting of the OAS Ltd. Constructor systematically exposed the poor business practices and illegalities committed by the ABC, including the surcharge, the weakening of the requirements in tendering and contract documents to favor OAS, so as changing the terms and conditions, violating the rules governing this type of change (twenty amendments were made), among many others.

This assessment detailing illegal acts was undertaken prior to the signing of the Financing Agreement and publicly known. However, it had no role in the decision of BNDES for the signing of the Financing Agreement, showing violation of their own policies.


3.3.3. Compliance with national environmental legislation

Table 1 and Appendix 1 detail documents relating to the application of safeguards as set out in the Financial Collaboration and State documents generated as part of the detailed project planning.

Most of the instruments of detailed social and environmental safeguards should be developed in the implementation stage of stretch 2 of the road, which never started. According to the loan agreement, at this stage, the role of BNDES would primarily be the one of receptor of documents without responsibility on the project and its results.

The study of environmental impact assessment

According to Bolivian law and the contract of the company OAS, the study of Environmental Impact Assessment had to be one for the entire project. As a strategy to overcome the rejection of the construction of the road through the TIPNIS, the project Environmental Assessment and related financing were split into three stretches. The company moved OAS went through the studies for stretches separately and forcibly managed the environmental permit for both, allowing it to start construction in the end of the stretches. This was a form of pressure to the TIPNIS indigenous peoples to accept the construction of the project through the park.

The approval of the incomplete and deficient studies of Environmental Impact Assessment of stretches 1 and 3 under political pressure and change of the National Environmental Authority demonstrated the infringement of the Bolivian environmental legislation by the Bolivian Highway Administration and the OAS Ltd. Constructor, along with the breach of the terms of the Financial Cooperation Agreement approved by state law.

The EIA have generic direct impacts and the ones usually caused by the construction of such works. But the biggest shortcoming is that they do not evaluate the indirect impacts of each stretch and of these over the TIPNIS, which are most important to people. This situation is recognized in the granting of environmental permits, that are awarded in spite of being aware of the deficiencies in the EIA and environmental management plans: the analysis of indirect impacts is postponed, in both cases, until the completion of the Environmental Impact Assessment of the stretch 2111.

The public consultation

The public consultation workshops were conducted in 2010, separately for each stretch as part of studies of environmental impact assessment and without regard to the inhabitants of TIPNIS in any of the cases. They were general informational processes of the project benefits, signature of certificates that guarantee the execution of these workshops and

111 MMAyA / VMA 1513/10 and MMAyA / VMA 1512/10 on August 5, 2010.


112 Shouting “TIPNIS for Bolivia and not for Brazil,” hundreds of young environmental activists, human rights representatives and other organizations protested on Monday against the Brazilian embassy grounds that is responsible for the decision of President Evo Morales of build “without any doubt” the road that would split in two the Indigenous Territory and Isiboro Secure National Park. Protest outside the Brazilian Embassy by the TIPNIS and GM (16/08/2011). http://www.jornadanet.com/Hemeroteca/n.php?a=66712-1&f=20110816

collection of concerns and needs of the population, instead of real informational processes, debate and discussion on the benefits and risks of project implementation.

These instruments, which are binding for Bank financing as for Bolivian law, were mere formal processes for compliance with the rule and not tools for decision-making by agencies involved or alert regarding compliance with the legislation and international commitments. They were made by the company responsible, specialized in the construction industry and interested in doing the work of competence, therefore evaluations and studies in charge of it could hardly be objective, transparent and reflect the concerns and rejection of the people of TIPNIS towards the project.

The decision of the Executive to implement the project and the decision of the BNDES to finance it knowing the complexity of the situation and without the technical, economic, legal, social and environmental elements necessary, turned up into a conflict reflected in indigenous marches and social support to the non-construction of the road through the TIPNIS, affecting the image of the Bolivian government, the Bank and the Brazilian state112.


C.

CASE OF EXPORT-IMPORT BANK OF CHINA (CHINA EXIM BANK) AND COCA CODO SINCLAIR HYDROELECTRIC

(ECUADOR)

This chapter focuses on the application of safeguards by the Export-Import Bank of China (China Exim Bank) in the context of Coca Codo Sinclair hydroelectric project, the flagship project in terms of the challenges of managing social and environmental risk posed both for the Ecuadorian State and the China Exim Bank. To appreciate the specific manner in which the Bank conceptualizes and implements its safeguards, the analysis highlights the most important milestones of the Coca Codo Sinclair project cycle.

Identified milestones based on the successful completion of the China Exim Bank projects: (i) EIA and EIS - insufficient public consultation; (ii) accelerated analysis (six to seven months), and (iii) negotiation (lasted one year).

1. SAFEGUARDS TOOLS ESTABLISHED BY THE CHINA EXIM BANK

The China Exim Bank was founded in 1994. It is a state-owned bank under the leadership of the State Council and supervised by the Ministry of Finance of the Republic of China. It is mandated to facilitate the export and import of Chinese products and support Chinese domestic enterprises to invest in other countries and promote greater trade113. In fact, the China Exim Bank has been one of the most important financial institutions within the business strategy of the Chinese Republic in guiding flows US $ 30 billion annual through direct investment to other countries since 2007 (compared with US $ 50 billion from the World Bank Group in the same period)114

The portfolio of financing and insurance of China Exim Bank provides support and financial services to Chinese exporters to improve their international competitiveness. Its primary target markets include countries such as Japan, Korea, Indonesia, Vietnam, India, Brazil, Russia, Turkey, South Africa, the Middle East and Mexico. In 2012, the China Exim Bank granted a financing to the cumulative export of NT $ 5.5 billion (US $ 182 million) to these target markets.

Additionally, the China Exim Bank seeks to help Taiwanese companies enter emerging markets located in areas of Southeast Asia, Latin America and Eastern Europe. In 2012, loan approvals for exports to these emerging markets accounted for 63.90% of total export credit disbursed by the Bank. Thus, the China Exim Bank is exploring new business opportunities and helps local firms to expand into these markets115.

It is estimated that, since 2005, credit commitments of the Republic of China towards Latin America are of approximately US $ 75 billion, of which about 82% come from the China Development Bank (CDB) and 12% of China ExIm Bank, having as its main destinations Argentina, Venezuela, Ecuador and Brazil, which account for 91% of that amount. Furthermore, it is evident that the Chinese financing to Latin America began

113 China Exim Bank Annual Report 2013. Available at: http://english.eximbank.gov.cn/tm/enAR/index_634_26391.html

114 Irwin and Gallagher (June 2014) Exporting National Champions: China’s OFDI Finance in Comparative Perspective, Global Economic Governance Initiative Working Paper; M. Grimsditch (May 2014) Development Finance in the BRICS Countries: A Review from China. The author notes the difficulty of specifying the amounts and final destination of Chinese investment flows.

115 China ExIm Bank, Annual inform, 2012.


to grow significantly since 2008, when it placed $ 6 billion in the region, a number that would triple for the next year, exceeding US $ 14 billion and US $ 15 billion invested in the region by the World Bank and the IDB, respectively. In 2010, the amount would double, reaching US $ 37 billion and exceeding by far the investments by the World Bank and the IDB116.

Also, there was an estimated population of over US $ 1trillion in new funding for infrastructure in Africa by China over the next twelve years, of which between 70% and 80% would come from China ExIm Bank117. In Ecuador, the China ExIm Bank provides financing for hydropower projects Paute-Sopladora, San Francisco and Coca Codo Sinclair Mines (US $ 571 million, US $ 312 million and US $ 1.682 billion, respectively) and for the purchase of heavy equipment to the mining and hydrocarbons, among others.

Instruments of China ExIm Bank financing are concessional loans and commercial loans to Chinese enterprises in the form of credit for export and import of goods and services118.

Major Chinese government agencies of control on investments abroad are: the State Council, the Ministry of Commerce, Ministry of Foreign Affairs, the Ministry of Environmental Protection, State Commission for Regulation of Banking, and Supervision and Administration Commission of the Central Business Assets119 (see Annex 1 - Section China ExIm Bank).

Despite the existence of a comprehensive regulatory framework and numerous government control agencies for investments abroad, the main differences between the regulations of Chinese banks and other international financial institutions (IFIs) such as the World Bank, IDB and the International Finance Corporation (IFC), are in a lower level of development than the former. This difference in the institutional framework for environmental and social safeguards is particularly clear in regard to the specific mechanisms for implementation and monitoring. While the IFIs have policies and procedural requirements, work teams and budgets for these activities, the China ExIm Bank’s has not mandatory safeguard policies.

Furthermore, in 2008, the China ExIm Bank published a Guidelines for Environmental and Social Impacts Assessment. To finance projects abroad, the Guide states that the environmental system of laws, policies and regulatory frameworks of the borrowing country are the basis for evaluating the relevant risks. However, the Bank and the companies that receive the loan from it are asked to carry out an EIA before deciding on a loan and carry out environmental monitoring (ex post EIA) during the implementation

116 Gallagher, Kevin P., Amos Irwin, and Katherine Koleski (Mar. 2012) The New Banks in Town: Chinese Finance in Latin America, Inter-American Dialogue, pp. 5-7

117 Toh Han Shih (2013) China to Provide Africa with US$ 1 trillion Financing, South China Morning Post, 18 November. In March 2012, the China ExIm Bank and the IDB established a joint investment funding for the Latin American region and move until US$ 1 000 million in investments.

118 Gallagher et al. (2012:13). Table 6 explains that the costs of credit of the China ExIm Bank are below other Banks, such as BIRF y US ExIm, although the interest of 6, 9% for the loan for the CCS is exceptional. According to the State Council, the concessional loans of the China ExIm Bank have an interest rate among 2% and 3%, with a payment deadline between fifteen and twenty years and a five-year period at the start, were only interests are paid. PRC (2011) White Paper: China’s Foreign Aid. Information Office of the State Council. The concessional loans require buying a minimum of 50% in goods and services of Chinese origin for the financed projects.

119 Garzón (2014). Legal manual on Chinese environmental and social for loans and regulations for loans and investment abroad; Banktrack and Friends of the Earth (2012) China Development Bank’s Overseas Investments: An Assessment of Environmental and Social Policies and Practices; International Rivers (2012) The New Great Walls: A Guide to China’s Overseas Dam Industry.


of the project financed. It is clarified that the China ExIm Bank reviews the credit application documents submitted by the borrower and hires independent experts when deemed necessary120.

The Guide also provides that if the national system does not have the ability to assess and manage these social and environmental risks, they should use standards and practices governing investments in China121. On the other hand, the existence of environmental accidents and poor enforcement of social and environmental regulations in the same household level (in China) have raised concerns in the sense that these problems can be transferred to infrastructure projects undertaken by Chinese construction companies in Latin America122.

The China ExIm Bank has collaborated with IFC through two Agreements of Understanding to strengthen collaboration on environmental issues in investments in the energy and transport sectors in Africa123. However, the commitments of China ExIm Bank do not allow it to check how internal decisions are made during the project cycle and measures to make an independent review are necessary. The China ExIm Bank is supervised by the National Commission for Regulation of banking, but the public doesn’t know whether this form of regulation is implemented in the context of non-compliance124.

As for the chart of China ExIm Bank, this includes a number of offices and departments potentially relevant to the treatment of foreign investments, such as the Office of Oversight, Department of Economic Research, Department of Internal Control and Compliance, the Department of Legal Affairs and International Business Department (see Annex 2 - Section China ExIm Bank).

Policy or practice of access to information

The China ExIm Bank has no policy on access to information and not disclose internal documents concerning projects financed. In addition, the Bank’s website does not provide a tool for finding information on funded projects and documentation of results.

This way, the possibility of access to official information on funded projects such as EIA and EIS, credit agreements and contracts work- is subject to the provisions of the regulatory framework of each country or even in practice, the opening showing the authorities of the institutions or companies where these documents lie.

In this sense, Ecuadorian law stablishes that access to public information is a right of individuals guaranteed by the state. The Organic Law on Transparency and Access to Public Information (OLTAPI) provides that “any information arising or which is held by the institutions, agencies, legal persons in public or private right that [...] have state participation or are concessionaires of this [...] of workers’ organizations and service providers state institutions, institutions of higher education that receive income from the state, the so-called non-governmental organizations (NGOs), is subject to the principle of publicity [...]”125. Also, the right of access to public information is claimed in order to enable “citizen participation in decision making of general interest and declaration of the accounts of the different authorities exercising public power”126.

120 China ExIm Bank (2008). Guidelines for the social and environmental impacts assessment, article 13.121 Ibíd., article 12. For a synthesis of the quick evolution of the regulatory environmental framework in China en

China, see Gallagher et al. (2012: 21-26) and Garzón (2014). 122 Gallagher, Kevin P., Amos Irwin y Katherine Koleski (Mar. 2012). The New Banks in Town: Chinese Finance in

Latin America, Inter-American Dialogue, p. 26.123 P. Bosshard (2010).124 About the CBRC, http://www.cbrc.gov.cn/showyjhjlindex.do125 Organic Law on Transparency and Access to Public Information - OLTAPI (2014), article 1.126 Ibid, article 4.


It is worth mentioning that public information means “any document in any format that is held by public institutions and legal persons referred to in this Act, contained, created or obtained by them, under their responsibility or that has been produced with funds from the state.”127

With regard to the dissemination of public information, OLTAPI indicates that these institutions must obligatorily spread, through an informative portal or website, or other means necessary, a significant amount of minimum updated information128.

At this point, it should be noted that the promoter of the project Coca Codo Sinclair EP has mechanisms for disseminating information that largely conform to the provisions of national and public law: in its website, most of the information required by Article 7 of the OLTAPI is found. However, there is some information that is not published, especially in reference to external financing for the project, in this case from China ExIm Bank129.

Furthermore, the Guideline for Environmental and Social Impacts Assessment published by the China ExIm Bank notes that projects with significant environmental impacts should be consulted with the public in a manner that is consistent with local laws. However, the extent or quality of the information necessary for it to be an effective consultation is not defined.

In Ecuador, the right to free and informed prior consultation is recognized since 1998, when Congress approved the Convention 169 of the ILO. Later, in 2008, this right was also recognized in Article 57 of the Constitution of Montecristi, concerning the rights of groups of communes, communities, indigenous peoples of Ecuador. This article states that the inquiry should be conducted by the competent authorities in a mandatory and timely manner130.

Later, in Article 398, in the section referred to nature and the environment, it speaks of the duty to consult with the community at large regarding the approval of a project that may affect the environment, and notes that “the law shall regulate the consultation, citizen participation, deadlines, the consulted subject and endpoints and objection criteria to the activity subject to consultation “and clarifies that” the State shall consider the opinion of the community according to the criteria established in Law and international human rights instruments131. “On the other hand, it states that “if from that process (...)

127 Ibid, article 5. The information considered as confidential for having a direct relationship with the defense or safety of the State is excluded.

128 Among the information that must be spread, the following stands out: the services offered by the institution, the way to Access them, the attention schedules and other necessary indications for citizens to exercise their rights and fulfill their obligations; the forms or formats of requests for the realization of procedures inherent to its field of action; total information about the annual budget administered by the institution; the results of internal and government audits to the exercise of the budget; complete and detailed information about the pre contractual, contractual, adjudication and liquidation, work contracts, goods acquisition, servicing, commercial leases processes, etc.; the detail of the contracts of external or internal credits; mechanisms of accountability to citizens; inter alia. Ibid. article 7.

129 On the other hand, in the Enterprise communication policy, gathered in its website, it is indicated that this should “keep confidentiality with regard to technical and business information and, in general, to the information considered by the board of COCASINCLAIR EP as strategic and sensitive to its interests”, which said in such a general way would seem to oppose to the established by the LOTAIP in article 5. COCASINCLAIR EP (2014), http://www.cocacodosinclair.gob.ec/gestion-comunicacion-e-informacion/

130 Ecuadorian Political Constitution (2008), article 57.131 Ibid. article 398.


a major community opposition arises (...), the decision to run or not the project will be adopted by resolution duly substantiated in higher administrative level correspondent, according to the law.”132

Complaint mechanism

The China ExIm Bank does not define a provision for the borrower to establish an independent mechanism to receive, process and remedy complaints issued by the affected population. It only refers -in general terms to the compliance with national laws.

In the case of the Coca Codo Sinclair hydroelectric project, the Environmental Management Plan, contained in EIAD approved by the Ministry of Environment, does not provide a mechanism for complaint as such. However, the company has in its organization a department of Environmental and Social Responsibility Sub management, which would be responsible for processing potential claims filed by citizens, although this is not explicitly a function of this dependence.

Finally, in the absence of a complaint mechanism in such projects, there is a set of administrative and constitutional resources that communities can turn to if they feel affected by any prejudice to social or environmental nature.


There is no information about the internal capacity of China ExIm Bank. Although the Bank has taken significant steps to strengthen its management tools for environmental and social risk steps, the application of the Guidelines for the Environmental and Social Impacts Assessment is still a fairly general process not very transparent and lacking in detail in critical aspects of the project cycle133.

2. PROJECT PROFILE

The Coca Codo Sinclair hydroelectric project is located in the Amazon cantons El Chaco (province of Napo) and Gonzalo Pizarro (Sucumbios). The headwork are located downstream of the confluence of the Quijos and Salado rivers134. Works include water harvesting through a 24.10 meters high dam, driving the flow through a tunnel of 9.15 meters in diameter and 24.82 meters in length, to reach a compensation reservoir and then to the roundhouse, where eight turbines, 187.5 megawatts each, will generate 1500 megawatts in total, to finally deliver the water to the Coca river through a restitution tunnel.

132 With regard to this article, the fact of not taking into consideration “the special features of the right to a previous consultation as a collective right of the indigenous population” has been criticized and that it grants the State “an extreme situation of power over the adopted decisions by the consulted population [without granting] weight to the opposition expressed by the affected community”, and that additionally “does not consider the need to make a previous study of social and environmental study”. Foundation for Due Process (2011). The right to free, prior and informed consultation with indigenous peoples. The situation in Bolivia, Colombia, Ecuador and Peru.

133 M. Grimsditch y Yu Yin (2014). Development Finance in the BRICS Countries: A Review from China.134 COCASINCLAIR EP (2014), http://www.cocacodosinclair.gob.ec/sitio-de-desarrollo-del-proyecto/


135 According to the Fiscal Policy Observatory (OPF), the credit relationship with China among contracted loans and advance sale of petroleum now exceeds US $ 10 billion, although the stock of debt at December 2013 was US $ 4,633, 9,000,000 according to the Ministry of Finance of Ecuador. If this official figure US $ 1.4313 billion from the pre oil sale on 2013 oil are added, the government does not consider debt but a credit for the country, the financing granted by China to Ecuador totaled US $ 6.071 billion.

136 See Annex 3: Chronology of Coca Codo Sinclair hydroelectric project, and Annex 4: Timeline of Coca Codo Sinclair hydroelectric project.

137 Efficáticas (2009). Final Environmental Impact Study Coca Codo Sinclair Hydroelectric Project, Section III: Project Description, p. III-12.

138 On June 6, 2014, Ecuadorian President Rafael Correa confirmed that this project would not only achieve the so-called energy sovereignty, but it would also export energy to Chile under the energy integration process carried out by UNASUR-COSIPLAN. http://www.prensa-latina.cu/index.php?option=com_content&task=view&idioma=1&id=2761211&Itemid=1

139 COCASINCLAIR EP (2014). Accountability Report 2013.

The total cost of the project is US $ 1.979 billion for the engineering development contract, civil construction, equipment installation and commissioning of the project (awarded to Sinohydro Corporation) and US $ 72.5 million for the contract management and oversight of the project (awarded to the Cfe-PYPSA-Cva-Ica Association). The funding provided by the China ExIm Bank to the Government of Ecuador represents 85% of the total cost of the project (US $ 1.682 billion), with an interest rate of 6.9% annually, fifteen-year term135.

The project construction contract, awarded to Sinohydro Corporation, was signed on October 5, 2009; work began in July 2010 and it is expected to be completed by the end of 2016136. The main actors in the project are the Government of Ecuador, the China Exim Bank, the National Electricity Council (CONELEC), the Public Strategic Enterprise Coca Codo Sinclair Hydroelectric (COCASINCLAIR EP), the company Sinohydro, and the Cfe-Pypsa-Cva-Ica association, the Ministry of Environment and the Ministry of Electricity and Renewable Energy.

The hydroelectric project Coca Codo Sinclair was rated as a priority by the National Secretariat of Planning and Development (SENPLADES), considering it was one of the flagship proposals of the Government of Ecuador and that its operation would contribute to the mitigation of the problems in the energy sector in the country137. It is considered that the project will achieve the autonomy of the public electricity service, with possibility to export electricity to neighboring countries138, reducing the average cost of electricity generation in the country, significantly reducing the use of fossil fuels and contributing to the reduction of carbon emissions and creating jobs.

According to the Accountability Report submitted by the project promoter (COCASINCLAIR EP) to the Ombudsman of Ecuador, at the end of 2013 the project recorded an increase of 55.20% in the execution of works and 54 90% in budget execution. In the same report it is noted that the project employs a total of 6145 workers, of which 2748 are considered skilled, whereas 3397, unskilled (of which 1166 are Chinese workers)139.


FIGURE 8: LOCATION OF THE COCA CODO SINCLAIR HYDROELECTRIC PROJECT

Source: COCASINCLAIR EP http://www.cocacodosinclair.gob.ec


The China ExIm Bank financing for Coca Codo Sinclair hydroelectric project is for the signing of an EPC contract (engineering contract, purchase of materials, equipment and construction) and it’s guaranteed through a commercial trust of guarantee and administration thanks to the funds proceeding from the sale of the electricity generated by the project.

Consents or authorizations required to approve the signing of the credit agreement included:

• DeclarationofpriorityoftheprojectbySENPLADES

• DeterminationoftheeconomicandfinancialviabilityoftheprojectbytheMinistryof Finance.

• ApprovalbytheStateGeneralAttorneyforthesubmissiontoarbitrationundertherules of the International Court of Arbitration in London.

• Letter from the General Attorney’s Office concerning the legal framework thatallows the creation of a trust.

• ResolutionfromtheFundingInterinstitutionalCommitteeauthorizingtheborrowerto incur indebtedness in terms of the credit agreement140,

• ResolutionbytheDebtandFinancingCommitteeauthorizingtheborrowertoincurindebtedness in terms of the credit agreement.

Environmental and social risk categorization

The categorization of environmental and social risk of the project is not indicated in the credit agreement or work contract or in the environmental permit. However, the project is similar to those of other hydroelectric dams considered of high risk according to the scheme of the China ExIm Bank features.

According to the risk analysis contained in EIAD of the Coca Codo Sinclair hydroelectric project, potential risks during construction and operation phases of the project are related to events like the overflowing of the dam by heavy rain or accumulation of waste; break of the dam by heavy rain or structural failure; the slope caused by landslides, heavy rain or bad engineering practices, and pollution of water from the dam by the eventual rupture of the pipeline near the construction area for wastewater discharge upstream or eutrophication141. These risks would affect, depending on each case, project workers or people in its area of influence, both in terms of health and physical integrity, as in economic terms.

140 It is not necessary that the buyer credit agreement is filed, registered or recorded in any court or public office of Ecuador, although it will be translated into Spanish and registered with the Ministry of Finance and the Central Bank of Ecuador.

141 Efficáticas (2009). Estudio de Impacto Ambiental Definitivo Proyecto hidroeléctrico Coca codo Sinclair. Section VIII: Análisis de riesgo.


3. PROJECT CYCLE

To understand the application of safeguards tools by the China ExIm Bank, we analyzed the chronology of events in relation to the Coca Codo Sinclair project cycle (see Annex 3 and 4 - Section China ExIm Bank). Next, the most important milestones related both to the application of safeguards as to their correspondence to decisive moments for the execution of the project are highlighted. It is also indicated whether the documents supporting each milestone are publicly available or not. (see Annex 5 - Section China ExIm Bank). Based on the lack of official documentation of the China ExIm Bank, this part of the analysis is guided by the following assumptions:

1. The stages of the of the China ExIm Bank’s project cycle are similar to those of other development banks.

2. The approach favors the use of national management systems for environmental and social risk.

3. However, the Bank may make its own independent analysis of risks, if necessary.

4. Thus, the China ExIm Bank’s project cycle has five stages. Each includes some requirements, of which the principal are presented in the following table:

TABLE 9: STAGES OF THE CHINA EXIM BANK’S PROJECT CYCLE AND COCA CODO SINCLAIR HYDROELECTRIC PROJECT

ENVIRONMENTAL MANAGEMENTE PLAN PROGRAMS142

StageOrigination (Pre

construction phase)

Preparation / Evaluation

Negotiation / Approval / Contracting

Implementation during

disbursment Operation

Lenght12 months

January 2008 - February 2009

6 monthsMarch 2009 -

July 2009

11 monthsAugust 2009 -

June 2010

6 yearsJuly 2010 -

January 2017

8 yearsJanuary 2017

- December2025

Requisitos • Screening• Preliminary

approval• Scopingofthe

environmental study

• EIAandEISapproved by the authorities of the host country

• Publicconsultation for projects with serious negative impacts

• Scheduledinspections to the implementation of the project according to EIA and EIS

• Regularreportson project execution and its environmental and social impacts

• Reportsonmeasures to control and / or eliminate impacts

• Closure• Environmental

Assessment Study (EAS) at project closure

• Environmentalacceptance documents at the end of the project construction

142 Garzón (2014). Manual legal sobre regulaciones ambientales y sociales chinas para los préstamos e inversiones en el exterior; Efficácitas (2009). Estudio de Impacto Ambiental Definitivo Proyecto Hidroeléctrico Coca Codo Sinclair, Section X: Plan de Manejo Ambiental.


StageOrigination (Pre

construction phase)

Preparation / Evaluation

Negotiation / Approval / Contracting

Implementation during

disbursment Operation

Coca Codo Sincalir Project envitonmental requirements

• EnvironmentalManagement Program

• Socialandeconomic Management program

• Programforcompensation and resettlement of internally displaces population

• Mitigationandcontrol of air emissions

• SolidWasteManagement

• Liquiddischargeshandling

• Preventionfromgroundwater pollution

• Handlingoftheinputs in the worksite

• Borrowedmaterial handling

• Handlingoffloraand fauna

• Healthandsafety• Preventionand

control of erosion and sediment transport

• Compensationfor infrastructure and services

• Handlingofplant material removed from the reservoir

• Handlingandcontrol of aquatic weeds and cyanobacteria

• Relocationandmonitoring of wildlife

• Erosionofthereservoir basin control

• Reservoirmanagement program

• Solidwastemanagement program

• Protectedáreas management program

• Compensationand economic development

• Mitigationregarding public health

• Tourismdevelopment

• Communityrelations program

• Archaeologicaland cultural resources management program

• Healthandwork safety program

• Environmentaltraining program

• Abandonmentplan

• Enironmentalmonitoring program



3.1. ORIGINATION OR IDENTIFICATION OF THE PROJECT (JANUARY 2008 - FEBRUARY 2009)143

It can be seen at least three areas of divergence in the origination of the project with respect to international standards of corporate management. First, the credit agreement between the China Exim Bank and the Ecuadorian State does not include any categorization of the project in terms of social or environmental impacts that this implies. Nor is there a section that refers to requirements for environmental or social reasons for approval, realization or reversal of credit. Second, there was no public consultation on the terms of reference (TDR) of EIAD or SEA. And third, information on hiring independent evaluators by the Bank is not found. The only amendment to the contract was made on the basis of the observations issued by the Ministry of Environment.

The importance of these apparent weaknesses in this stage of the cycle lies on the fact that they affect the identification of preliminary risks and therefore interfere with the proper design of the investment.

3.2. PREPARATION - DUE DILLIGENCE (MARCH 2009 - JULY 2009)

On January 9, 2009, the company behind the project, COCASINCLAIR SA, made the second call directed to national consultants for the preparation of EIAD and Environmental Management Plan of the project for the same purpose after declaring the contest deserted on August 10, 2008144.

This consultancy was hired in March 2009 with the Efficácitas Firm. The DEIA report document and Environmental Management Plan were delivered by letter to the Ministry of Environment on July 15 of that year and approved on July 22, 2009, when the environmental permit for the project was also granted. This means that the studies were carried out in an even shorter period specified in the call (four months from the signing of the consultancy contract) and the Ministry of Environment approved them in a week time145.

Public consultation and citizen participation

Regarding the institutional framework, Section II of EIAD identifies as regulatory and control institutions the following: Ministry of Environment (ME), National Electricity Council (CONELEC), autonomous regional governments (municipalities and county councils) and the National Water Secretariat of Ecuador (SENAGUA). Of these, the main and the one who has to act as a governing body, coordinating and regulating the National Decentralized Environmental Management System is the Ministry of Environment146.

143 While early feasibility studies for the Coca Codo Sinclair hydroelectric project has already conducted between 1986 and 1992, it can be considered that the origination stage of the project, under the Project Cycle China Exim Bank, begins in 2008 with the declaration of the project as a high national priority by the national Electricity Council (CONELEC), because from that moment the project is directly linked to the possibility of Bank financing

144 To prepare the EIAD and Environmental Management Plan, the notice provided for a period of four calendar months from signing the contract. COCASINCLAIR (2014)

145 Ministry of Environment (22/07/2009). Resolution 215.146 Efficácitas (2009). Estudio de Impacto Ambiental Definitivo Proyecto Hidroeléctrico Coca Codo Sinclair. Section

II: Marco Legal e Institucional, p. II-8.


In this section it is stated that “the mechanisms for public information may include: information meetings, participatory workshops, awareness campaigns through the media, citizens environmental management and citizen oversight, public information centers, presentation or public hearing, web pages, public forums, open meeting of the council and roundtables”147. However, neither obligatoriness nor specific criteria for its application are mentioned.

While in this section it is mentioned that the public participation process should be performed previously to the approval of the EIA, it does not mention anywhere about the need for a free and informed prior consultation as such.

Furthermore, in Section IX of the project EIAD- Citizen participation- in practice the project had a public inquiry office of the Environmental Impact Study at the offices of the Municipal Government of El Chaco Canton and an office in the Environmental Communication Center of Grand Sumaco National Park, Gonzalo Pizarro Canton, the same that ran from May 20th to June 3rd, 2009. In addition to this, a public audience was carried out on May 27th in El Chaco Coliseum.

The citizen participation process was implemented on the basis of Decree 1040, for the Regulation of Social Application of Social Participation Mechanisms established in the Environmental Management Act and in considerations of the instructive account of the regulation of implementation of Social Participation mechanisms issued by the Ministry of Environment148. In the same section, it is reported that the citizen participation process for the EIAD draft used three mechanisms of socialization:

• TwoPublic InformationCenters (CIP)were implemented:One inElChacoand one in Lumbaqui.

• Apublichearingwithstakeholderswasheld.

• Through a website for parties whose access would be through internetservice.

There, it is also explained that other mechanisms, such as “briefings, information workshops, campaigns and other methods of mass participation” were discarded on the grounds that they had “little chance of collecting real public concerns”149.

It is worth saying that the local population was not informed well in advance of the completion of the Public Hearing to inform about the Definitive Environmental Impact Study of the project, since its announcement in the weekly news was published on the same day that the hearing was performed150.

Regarding the Public Information Centers, located in the municipalities of El Chaco and Lumbaqui, in the same section of EIAD it is stated that, “following the provisions of the agreement 112, these were installed seven days before the date of completion of the public hearing “and” began serving the public from May 20 to June 3, 2009, between the hours of 09h00 to 12h00 and from 14h00 to 17h00.” It also indicates that the

147 Ibíd., p. II-14.148 Ibid, Section IX. Citizen Participation, p. IX-1.149 Ibíd.150 With regard to the Public Hearing, it is reported that this “was held on 27 May 2009 at 10h00” in the coliseum

of the city of El Chaco and dissemination was done “through a publication in the weekly The Independent of the week from 27 to 30 May 2009 “publication that” plus the location of the two Public Information Centers located in El Chaco and Lumbaqui, uptime and business hours noted “. It also indicates that radio spots were broadcast on radio stations in the area. Ibid, P. IX-3.


centers were intended to “provide information to attendees on the content of Coca Codo Sinclair hydroelectric project Definitive Environmental Impact, and gather the criteria, comments and suggestions from the community on the draft of that study.”151

In the same section, it is reported that CIP had the following documents available to the public:

• FinalDraftoftheEnvironmentalImpactStudy

• ExecutiveSummaryoftheFinalEnvironmentalImpactStudy

• SummarybytheEIADforPublicHearing

• JournalofCocaCodoSinclairHydroelectricProject

To the above mentioned, it follows that the Public Information Centers functioned in practice, for a period of only fifteen days, much lower than originally suggested in subprogram dissemination, information and communication project, contained in the Environmental Management Plan152.

During the development of the investigation correspondent to the application of safeguards in the Coca Codo Sinclair hydroelectric project it was not possible to confirm or rule out other EIAD internal assessment mechanisms by the China Exim Bank, or to monitor the compliance of the Environmental Management Plan or mechanisms for citizen participation by any person or team delegated by the Chinese Embassy in Ecuador.

Strategic evaluation or consideration of alternatives previous to the project

The DEIA discusses two alternatives: to build the project and not to build it. It is stated there that “the analysis is based on the criteria of environmental engineering applicable to the project and developed in the EIAD, as well as the interrelation of engineering with the environment and society in the various phases involved.”153

At the end of this section, a weighting of both alternatives “considering factors of environmental, social, economic, technical and safety character” is made, and it is determined that the implementation of the project or “Alternative One” represents “a slightly higher profit than the non-execution of it.” While it is stated that “in both cases the weight is negative,” and “environmental aspects affect the negative character of the result”, it is determined that it is necessary “to highlight the social benefits that the project implies in regard to the generation of employment and generation of electricity at low cost for the country “, to which is added “a deeper connotation in environmental terms: that the use of hydropower to meet the country’s demand, will result in the displacement of technologies capable of cause environmental pollution, such as thermoelectric generation operated with fossil fuels, being these non-renewable resources.”154

151 Ibid152 The dissemination, information and communication of the project program, which is part of the Environmental

Management Plan Project, suggests “[...] have a Centre for Information and Public Communication (CICP) in the City of El Chaco to serve as a link among stakeholders and the project [...] “and states that” [t] he CICP will remain open during the construction phase of the project and will serve on a schedule that allows access to most of the population.” Ibid., Section X : Environmental Management Plan, p. X-17.

153 Ibid, Section VII: Analysis and alternatives, p. VII-1.154 Ibíd., p. VII-11


155 Ministry of Environment (22/07/2009). Resolution 215.156 In Table 1 of this chapter programs and activities of the Environmental Management Plan based on each phase

of the Coca Codo Sinclair hydroelectric project are presented. Efficáticas (2009). Final Environmental Impact Study Coca Codo Sinclair Hydroelectric Project, Section X: Environmental Management Plan.

157 Ibíd., p. X-9.

Obligations of the Coca Codo Sinclair Hydroelectric EP according to the Environmental Permit

According to the Environmental Permit issued by the Ministry of Environment to the company COCASINCLAIR SA on July 22nd, 2009, its main duties are155:

• Strictly comply with the Environmental Impact Assessment and EnvironmentalManagement Plan approved.

• ReporttotheMinistryofEnvironmentonthestartofprojectactivitiesinsideandoutside sensitive areas to be tapped.

• Immediately apply measures to avoid problems of colonization, deforestationand encroachment within the Cayambe Coca Ecological Reserve and La Cascada Protected Forest, by installing strategic control points.

• Quarterly submit to the Ministry of Environment compliance reports onEnvironmental Management Plan during project implementation.

• AfterthefirstyearoftheEnvironmentalPermitisissuedandeverytwoyearssincethen, must submit environmental compliance audits and environmental regulations to the Ministry of Environment.

• Use technologyandmethods tomitigateandprevent themagnitudeofnegativeenvironmental impacts as far as possible.

• Get theSpecialPermit forForestHarvestingunderexisting forestryregulations,before cutting and removing vegetation cover that will be affected by the project implementation.

• ImmediatelyimplementtheCompensationandSocialCompensationPlanandtothecommunities directly affected by the project execution.

• SupportthetechnicalteamoftheMinistryofEnvironmenttofacilitatetheprocessesof monitoring and enforcement of the Environmental Management Plan.

Environmental Management Plan

Regarding the Environmental Management Plan, this includes five phases, each of which includes some programs, subprograms and activities156.

According to the Environmental Management Plan, the responsible instance for the environmental management of the project into the public company Coca Codo Sinclair is the Deputy Manager of Environmental Management and Community Relations. Among its primary duties are: to ensure that the goals and objectives of the project respond to environmental and social policy of the organization; approve, update and verify compliance with the Environmental Management Plan; convening regular meetings with the levels of the company, at least quarterly, to track environmental management plan and take corrective action with emphasis on prevention157.


A recommended activity in the Environmental Management Plan, intended to inform about the project to local people and other stakeholders, is the installation of a Centre for Information and Public Communication (CICP) in the city of El Chaco. In addition to this, it is recommended that the company behind the project maintains an office for the same purpose in the camp of the project.

The proposed CICP should have been open during the construction phase of the project and have outreach materials, audiovisual aids, project studies and trained personnel. In the center itself, the community could voice their complaints, concerns or requests for information, which had to be channeled and properly answered158.

As for communication with authorities and NGOs, the Environmental Management Plan suggests that “relations with environmental regulators should be continuous and transparent” and should “maintain fluid communication with CONELEC, Ministry of Environment and environmental areas prefectures of Napo and Sucumbios and of El Chaco and Gonzalo Pizarro cantons. “It is also recommended that “a list of providing information and monitoring perceptions” with environmentalists and opposing NGOs project is maintained159.

Furthermore, it is noteworthy that the estimated amount to cover the various programs and activities of the Environmental Management Plan is clearly reduced. A review of the Schedule (valued) of Implementation of Environmental Management Measures contained in the Coca Codo Sinclair project EIAD160, including the construction phase and filling of the reservoir and the operation phase of the project shows an estimated investment of more than US $ 8.4 million in the implementation of all prevention, mitigation or compensation as part of the Environmental Management Plan in the two phases mentioned161. Considering the total project Coca Codo Sinclair (US $ 1.979 billion), the estimate for the Environmental Management Plan amount represents less than 0.5% of the total budget.

3.3. NEGOTIATION, APPROVAL AND CONTRACTING (FEBRUARY 2009 - JULY 2010)

The negotiation of credit with China Exim Bank took place between February 2009 and March 2010 and it was required to hold at least five rounds of negotiations before signing the credit agreement162.

Regarding the process of contracting with Sinohydro, the EPC contract concluded between the company behind the project, COCASINCLAIR (then SA), and the construction company Sinohydro indicates that COCASINCLAIR SA performed the open international call CCS-001-2008 to select the contractor for the project

158 Ibíd., p. X-17.159 Ibíd., p. X-18.160 Ibíd., pp. X-232 a X-266.161 The aforementioned Schedule of Implementation Environmental Management Measures presents a range of total

costs for each measure contained therein. The indicated value (US $ 8.4 million / 0.42% of total project budget) is the sum of all maximum values presented in this schedule valued for both phases contemplated. It is noteworthy that the major items included are: Compensation and resettlement of IDPs (US $ 5,256,000); Water quality in the water system (US $ 1,263,000); Management of biological resources (US $ 393,600), and Management cultural and architectural resources (US $ 329,000). See Annex 5: Estimated costs for implementation of WFP hydroelectric project Coca Codo Sinclair.

162 See Appendix 3: Chronology of Coca Codo Sinclair hydroelectric project.


implementation. This call was aimed at domestic and foreign legal entities and was published in printed media, national and international media during September 2008163.

It is indicated in the same document that on April 20, 2009, the Board of COCASINCLAIR SA resolved to authorize the Recruitment Committee to negotiate the work contract for the sole qualified participant, the Sinohydro Consortium - JV Andes, from the proposal submitted by this consortium on April 13th, 2009164.

Later he states that on September 4th, 2009, the company Sinohydro Corporation notifies CocaSinclair SA that its local counterpart, the Construction Company of the Andes (COANDES), withdrew from the consortium and the tendering process voluntarily. Then, on September 26th of that year it announced its willingness to continue the negotiation process itself.

Thus, on October 3rd 2009, the General Shareholders’ Meeting resolves to authorize the CEO to notify Sinohydro Corporation on the contract award and subsequent celebration.

Object of the contract

It is a contract for “turnkey design, engineering, procurement, permits, manufacturing, construction, installation, commissioning, operation and safe and timely completion of the work required for project implementation.”

The obligations of the contractor, in this case Sinohydro Corporation, lead to the implementation of the project, preparation of operation and maintenance manuals, and transfer of the know how to operate the project.

3.4. IMPLEMENTATION, DISBURSEMENT AND CONSTRUCTION (JULY 2010 - JANUARY 2017)

Construction began in July 2010, progressing as the original construction schedule and expected to be completed in late 2016165. Since the project intersects with the National System of Protected Areas, strategic public company Coca Codo Sinclair Hydroelectric is required to submit quarterly reports to the Provincial Directorate of Environment of the provinces of Napo and Sucumbios, for which the company Sinohydro and Cfe-PYPSA-Cva-Ica audit must, in turn, make monthly progress reports on civil works and social responsibility.

163 COCASINCLAIR SA (2009). Contract for the development of engineering, provisioning of equipment and materials, construction of civil works, equipment assembly and commissioning of the hydroelectric project Coca Codo Sinclair (1500) (1500 MW), Background, p. 3.

164 Ibíd., p. 4.165 According to the construction contract, “the initial operation of the project should occur within 60 months

after the date of signing the Act of Home; Provisional Acceptance of Phase I within 61 months of that date; and Provisional Acceptance of Phase II within 66 months (...). “That is, the construction company has a period of five and a half years after the official date of start of work to complete the works. Ibid. P. 32.


Sinohydro obligations in environmental matters

According to the section concerning the contractor’s obligations, Sinohydro has an obligation to respect and enforce its subcontractors on every one of the applicable laws and permits, including environmental permits issued by the Ministry of Environment. In addition to this, the contractor must obtain, maintain and renew every existing permit in accordance with the laws and applicable deadlines.

Also, Sinohydro and its subcontractors shall comply at all times with the Safety, Health and Environment Plan, referred to in Annex V of the work contract, and submit a safety, hygiene, health and environment manual to the promoter, within ninety days following the signing of the Act of the Start of the project for approval166.

Additionally, the contract between COCASINCLAIR SA and Sinohydro Corporation indicates that the latter “shall allow all inspections by government authorities that may be required under applicable laws or permits”167.

3.5. OVERSIGHT

According to the construction contract, as outlined in the section on the rights and obligations of COCASINCLAIR SA, this must submit all work covered by the project, and in general compliance with the obligations of the contractor, to his control or of a third part on his behalf168.

Currently, the project is well underway, with an increase of about 55%. It was not possible to access these periodic reports. However, there is a report of accountability COCASINCLAIR SA for the year 2013.

3.6. OPERATION AND CLOSURE (JANUARY 2017 - DECEMBER 2046)

As provided in the construction contract for the Coca Codo Sinclair hydroelectric project, the operation phase would begin once the facilities and equipment are delivered and tested by the construction company Sinohydro, which should be in early 2017.

According to the project EIAD, the work lifetime has not yet been determined. However, it is indicated that this will depend on the operation and maintenance to which the plant is subjected169. On the other hand, it can be estimated that the dam will have a lifespan of at least thirty years170, after which closing and abandoning of the project should proceed.

166 Ibíd., p. 50.167 Ibíd.168 The scope and method of control is detailed in Annex X of the construction contract. Ibid.169 Efficácitas (2009). Final Environmental Impact Study Coca Codo Sinclair Hydroelectric Project, Section X:

Environmental Management Plan, p. X-187.170 According to Green Renewables, “such plants have highly variable life which can be 30, 60, 45 or 150 years. This

depends on the type of dam and construction, size and other environmental variables such as sedimentation and erosion can be reduced to more than half-life “. Moreover, it is clarified that period may be shorter than the lifetime of the physical work as is “when economic life is defined reference to energy production capacity at an acceptable economic cost becomes.” Green renewable lifetime technology for energy production, http://www.renovablesverdes.com/vida-util-de-la-tecnologia-para-produccion-de-energia/


171 Efficácitas (2009). Estudio de Impacto Ambiental Definitivo Proyecto Hidroeléctrico COCA CODO SINCLAIR, Sección X: Plan de Manejo Ambiental, p. X-187.

172 Ibíd., p. 188.

With respect to the closing phase of a project of this type, in the Environmental Management Plan included in the EIAD project it is stated that “at present the costs associated with the abandoning of a dam are usually not considered part of the lifecycle cost of the same, or included in the overall perspective of cost-benefit ratios when making decisions about the feasibility of a new hydroelectric project that includes a large dam”171. Thus, “the abandonment stage of the hydroelectric plant and Coca Codo Sinclair dam include the cessation of operations of the central [...]” which “[...] may include removal of structures (removal of mechanical and electric installations), emptying and cleaning the reservoir, or using the reservoir for recreational purposes (maintenance of the dam)”. Whatever decision is taken with respect to physical infrastructure that the project leaves once it fulfills its life, the document states: “[...] it is important that all considerations and measures to be taken at this stage are properly planned ahead and developed causing minimal environmental and social impacts”172.

In this sense, the Abandonment Plan contained in the Environmental Management Plan project aims to provide guidance for decision makers regarding the procedure for deciding the type of project abandonment.


D.

CASE OF THE ANDEAN DEVELOPMENT CORPORATION (CAF) AND THE INTER-OCEANIC SOUTH HIGHWAY ROAD

(PERU)

This chapter shows the application of CAF safeguards in the context of the Southern Interoceanic Highway, stretches 2, 3 and 4, iconic and innovative project in terms of the challenges of social environmental risk management, both for Peru and for the CAF. To see specifically how the CAF conceptualizes and implements its safeguards, we will highlight some milestones we consider as the most important within the CVIS project cycle, stretches 2, 3 and 4.

Our analysis shows that the CAF uses national systems of its borrowers as part of the management of social and environmental risk of each of the projects it finances; however, at the same time, domestically, it maintains a separate protocol analysis that allows it to identify and address gaps between their standards, which include its Environmental Strategy, the Guidelines on environmental and social aspects, environmental and social safeguards and manuals and evaluation guides, the latter of Internal- use and the borrower’s.

At the same time, in relation to the milestones, three of them set gaps or overlaps with international standards: (i) assessment tools were implemented inconsistently: no comprehensive EIA and SEA were subsequently executed to the date of signing the concession agreement between the State and concessionaire , (ii) the Environmental and Social Management Program I (ESMP I), environmental credit operation of the government of Peru, implemented by the National Institute of Natural Resources (INRENA), had a dimension in budget with limitations on the total amount. However, each of the objectives and areas of focus proposed in the EASE were attended by the ESMP I, as well as the excessive delay in the start of the Environment and Social Management Plan – Second Stage (ESMP II) that disposes to mitigate the indirect impacts of CVIS, stretches 2, 3 and 4, and (iii) lack of transparency of the CAF regarding the availability of documents related to the project cycle, although it does highlight the availability of officials to attend briefings.

1. SAFEGUARDS TOOLS OF THE CAF

The CAF is a development bank established in 1970, consisting of eighteen countries of Latin America, the Caribbean and Europe and fourteen private banks in the region. Its level of funding approvals increased between 2009 and 2013 to US $ 51.146 billion; only in 2013 CAF approved loans totaling US $ 12.101 billion, of which US $ 3.616 billion were invested in the infrastructure sector and about 50% went to the private sector (US $ 5.484 billion). It currently provides significant amounts of funding in the short and medium term to both public and private banks in the region. Its total approvals in the past five years amount to US $ 51.146 billion.

When the CAF decides to finance a project, the borrower must adhere to the guidelines and social and environmental safeguards173 that this institution has set and are embodied

173 The CAF has fourteen socio- environmental safeguards : ( i )national legislation; ( ii )impacts assessment, environmental and social risks and opportunities; ( iii )management measures and environmental and social budget; ( iv ) institutional strengthening , training of human and information resources; ( v ) water conservation ; ( vi) national parks and protected areas ; ( vii ) disaster risk prevention ; ( viii ) pollution prevention ; ( ix ) cultural heritage of the region; ( x ) ethnic and cultural diversity; ( xi ) participation and community development; ( xii ) involuntary resettlement or relocation ; ( xiii ) protection of children , and ( xiv) gender equity.


in its environmental strategy. The CAF has developed management instruments, which are hierarchized from an environmental strategy174 to the definition of environmental safeguards, which are manipulated through manuals and subsequent instruments that derive from them. However, this strategy by the CAF has no environmental requirements to facilitate public verification of compliance175.

Policy regarding access to information

The CAF does not have a policy on access to information. Documents pertaining to the cycle of the projects it finances are not public: it is not possible to access them through a direct request for access to information to the bank, but if the information is shared with the States some documents may be obtained through governments. In this sense, most of the information expressed in this analysis was obtained through documents available on the institutional portals of relevant entities176, as well as interviews were conducted with officials and former officials who have been involved throughout the CVIS project. However, it should be emphasized that there is indeed availability by CAF officials to provide information and an institutional interpretation of the application of its safeguards during the project cycle of CAF in general and the CVIS in particular.

The documents corresponding to each stage of the project cycle CAF are detailed below, and it is indicated whether these are available or not in the corporate website of the CAF:

174 The environmental strategy of the CAF is available at: http://publicaciones.caf.com/media/1140/estrategia_ambiental_esp.pdf

175 For further information, see the environmental strategy of the CAF. An independent analysis of the early years of the new environmental strategy is in Corporación Andina de Fomento (CAF). Basic script for Civil Society, (2008), by Bank Information Center.

176 The Peruvian State itself has a Law of Transparency and Access to Public Information (Law 27806), which must be respected by the institutions of public administration.

Stages of the Project cycle

CAF relevant documents according to the project cycleAre these documents

available on CAF’s website?

OriginationProject Profile(PP)

Preliminary risk report/ vulnerable environmental and social areas

No

Evaluation Social and environmental reporting (SER)

Report for the Loan and Investment CommitteeNo

Formalization Loan agreement No

AdministrationDisbursement

Disbursement RequestTraccking of the operation

No

Monitoring and tracking

Annual reports of monitoring and supervisionEx post evaluation of the operation at the closure of

the credit cycleNo

TABLE 10: CAF RELEVANT DOCUMENTS ACCORDING TO THE PROJECT CYCLE.



Complaint mechanism

There is no an express internal policy regarding the complaint mechanism in the CAF. Usually, complaints or comments are directed to the Office of the CAF in each country. Subsequently, it can be processed before the president of the CAF, if directed to him.

In the case of CVIS, usually CAF complaints received have been more linked to the performance of the executing agency-the Ministry of Transport and Communications (MTC) or concessionaire. In that case, the CAF has led them to the responsible entity, i.e., the MTC, which is the executive body responsible to the CAF. It states that, if the complaint is considered severe, it will remain as a precedent. According to what I talked with CAF officials, no communication is filed: all of them are answered.


It has not been able to access the information of institutional capacity available to the CAF in their areas. It is known that in times of economic evaluation itself there is an installed capacity of specialists within the CAF, such as Social, environmental, engineering specialists; however, it is usual to recur to hiring consultants for specialized topics.

2. PROJECT PROFILE

The CVIS (stretches 2, 3 and 4) is part of the road Peru-Brazil-Bolivia axis. It was concessioned through five stretches, covering in full 5404 km. This analysis refers to the 1009 miles that make up the stretches 2, 3 and 4177, which are those that directly involve the Amazon and were provided by several co-financing of the CAF178.

177 Stretch 2 (300 km), stretch 3 (403.20 km) and stretch 4 ( 305,90 km).178 For more information on CVIS, see Dourojeanni M. (2006). ). Estudio de caso sobre la Carretera Interoceánica en

la Amazonía Sur del Perú; Enrique Fernández y Cueto (2010); CAF (2013). Carretera Interoceánica Sur del Perú. Retos e innovación. At http://publicaciones.caf.com/media/34441/carretera_interoceanica.pdf); La República. “La Carretera Interoceánica: Un repaso de su histórica construcción” (Sep. 12, 2012). Bank Information Center- BICECA Project (http://www.bicusa.org/es/latinoamerica/biceca/)


Source: CAF, 2013

In June 2005, the concession of the three installments for twenty-five years —and renewable— was granted, the Southern Interoceanic Highway Concession Company SA (CONIRSA) winning the Award for stretches 2 and 3 (Odebrecht was part of the Consortium) and stretch 4179 to Intersur Concession Company S. A.180 That same year, the Ministry of Economy and Finance (MEF) was authorized to provide guarantees or to contract with multilateral financial institutions to attend private investment projects and concessions181. The granting of guarantees would only be applicable in the case of grants financed by the State182.

The project was implemented through a Public-Private Partnership (PPP)183. The type of intended procurement was a BOT concession184, with contributions guaranteed by

179 The stretch 4 of the Southern Interoceanic Highway (CVIS) ranges from Puente Inambari to Azángaro.180 Stretch 2 of the Southern Interoceanic Highway (CVIS) begins in the district of Urcos and ends in the district of

Inambari, in Cusco, and stretch 3 of the Southern Interoceanic Highway (CVIS) begins in the district of Inambari and ends at Iñapari district, in the department of Madre de Dios.

181 Public Sector Debt Law for Fiscal Year 2005. The Seventeenth transitional provision of the Act authorizes the MEF to provide guarantees or hiring national and international financial institutions in order to meet requirements derived - In 2005, Law 28423 was issued processes promoting private investment and concessions.

182 Emergency Decree 011-2005, Article 11183 In this type of concession investment and operating costs and maintenance fail to recover fully with the collection

of tolls and therefore requires payments from the state. In: Bonifaz, José Luis and Roberto Urrunaga (2008), Beneficios económicos de la carretera interoceánica. Lima: University of the Pacific. Research Center, p. 14

184 «Build, operate and transfer».

Stretch 1

Stretch 5

Stretch 2

Stretch 3

Stretch 4

FIGURE 9: STRETCHES 2, 3 AND 4 OF THE INTER-OCEANIC SOUTH HIGHWAY ROAD


the Peruvian State, in accordance with the financial proposal of the bidder. The form of the award was co-financed185 by the CAF and the Peruvian government, who in turn served as a guarantor to the CAF for Lines of Link Credit (LLC), which were awarded to the dealer. The warranty for stretch 2 was US $ 59 million; for stretch 3 was of US $ 91.4 million and for stretch 4 US $ 49.5 million. The purpose of the grant was the construction or improvement and rehabilitation of stretches 2, 3 and 4 as well as conservation (operation and maintenance) and exploitation of the concession186. The total cost of CVIS has already exceeded its initial estimate of US $ 820 million for several flaws in its design and execution to achieve an approximate final cost of US $ 2 billion187.

The total funding granted to the three stretches by CAF amounted to US $ 700 million188. For its part, the government of Brazil through PROEX189, provided financing to the government of Peru in the amount of US $ 417 million for the construction of the waterway that links Asís (State of Acre) and Iñapari (Madre de Dios ), through Cusco and Puno, to the ports of Ilo, Matarani and Marcona190.

3. PROJECT CYCLE

According to the Environmental Strategy of the CAF, the project cycle is as follows: (i) origination; (ii) formalization; (iii) assessment, and (iv) management and disbursement (see chart, Appendix 1 - Section CAF). It takes a period of ex post evaluation and learning. The CAF client, in this case the government of Peru, through the MTC, under contract agrees to comply with the contractual environmental, social, occupational health and safety terms, for proper environmental and social performance of the credit operation to ensure compliance with any and all social and environmental safeguards of the CAF. Also, the borrower according to one of the social and environmental safeguards of a piece of the CAF— national legislation191— has a responsibility to properly apply their legislation on social and environmental issues, to monitor what the CAF has internally with a system that analyzes if the legal system of the country concerned is prepared to meet the standards posed by CAF as an institution.

3.1. ORIGINATION

This stage is manifested through the expression of interest by the borrower, in this case the Peruvian government, which through its MEF sends a request to

185 Disbursements to be performed by the State are paid for works (PAO), payment for maintenance and operation (PAMO) and payment for walkability.

186 The deadlines for execution of works for the dealer to stretches 2, 3 and 4 provide three stages. The deadlines are twelve months for the first stage and eighteen months for the second and third stages.

187 La República (Sep. 12, 2012).http://www.larepublica.pe/12-09-2012/la-carretera-interoceanica-un-repaso-de-su-historica-construccion

188 Financing of US $ 200 million (through credit lines granted by CAF link to each of the stretches, and partial funding granted for the missing works of stretches 2, 3 and 4 in 2008 and 2010 are included. The amounts were $ 300 million and $ 200 million, respectively.

189 Export Financing Program (PROEX). Program of the federal government of Brazil, which is the main instrument to support Brazilian exports of goods and services, with financing at favorable interest rates and longer terms.

190 Memorandum of Understanding signed on December 8, 2004 between the government of Peru, represented by the Minister of State in the Ministry of Finance, Dr. Pedro Pablo Kuczynski, and the Andean Development Corporation (CAF), represented by its Chief executive, Dr. Enrique García.Social and environmental safeguards CAF.

191 Social and environmental safeguards of the CAF.


the CAF192. Since the interest request arrives, it goes through three instances, Corporate Business Committee (CNC), the Loan and Investment Committee (CPI) and the Board193.

The origination stage includes all the previous activities to the approved ones by the Corporate Business Committee (CNC by its acronym in Spanish), including identification of the potential credit transaction194. The aim of this first step is to conduct a brief review of available information on the quality of the customer and the adequacy of the proposed business policies of the CAF195.

The CAF makes a preliminary risk analysis, which includes the development of an Environmental and Social Risk Preliminary Analysis Matrix for Credit Infrastructure Operations, Social and Environmental Development196, and the Condor Geographic Information System and other available resources. When submitting the request for funding, the state has the obligation to provide all information related to the project, one of the key inputs that the State must deliver is the Feasibility Study. The CAF also seeks information from third parties and hires consultants according to the complexity of the project.

In environmental and social terms, this phase is meant to identify and provide early warning of risks and opportunities for environmental and social investment initiative submitted to the CAF. At this stage the project is categorized according to the type of operation, technical characteristics and potential environmental and social impact. There are four categories A, B, C and D. Also, the sensitivity of the environment is analyzed. Both results demonstrate the qualification of environmental and social risk, which may be: (i) high; (ii) moderate; (iii) low, and (iv) without risk. The classifications of high or moderate imply that the project requires a full environmental and social assessment; in case the operation is classified as “low environmental and social risk” or “without environmental and social risk”, the assessment visit to the place of installation is not required197.

Also, in the Matrix, various criteria are evaluated, such as institutional capacity of the borrower country to cope with the project and social and environmental issues that are the responsibility of the Environment Board of the CAF. Not only are considered the express risks: potential risks will also be evaluated, such as technical political, trust, governance risk, among others.

192 It should be considered that the assessment to approve funding does not begin with the application of interest the borrower state, but the foregoing. This means that prior to sending the request CAF has been conducting a coordinated internally work with the State concerned, through informal negotiations.

193 The Board, composed of representatives of Series A, B and C, is responsible for approving credit operations, however, certain operations are delegated to the Executive Committee or the chief executive of the CAF.

194 This information has been obtained from meetings with officials of the CAF and is part of the Manual of Social and Environmental Assessment and Monitoring Credit Operations, Infrastructure, Social and Environmental Development, which is internal (2008 version).

195 Ídem196 When it is known that a loan will be applied by the State, processing Matrix Preliminary Analysis of

Environmental and Social Risk for Credit Operations Infrastructure, Social and Environmental Development begins to coordinate, to this end, all inputs to be used in this matrix are collected; however, the final version will be made in the evaluation stage.

197 This information has been obtained from meetings with officials of the CAF and is part of the Manual of Social and Environmental Assessment and Monitoring Credit Operations, Infrastructure, Social and Environmental Development, which is internal (2008 version).


198 Ídem199 On April 29, by Law 28214, the execution of the inter-oceanic corridor project Peru-Brazil-IIRSA SUR is declared

public necessity and national interest. Among other rules adopted by the Peruvian State to demonstrate the will to expedite project implementation, we can mention the DS 022-2005, which is excepted from sections included in the CVIS application of rules of the National Public Investment System (SNIP), referring to the preliminary stage. Regional Emergency Decrees 008-2005 and 011-2005, which seek to facilitate the financing of public works concessions infrastructure and public services and facilitate the start of construction.

200 The Bilateral Agreement was signed in November 2004.201 Within the pre-investment studies are conducted prefeasibility and feasibility. Detailed engineering is done in

the investment phase, as part of the final studies.202 BWAS-BADALLSA Consortium (2003). Prefeasibility study analysis of alternatives to road interconnection

Iñapari-South Seaport. Lime. This document was prepared by the BWAS-BADALLSA Consortium for the Ministry of Transport and Communications.

203 South Road Consortium (2004). Feasibility study of road interconnection Iñapari-South Seaport. Lima: Ministry of Transport and Communications (this document was prepared by the South Road Consortium for the Ministry of Transport and Communications).

The results obtained from all the tools mentioned above: Preliminary Matrix, Condor Tool and from the documentation provided by the borrower and that obtained by the CAF, will identify and provide early warning about the opportunities and constraints of environmental character and social investment initiative, set some of the aspects which should be emphasized in the assessment stage and identify the most relevant information to be requested to the customer in order to prepare the evaluation198. All this information must be sent to the CNC.

In the case of the CVIS, the CAF identified at this stage that there were weaknesses in the institutional level in Peru and could hinder the implementation of the project. At that time there was not yet a Ministry of Environment (current MINAM), and this was revealed in the minor and low levels of demand around the SEA. Precisely, identifying these institutional weaknesses, the CAF, through Technical Cooperation, decides to strengthen key institutions in the process of CVIS such as the Directorate General of Social Environmental Affairs (DGASA) and OSITRAN (Supervisory Agency for Investment in Infrastructure Public Transport) in 2004. This support contributed to a better functioning of the state, and therefore, that efforts being made available and that the CVIS project is carried out within the time allowed. The DGASA had increased technical capacity, there was staff training and was strengthened as an institution. In this aspect, the CAF had an important role.

In the case of CVIS, since the beginning of the government of Alejandro Toledo (2001-2006) the issue of the implementation of this corridor began to be put on agenda, as a flagship project to promote regional integration through infrastructure. In 2004, its execution is declared public necessity and national interest199. The will of the Peruvian State and Brazil to build the road immediately also revealed through the Bilateral Agreement signed between the two governments to secure financing of the CVIS and immediately building the Interoceanic highway linking the two countries200. At that time, between 2003 and 2004, two of the most important pre-investment studies201 were performed: the prefeasibility202 and feasibility203 studies, both funded by the CAF. While interest MEF application was submitted in December 2004204, negotiations between the CAF and the Peruvian government were previous; hence, the request was only a formalization of the expression of interest in the project.


3.2. EVALUATION

It is the most complex stage, and thus implies longer execution. This stage includes all activities, since the incorporation of the transaction approved by the CNC in the inventory of operations of the institution until the acceptance of the Credit Evaluation Report (DEC acronym by its name in Spanish) by the appropriate approving instance. In this phase, the evaluation mission is prepared, field visit is conducted and the Social and Environmental Reporting (SER) is made205.

Among the main objectives of this stage, we mention the analysis of: (i) the principal risks of the operation (in relation to the payment capacity of the borrower); (ii) the technical, institutional, market, financial, economic, environmental and social aspects of the operation used to determine its feasibility, and finally recommend to the appropriate level the approval or not of the operation, under certain terms and conditions206.

From an environmental and social view at this stage, the CAF will seek to verify -under an analysis of risks-if the operation ensures compliance with all social and environmental safeguards established as an institution, and which are fixed by law environmental force in the country where the operation will take place.

The CAF will evaluate all information necessary to identify, qualify and quantify in detail the potential impacts and risk factors by operations on the environment and their economic, social and cultural environment, and those that from the environment may adversely impact it. It will determine the special management measures to which this operation should be conditional, as well as recommendations and investments needed to prevent, control, mitigate or compensate the risks and impacts identified. Finally, it identifies potential opportunities of operation or its natural, social, and economic environment to promote new initiatives to conserve natural resources and ecosystems, as well as opportunities for improving the quality of life of the communities involved and associated costs207.

As previously noted, in the evaluation stage the CAF makes a field visit that aims to acquire the best possible knowledge about the project and the relevant aspects that characterize their environmental and social environment. This visit can identify early warnings that may be exposed to the client and incorporated into the evaluation report. Before the field visit, the assessment mission is prepared, which also implies that the CAF will request and gather as many environmental, social and institutional information of borrowers and proceed to evaluate it.

Usually, once feasibility studies and environmental studies have already been performed, the CAF can get all the useful information for this stage. However, in other cases, where the borrower requests funding when the operation is still in its early stages of design are presented, information is limited and the CAF gives importance to external sources of information to achieve obtaining it.

204 On December 8, 2004 the Memorandum of Understanding between the Ministry of Economy and Finance and the CAF was signed, while declaring priority project implementation.

205 This information has been obtained from meetings with officials of the CAF and is part of The Guide to the Environmental and Social Assessment of Infrastructure, Social and Environmental Development Operations, which is internal (2008 version).

206 Ídem207 Ídem


208 The SER will contain the impact assessment and project risks related to the physical, biotic, socioeconomic, institutional and organizational system, and issues that the institution considers as critical in the operation.

209 This information has been obtained from meetings with officials of the CAF and is part of the The Guide to the Environmental and Social Assessment of Infrastructure, Social and Environmental Development Operations, which is internal (2008 version).

At this stage there is a Loan and Investment Committee (CPI) that shall approve or recommend that the transaction is approved by the Board. At this point there should already be a full assessment document and a Preliminary Analysis of Environmental and Social Risk Matrix must be completed. Also, during this stage the CAF should perform due diligence and as part of this, the first draft of the Plan of Social and Environmental Action and Corrective Action Plan.

The CAF, through the Department of Environment and its team of specialists and executives, is in charge of due diligence and preparation of documents or reports evaluating the operation. If required, the services of experts and / or specialists in specific subjects are recruited. The MTC is responsible for the results of implementing the plan. The plan is executed by the grantee, contractor, supervisor, controller, and specialized bodies as DGASA / PROVIAS-PACRI, OSITRAN.

The Plan of Social and Environmental Action evaluates the direct impacts of the project. For its part, the Corrective Action Plan usually sets a deadline for it to comply with the recommendations made, which varies according to the level of impact that involves the breach. Both plans are tools that the CAF has to assess compliance with the social and environmental safeguards and they will be attached to the loan.

After the evaluation phase, the CAF draws up a Social and Environmental Report (IAS), in which key impacts, risks208 and environmental and social opportunities of the operation are detailed, relevance and sufficiency of the measures established management is determined and recommendations and conditions are defined, as a way of contractual commitments, in order to ensure appropriate environmental and social management of the operation, based on the standards of the CAF and environmental and social legislation in the country and applied to operation209.

Before approval, the CAF meets the appropriate government entity, in this case the MEF, or MTC, to indicate the conditions that were set by the Loan and Investment Committee (CPI) and see how these are met by the State. The time negotiations demand will not only depend on the CAF, but on the State.

Finally, the evaluator must capture in the SER-based on an environmental and social perspective if the project is viable or not to be funded by the CAF.

3.2.1. Instruments of relevant social and environmental safeguards implemented by the State in the CVIS

The CAF starts on the basis of the safeguards available to the State in its internal regulations, and it also requires the fulfillment of their aforementioned environmental standards. Below we present the points that we consider relevant in relation to the demands of the Peruvian national legislation applicable to the CVIS:


Environmental Impact Assessment (EIA) of stretches 2, 3 and 4

There was an important program implementation history, three EIA were prepared, one for each tranche, in the prior form to signing the loan agreement between the government of Peru and the CAF. Later, due to the characteristics of the construction contract, which included a full review of the engineering design, the project had a dynamic advance so three EIA were elaborated in an updated format, which were completed and approved by the competent environmental authority prior to commencement of works of each stretch which they corresponded to.

In this regard, the CAF has indicated that, on their part, there was a technical evaluation from the ecosystemic point of view, which resulted in a document called Plan of Strategic Environmental Assessment that helped dimension the Environment Program. Unfortunately, we have not had access to that document.

In the CVIS an Integrated Project EIA was not performed. The EIA210 were made by stretches, each stretch and even staged assessment was divided (as in the case of Stretch4). Upon signing of the concession-August 2005, there were already EIA. These were included in the prefeasibility and feasibility delivered by the MEF to CAF when applying for funding211.

While the optimum was conducting a comprehensive EIA212, not stretch by stretch, this situation was not presented because it was more feasible for the project to be carried by stretchs due to the characteristics of the concession contract (BOT: Build, Operate and Transfer ). In addition, conducting a comprehensive EIA was not an option for the state because of time and a topic of investment and economic loss: being the state also a financier of the project, the loss was greater if a comprehensive EIA was expected.

The EIA (stretches 2 and 3) started in March 2006 and concluded in April 2007. The construction of the works cannot begin without a final and approved EIA. As part of the EIA, the concessionaire must develop an environmental management program for each stretch and activity. On the other hand, among the obligations to be met by the concessionaire during the stages of construction, maintenance and operation of the different stretches is to abide by the specifications and measures of the EIA of each stretch. It also has an obligation to deliver environmental reports during construction and conservation of works and exploitation of granting213.

210 The concessionaire shall be responsible for preparing the EIA stretch. It shall be based on the EIA feasibility level. This part of the final EIA study engineering. The concessionaire is responsible for implementing the conditions and measures set out in the EIA.

211 This was because approximately 22% of the original stretches varied. For example, in the case of stretch 2, during the execution of the works there were some variations due to differences with the reference project meters that were presented. Under the concession contract of stretch 2, in addition to the provisions in the initial budget, greater measures amounting to a total of US $ 45 959 856.26 were approved. This involved reprogramming of the obligations assumed by the State, generating a budget deficit of S /. 144,441,580 for payment of contractual obligations for the month of December 2010, arising from stretches 3 and 4 of CVIS and others, such as North IIRSA.

212 However, performing the EIA for stretches presents the problem of not properly identifying the social and environmental indirect and cumulative risks.

213 During the first year, the report will be delivered the first fifteen days of each semester; from the second year of operation and up to two years before the compliance deadline of the end of the concession, the reports will be delivered once per year, and the last two years, the concessionaire shall submit reports at intervals of six months.


3.3. FORMALIZATION

This phase is comprised from the adoption of the operation in the Loan and Investment Committee (CPI) or the appropriate level, until the signing of the respective loan agreement214.

In this stage the objective is to ensure that the environmental and social recommendations and conditions are incorporated –as proposed in the SER- to which the operation is subject in the credit agreement. Budgets are also incorporated to implement these measures, which may be granted by the CAF through the national counterpart, or funded by both215. Before signing the contract, the Department of Environment (DMA) will verify that the conditions or recommendations have been satisfactorily fulfilled by the customer, which must be demonstrated by submitting the relevant documents216.

In that sense, as part of this stage, the Peruvian State, who had previously authorized the MEF to provide guarantees or contracting with multilateral financial institutions for private investment projects and concessions acted as guarantor of the dealership in 2006 in some LCL217 that were granted by the CAF. The total amount of credit extended to the concessionaire for the start of construction amounted to US $ 200 million.

As conditions set by the CAF for the disbursement of the respective loans, such institution finances the ESMP I and II. The latter program formed part of the loan agreement signed by the CAF with the Peruvian government to partially finance the remaining works of stretches 2, 3 and 4.

The Social and Environmental Report (SER) is approved by the Board or by the Executive Committee which is chaired by the CEO of the CAF. If the cost of the project exceeds $ 70 million, it must be approved by the Board; otherwise, it may be approved by the Executive Committee.

The time of approval of a project in the CAF is on average lower than other institutions such as the World Bank and IDB. At this point, the time taken for approval by the CAF is similar to the BNDES’s.

3.3.1. Environmental and Social Management Program (ESMP I) in stretches 2, 3 and 4 of the CVIS

The direct impacts of the project, in its three stretches 2, 3 and 4, were treated and fiscally covered by the concessionaire, which amounted to approximately 4.7% of the total budget of the project. Indirect impacts

214 This information has been obtained from meetings with officials of the CAF and is part of The Guide to the Environmental and Social Assessment of Infrastructure, Social and Environmental Development Operations, which is internal (2008 version).

215 Andean Development Corporation (CAF). “CAF Environmental Strategy”. 2010, pp. 25-26.216 This information has been obtained from meetings with officials of the CAF and is part of The Guide to the

Environmental and Social Assessment of Infrastructure, Social and Environmental Development Operations, which is internal (2008 version).

217 These LCL were “bridge” credits that served to accelerate the process; it was not a business from a financial point of view. After these LCL, the sovereign loan was granted, once the work is started.


were sized by the EASE and were partly attended by the ESMP I - CAF / INRENA Program and the ESMP II.

Thus, in July 2006, the loan agreement between the CAF and the Peruvian government for the implementation of the Program is signed, turning this loan into the first environmental matter granted by the CAF218. The total program cost was US$ 17’785,957 millions, of which US$ 13’452,435 millions corresponded to investment resources (US $ 10 million through funding from the CAF and US$ 3’452,435 millions of national counterpart) and US $ 4,333,522 were recurrent expenditure resources219.

Strategic Environmental Assessment (SEA)

Within the ESMP I220, one of the fundamental tools for identifying indirect impacts was SEA, prepared under the CVIS framework. Dourojeanni (2006) identified a number of likely indirect impacts of the CVIS, including the increase of deforestation by legal and illegal agriculture, increased degradation of forests by logging, reduction of environmental services, and cumulative impacts from other complementary works, as programmed by the IIRSA (hydroelectrics, other roads, etc.)221. In November 2006, the Implementation Agreement was signed on Request between INRENA and the National Environment Council (CONAM), so that the latter were responsible for the execution of the SEA. In 2008 the MINAM is created –causing the extinction of the CONAM- and an Implementation Agreement on Request is re-signed, this time between INRENA222 and MINAM. Finally, the development of the SEA was commissioned to MAXIMIXE Consult SA and the final report was delivered in December 2009. The objective of the SEA was to “identify the environmental implications, analyze and prevent environmental and social impacts that could generate the decision to approve or modify policies, plans and programs, at national, regional and local levels with impact on the geographical scope of the corridor.”223

218 Enrique Fernandez, Claudia and Vanessa Cueto. “Propuestas para construir gobernanza en la Amazonía a través del transporte sostenible. Análisis de la Eficacia del Programa para la Gestión Ambiental y Social de los Impactos Indirectos del Corredor Vial Interoceánico Sur - tramos 2, 3 y 4”. November 2010, p. 27.

219 Ibídem, p. 43.220 The ESMP I consisted of ten projects : ( i ) Land Use Plan of the area of influence of the Southern Interoceanic

Highway ; ( ii ) improved management of protected natural areas and the creation of protected areas ; ( iii ) establishment of a development plan for tourism activities in the sphere of influence of the Interoceanic highway south axis ; ( iv ) improving environmental management in gold production in the sphere of influence of the Central Southern Interoceanic Highway; ( v ) cadaster, land titling and registration in twenty districts adjacent to the road axis of the Interoceanic Highway South; ( vi) consolidation and development of forest concessions and capacity of strenghtening of the competent authorities of administration and forest control and wildlife ; ( vii ) strengthening the productive chain of chestnut in the Madre de Dios region ; ( viii ) strengthening cultural identity and protecting the lands of indigenous peoples ; ( ix ) capacity of strenghtening for environmental and social management and local governments and promoting the participation of civil society , and ( x ) the establishment of the UEP.

221 Marc Dourojeanni (2006). C Estudio de caso sobre la Carretera Interoceánica en la Amazonía Sur del Perú, pp. 44-55; Also, Dourojeanni M. (2009). Amazonía peruana en 2021: explotación de recursos naturales e infraestructura.

222 In July 2009 an addendum to the Implementation Agreement whereby the Ministry of Agriculture (MINAG) replaces INRENA in its capacity as program execution unit subscribe.

223 Final Strategic Environmental Assessment and prospective of the Southern Interoceanic Highway Report. 2009, p. 7


224 Enrique y Cueto, pp. 78-79.225 Ibídem, p. 62.226 This information has been obtained from meetings with officials of the CAF and is part of the Manual of Social

and Environmental Assessment and Monitoring Credit Operations, Infrastructure, Social and Environmental Development, which is internal (2008 version).

The SEA, commissioned by the government of Peru through the ESMP I, was completed three years after the ESMP I was adopted224, so that in reality, the impact of this evaluation after project implementation is minimum. Not to mention that the budget for this program ($ 10 million) was insufficient when compared with those granted to similar projects in other areas of the Amazon region, where the average funding of these programs varies between 5 to 20% of the final cost of the project. In the case of the CVIS, funding was less than 2%225.

3.3.2. Program for Environmental and Social Management (ESMP II) in stretches 2, 3 and 4 of CVIS

The ESMP I concluded in March 2010. According to the final report of the ESMP I, the project complied fully and satisfactorily all indicators and targets scheduled. The MEF cataloged the project-during 2008 and 2009 as the country s most efficient budget implementation project within all public investment portfolio. This was possible thanks to the quality of high management the project was put through. The second stage of this program was part of the loan agreement signed by the Peruvian State and the CAF in November 2009 for the partial financing of the remaining works of stretches 2, 3 and 4. In the ESMP II the program execution unit is the MINAM. The total program cost is approximately US $ 26.4 million, of which a part is financed with resources from the CAF (approximately US $ 15.23 million), and the other part is financed with counterpart resources of the MINAM.

Despite having had detailed feasibility studies in 2011, the implementation of the second part of the program has been delayed three years. According to the CAF, the ESMP II should have initiated in May 2011, but due to delays in the competent State body is only in April this year that the loan contract is signed. The CEO who would be in charge of the ESMP II - Edgar Fidel Pebe Diaz (who works at the MINAM) - was appointed last September and in October this year the first disbursement was made, the headquarters of the program will be in Puerto Maldonado.

3.4. MANAGEMENT AND DISBURSEMENT

In the last stage of the project cycle the Business Area of the CAF issues an opinion regarding the borrower’s compliance with environmental and social conditions. Based on this review, the Department of Environment will decide whether to perform or not a field visit to verify compliance with the social and environmental safeguards of the institution, contractual commitments, and know the environmental and social performance of the project, among others. It is noteworthy that disbursements will be conditional on compliance with environmental and social conditions that have been fixed in the loan agreement226.


CAF also undertakes the commitment to perform appropriate control and monitoring, fully monitoring the environmental and social performance of their operations227. The monitoring stage is divided into two: (i) social and environmental, in charge of the Department of Environment, who performs a background monitoring of the compliance of social and environmental clauses, makes visits, hires consultants for specialized engineering topics, among others, and (ii) contract, which corresponds to the contract Management Area, who oversees all ongoing contracts and collects all information from the grantor. This area receives all social, environmental and engineering reports, which are validated by the Department of Environment.

Most of the visits by the CAF in the project are given in the period of disbursement. However, they continue throughout the construction process and generally throughout the project cycle, but less so. In principle, the CAF is guided by the Concessionaire Reports that are sent every two months. These contain the highest amount of detailed information. NATIONAL PROVIAS also sends quarterly reports on project implementation, and finally, OSITRAN prepares semiannual reports. All these documents are reviewed by the CAF and discussed if applicable. In the case of the CVIS, visits still continue because there have been changes in the Tranche 4 (tunneling).

Operations considered as the most critical from an environmental and social point of view have an annual evaluation of its management, which is performed in addition to routine monitoring of environmental and social work previous to the approval of disbursements of an operation. The Environmental Strategy mentions two tools that guide these activities: (i) Guide for Environmental and Social Operations Monitoring, and ii) Guide for Final Environmental and Social Monitoring (it performs an ex post evaluation of operations at the end of the credit cycle). Other instruments available to the CAF are the Internal Manual of Social and Environmental Assessment and Operations and the Business website, which is an online information system that stores and classifies technical, legal, financial monitoring documents, designs, studies, assessments and other information provided by the client, documents relating to environmental and social management of the operation. This is a permanent reference tool that helps decision making for all actors involved in the development of the operation. However, it has not been possible to access detailed and updated information regarding the monitoring of the implementation of the CVIS, because there is no public reporting.

CONSULTATION AND CITIZEN PARTICIPATION

In 2004, not existing neither law nor regulation on Prior Consultation228, the DGASA issued two Directorial Resolutions which reflect policies in consultation and citizen participation229. A section on consultation was included, which was

227 Corporación Andina de Fomento (CAF). CAF Environmental Strategy 2010, p. 26.228 The participation of indigenous peoples was regulated by ILO Convention 169, which was signed and ratified by

Peru since 1995, but the regulation of consultation in Peru was subsequent to the execution of CVIS -in the year 2011- by Law 29875, Prior Consultation Act and its Regulations.

229 Directorial Resolution 006-2004 -MTC / 16: Approval of the Regulations for Consultation and Public Participation in the Process of Environmental and Social Assessment in the Subsector Transport, Ministry of Transport and Communications , and Executive Resolution 007-2004 -MTC / 16 : Adoption of document containing the Guidelines for the Development and Implementation of Compensation Plans and Involuntary Resettlement (PACRI) .


applied in case of new projects or projects affecting indigenous peoples. Through the due fulfillment of these resolutions, the Peruvian State, through the DGASA, could prove to the CAF that it complied with the social and environmental safeguards contained in its Environmental Strategy.

WORKSHOPS ORGANIZED BY THE CAF

In June 2005, the CAF had conducted a public consultation process through a sequence of workshops in Lima and in the regions of Cusco, Madre de Dios and Puno, in order to identify the key “indirect” environmental and social impacts that had not been considered in the consultation process conducted by the MTC, in the preparation of the Feasibility Study of the CVIS. This process was under the leadership of the Peruvian Society for Environmental Law (SPDA by its acronym in Spanish) and Futuro Latinoamericano230.

WORKING GROUP OF CIVIL SOCIETY FOR THE SOUTHERN INTEROCEANIC (GTSC IOS)

The executor of the ESMP I -INRENA- lacked institutional capacity, so it did not guarantee the implementation of complex projects, of multisectorial and regional character. Therefore, the civil society, through the collective that was formed in 2005, Group of Civil Society for the Southern Interoceanic, (GTSC IOS) - calls for an instance of multisectoral coordination, autonomous and binding. However, this request was not accepted231. The GTSC IOS acted as representative of the civil society in the Consultative Council in the ESMP I232.

The GTSC IOS created in 2005, under the ESMP I. This was a group of non-governmental organizations and academic institutions concerned with the direct and indirect social and environmental impacts of CVIS. The GTSC IOS did not just make a diagnosis but, from testimonies and experiences from regional and local actors of stretches 2, 3 and 4, developed recommendations for any subsequent phase of investment in sustainable development in southeast of Peru233.Among the initiatives of the civil society to promote sustainable development, we can mention the Southern Interoceanic Initiative (ISUR) alliance established in 2007 between Odebrecht, Concessionaire Interoceanic Sur, CONIRSA, International Conservation and ProNaturaleza Foundation to contribute to sustainable development and conservation in the area of influence of stretches 2 and 3 of the CVIS. The CAF participated in the design and creation of ISUR, initiative formulated between the CAF and Odebrecht, and then other institutions such as the IDB, are summed through the MIF. ISUR is executed by the Odebrecht Peru Association. Its activities were carried out under various development programs, such as Econegocios, Responsible Tourism, Biodiversity Conservation and Strengthening Local Governance Programs. Also, ProNaturaleza, with funding from Critical Ecosystem Partnership Fund (CEPF), implemented the project

230 Enrique and Cueto “Propuestas para construir gobernanza en la Amazonía a través del transporte sostenible. Análisis de la Eficacia del Programa para la Gestión Ambiental y Social de los Impactos Indirectos del Corredor Vial Interoceánico Sur - tramos 2, 3 y 4”. November, 2010, p. 42.

231 Enrique y Cueto, p. 45.232 Ibídem.233 Enrique and Cueto, p. 22.


“Promoting the participation of civil society and field monitoring to mitigate environmental impacts and social impacts of the Peruvian Interoceanic Highway in the Conservation Corridor Vilcabamba-Amboró”.

The GTSC IOS has made an almost permanent monitoring of the ESMP I, even from the process of negotiations, and it has completed several manifests to the governing authorities responsible for this program234. The GTSC IOS tried to make its actions permanent; however, in 2009 it dedicated to the tracking of the Iñambari Hydroelectric project235.

BENEFITS OF THE CVIS

At the stage of origination, the CAF makes a demand study, which is important to verify the project’s profitability236. It also performs a social assessment, which is important because the CAF is characterized by finance development projects. In this evaluation the series of benefits linked to the project in question is valued237. CAF headquarters in Caracas, Venezuela, has a specialized area -Risk Control Area238- in which the Office of Analysis of costs and benefits that are responsible for developing the Matrix of Preliminary Analysis of Environmental and social risks is located.

The benefits generated in the transport sector following the construction of the road are those benefits to society through road users, which consists in reducing vehicle operating costs and saving time on journey of vehicles239. The flow of trafficability of vehicles has changed considerably following the construction of the road; in that sense, within the feasibility study a projection of trafficability level was conducted from 2004-2029 in which the expectancy of positive impact of the road on the road integration is reflected. For example, according to the study of the feasibility of Iñapari - South Seaport road interconnection, average daily volume (IMD) transport would transit between 2004 and 2029 was projected and it turned out to be almost double the traffic in the “with project” that “without project”240.

234 Ídem, p. 49.235 Enrique and Cueto, p. 50. This project was under the Agreement between the Government of the Republic of

Peru and the Government of the Federative Republic of Brazil for the supply of electricity to export surpluses Peru and Brazil, better known as “ Energy Agreement Peru Brazil” , which was filed by the Foreign Relations Committee of Congress last May 12, 2014 .

236 In a study published by the University of the Pacific on the economic benefits of the Interoceanic Highway South mentions that “ the estimation of benefits considers both the direct benefits of a transportation project , ie savings in vehicle operating costs and reducing travel times for people and indirect benefits given by the producer surplus , estimated from a macroeconomic model that shows the results of the construction and operation of the road on national , regional and sectorial production . [ ... ] The direct benefits are identified as those derived by society through road users , which consist in reducing the operating costs of “normal “ or existing traffic savings in travel time for passengers existing vehicles , and benefits for time and operating costs savings generated traffic . “In: Bonifaz, José Luis and Roberto Urrunaga. Economic benefits of the Interoceanic Highway. Lima: University of the Pacific Research Center, 2008, p. 18

237 For example, the “time” factor is considered essential when evaluating the economic benefits of a project, considering that saving time has a social value to be taken into account. This recovery would not necessarily be reflected in the amount charged by the toll, but will serve as reference to the CAF to see the positive impact that the project financed has.

238 According to the Annual Report 2013 of the CAF, the current director of Risk Control Area is Martha Diez.239 Bonifaz y Urrunaga, p. 14.240 For further information check Estudio de Factibilidad de la interconexión vial Iñapari-Puerto Marítimo del Sur.

Lima, 2004: Ministry of Transport and Communications


241 Bonifaz y Urrunaga, p. 12.242 Lincoln, Flor and Oscar Rojas. “Is there any regulation for incentives in road concessions? The Peruvian Case”.

Available at: http://aplicaciones.indecopi.gob.pe/ArchivosPortal/boletines/recompi/castellano/articulos/primavera2007/FLOR-ROJAS.pdf

243 Annual Works Payment (PAO): contribution that the Government ensures the concessionaire for a period of fifteen years, as established in the bases and the contract for exploitation concepts (operation and maintenance)

244 This certificate is widely accepted by international financial institutions as a means of payment and allows the concessionaire to obtain funding to continue with the project.

245 Andean Development Corporation (CAF). “Carretera Interoceánica, Sur del Perú. Retos e innovación “ pg.78246 Bonifaz and Urrunaga, pg.26

In addition to the potential benefits in transportation, we can mention other sectors that have been privileged, such as services, trade and manufacturing. The increase in the provision of marketing services, food and lodging respond to the rise in demand for these services expected to be generated by the flow of cargo transport from Brazil to the ports on the coast, by the emergence of new companies and the increase in the tourist flow241.

According to the reports submitted by concessionaires to OSITRAN this year, in the period January to December 2013 we can see the level of trafficability in stretches 2 (5209 vehicles per year), 3 (23 046 vehicles a year), and 4 (3120 vehicles per year). We can see that current projections show a clear difference with the estimates presented in the feasibility study, being in some cases double the number of vehicles passing daily.

CVIS COSTS

In the co-financed concessions, the Government assumes the investment and partially the costs of operation and maintenance242. For the CVIS the Peruvian Government was forced to grant the concessionaire two contributions:

a) Annual Works Payment (PAO)

b) Annual Payment for Maintenance and Operation (PAMO)243

The PAO must be paid every six months, for a period of fifteen years. The general rule with the PAO is that it must be given at the end of the project. In the case of CVIS, three stages of the projects execution were stablished and it was agreed that an PAO proportional to the work was to be delivered at the end of each stage. The Government’s obligation to pay the PAO was enabled through The General Budget Law of the Peruvian State. The receivables of a proportion of the PAO -after obtaining the Work Progress Certificate (WPC) of the respective milestone - secured the funding for the work progress on the next milestone, and so on. Currently these types of financial instruments such as the WPC and CRPAO (Recognition of the Rights of the PAO Certificate)244, have been applied in most concession contracts245.

The PAMO must be paid quarterly the following year after the completion of all works. It is the contribution corresponding to exploitation concepts (operation and maintenance) and will always be given; having the concessionaire met the standards of road service that sets the concession contract. The toll, to be collected by the concessionaire, will be its Working Capital, therefore, it is deducted from the PAMO’s payment and the state should only pay the difference246.


247 OSITRAN Plan de Negocios 2014, Stretch 2. Presentation. 42.248 OSITRAN Plan de Negocios 2014, Stretch 3. Presentation. 36.249 Ibidem, Presentation 60.250 El Comercio Newspaper. Cruz Fiestas, Darwin. ¿Por qué la interoceánica no eleva aún el comercio con

Brasil? Available at: http://elcomercio.pe/economia/peru/que-interoceanica-no-eleva-aun-comercio-brasil-noticia-1725638

Finally, the Government must also assume the cost of accessibility. Seven quarterly payments correspond to ensure the accessibility of the road between the start of construction and completion. According to the concession contracts of the three stretches, the Governement contributions correspond to:

Regarding the level of trafficability for the period 2013, the IMD of stretch 2 was 5209 vehicles, the stretch 3 was 23,046 vehicles and the stretch 4 was 3120 vehicles. We can see that even though the level of accessibility of the road is twice more than what was estimated in the feasibility studies, it is not significant for the investment the Peruvian Government is assuming in CVIS. It is also said that the current land trade route between Peru and Brazil, through the South IIRSA represents only 2% annually; however, some trade experts attribute this poor circulation to the stagnation of the other two axes that make up the Interoceanic Highway: north axis and the central axis since the southern axis is the only one operating now250.

Similarly, in a parallel between the low road accessibility it is added the income received by the State from tolls. As mentioned above, this income allowed the State to reduce the contributions to which it is bound by PAMO concept. However, the contractual obligations of the State are kept for a period of fifteen years, while the flow of the Southern Interoceanic Highway is not significant enough. While integration objectives are met internally, on a commercial level the impact is minimal among the relations between Peru and Brazil.

Source: Concession Contracts of stretches 2 , 3 and 4

Source: Elaborated by the authors.

Nº Stretch Cost Year

2 Urcos – Inambari US$ 428,000247 2013

3 Inambari – Iñapari US$ 1,751,743248 2013

4 Inambari – Azángaro S/. 2’199,220.60249 2013

Stretch Adjudicatario PAO (US$) PAMO (US$)

2Consortium Interoceanic Highway Concessionaire Urcos-Inambari

31.858.000,00 4.763.000,00

3Consortium Interoceanic Highway Concessionaire Inambari-Iñapari

40.682.000,00 5.959.000,00

4 Consortium Intersur 25.449.000,00 4.683.000,00

TABLE 11: REVENUE FROM TOLLS ON STRECHES 2, 3 AND 4

TABLE 12: CONTRIBUTIONS OF PERUVIAN STATE FOR CONCEPT OF PAO AND PAMO


COmParaTiVE fiNaL mEssaGEs

CHaPTEr iii

1. ABOUT THE ORGANIZATIONAL FRAMEWORK OF THE PROJECT CYCLE

The criteria, the application framework of safeguards and procedures established vary depending on the financial institution. As mentioned above, the common denominator among all banks is the project cycle to which all potential projects are subjected. This cycle helps to identify gaps and / or overlaps between safeguards instruments used by each institution in managing social and environmental risks that the project in question would involve. We can notice that the project cycle is quite similar to each bank and spans five sequential stages: identification, preparation, negotiation, and implementation and operation, each stage with its peculiarities. Our analysis reveals similarities in the structure of the project cycle of each bank, although some important differences in its implementation.

This sequence is presented in various ways: It has been attempted to demonstrate throughout the development of CVIS process the different stages that are part of the CAF project cycle and to which all projects that decides to finance are subjected. For CAF, this sequence is grouped and presented as: (i) origination; (ii) evaluation; (iii) formalization, and (iv) management and disbursement. The stages are quite defined in theory, but in practice, some of them are connected and can be carried in parallel, as with the origination and evaluation stage. The latter one is more time consuming. By that time, Matrix Preliminary Analysis of Environmental and Social Risk will be completed and the operation should have been categorized according to the environmental and social risks that it involves.

The sequence of the IDB project cycle consists of five stages: (i) identification and eligibility; (ii) analysis and due diligence; (iii) negotiation and credit approval; (iv) approval of the first disbursement, and (v) execution and supervision.

In the case of domestic banks in China ExIm Bank -depending on the Environmental Management Project Plan- the stages of the project cycle can be grouped into five stages: (i) origination; (ii) preparation and due diligence; (iii) negotiation, approval and contracting; (iv) implementation, and (v) operation and closure. While these stages are identified in the submitted project, there isn’t a graphic or official document of the Bank in connection with its project cycle to ensure that this is the way the institution conceives or, on the contrary, if there are additional steps or subdivisions within each stage. On the other hand, to what has been observed in the project cycle of China Exim Bank, it can be concluded that it has met so far with the requirements for the stages


of analysis and implementation of projects, based on the Ecuadorian legal framework. For example, if the second stage of the project cycle of the China Exim Bank, analysis of the project, considers the completion of an EIA and EIS, this stage has been overcome with the approval of a EIAD, as stipulated in the Ecuadorian regulatory framework. On the other hand, it was not possible to confirm whether this EIAD went through some evaluation by any person or team designated by the Bank or by the Chinese Embassy, in addition to the revision made by the Ministry of Environment.

In the case of BNDES, the cycle of processing operations is clear to projects financed within Brazil. However, in the case of Villa Tunari road - San Ignacio de Moxos that were to be built in Bolivia with the intervention of BNDES, a process different from formally established funding continues. Decisions are the result of negotiation processes in which the leading role is the diplomacy of countries and Ministers of Finance, without neglecting the role of presidents, which allows visualizing that if there is no prior understanding between governments, certainly in the context of other agreements, funding is not consolidated.

However, the case presented has allowed to identify a logic in the process, which we might call in some way “informal”, followed by the Bank for its operations outside Brazil consisting of the following steps: (i) preparation of the loan (It has not become established in the case if at this stage the Bank is directly involved); (ii) evaluation, approval and funding agreements, and (iii) implementation of the loan.

We can see that each financial institution handles similar financing schemes. In the case of BNDES, the project schemes within Brazil have the same structure; however, it is not clear the process to follow for funding projects outside Brazil.

In general, the time that the entire project cycle of the institutions studied cover is between thirty and forty years and preparation times range from five months for China ExIm Bank, and up to twenty-three months, for the IDB.

2. ABOUT THE DELAYS IN THE DEVELOPMENT OF THE PROJECT CYCLE

The four projects deadline duration for each stage of the project cycle is compared. Several delays are observed in the normal sequence of cycle: some important decisions were made before finishing and being able to have the results of the previous stages. In the case of Villa Tunari road - San Jose Moxos, tendering and contracting of the Construction Company OAS was conducted before the risk analysis and the construction work began without having ended the analysis.

There is an explanation for the delays in relation to time limits provided by each institution analyzed. From actions to respond to the identification of gaps in implementation capacity of safeguards in national institutions during the preparation stage that affects the implementation stage, creating new deadlines in the sequence of activities planned in a program of environmental management. For example, in LDCs of the Pasto-Mocoa and CVIS roads, delays in starting institutional strengthening activities have occurred, and therefore, significant gaps were created in the initiation and progression of mitigating indirect impacts due to delays of the national competent entity -in the Peruvian case CVIS- to implement the ESMP II.


Another response to mismatches related to the deadlines in the project cycle is more related to the political context. In the case of BNDES, for the international financing of Villa Tunari - San Jose Moxos the times respond more to the political processes that would also become defining in the loan implementation phase. This shows that the path followed is not formally established by the Bank. The Bank’s role becomes to fulfill decisions that result from processes in which the governments have the leading role. The BNDES would not determine independently whether to approve a project when funding runs out of Brazil; the decision would be in charge of the Brazilian government, specifically, the Committee on Finance and Guarantees COFIG.

However, these political processes are not only characteristic of domestic banks. In the case of CAF, although the project cycle was fully achieved, it can be seen an acceleration of relations between the State and the financial institution to close the stages. It took two years from origination in late 2004, to disbursement in 2006. The approval of the project coincided with the culmination of former President Alejandro Toledo’s presidency. Prior to negotiation stage, the CVIS project was considered very important by the state promoting various legislative initiatives intended to accelerate the execution of the project.

In the case of IDB, it took about two years to approve the first disbursement, due to the fact that in the level of institutionality of the Colombian Government, adaptation to the standards of the IDB was complicated. In that aspect it should be considered the political context of the time, since this stage of the project cycle coincided with a change of government between Alvaro Uribe and Juan Manuel Santos, the latter with a view to attract foreign investment in infrastructure and mining, so political interference was seen.


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If one of the first conclusions is that the development of the project cycle of the analyzed banks is subject to the political context of the country where the investment takes place, and in the case of BNDES and the China ExIm Bank, in addition to the interests of the current governments of Brazil (and the Growth acceleration Plan I and II) and China respectively, another important conclusion is that the most important decisions are taken and directed by the same context (see table 7.2.).

An example is the project through the TIPNIS. Repeated agreements between Bolivia and Brazil (2007, 2008, 2009) were decisive for the decision of the Bolivian State to hire Brazilian company OAS, leaving the technical analysis and enforcement of legislation in a second level. In this sense one must understand that the final decision to terminate the contract in April 2012 was more than a response to a (transparent) analysis of environmental and social risk by the Bank but to domestic criticism for the lack of indigenous consultation, concern of many sectors of the population due to the social and environmental impacts and many other internal deficiencies as well as the government’s own concern that had not been previously analyzed (An analysis document from the Bank has not been made public).

In cases such as the CVIS project of the CAF, at least from a formal point of view, the decision to fund or not a project is taken considering, beforehand, a number of risks detailed in its Matrix Preliminary Environmental and Social Risk Analysis and in environmental and social reports attesting the Bank information. However, in this specific case, it was not possible to access this Matrix Preliminary Environmental and Social Risk Analysis that it is of great importance at the moment of taking the decision whether or not to approve a project. Then, to make these documents available would facilitate the analysis of the reasons considered in the decision making.

TABLE 13: MILESTONES OF THE PROJECT CYCLE: SUMMARY OF THE FOUR OR FIVE DECISIVE MOMENTS IN THE IMPLEMENTATION OF SAFEGUARDS IN THE PROJECT CYCLE

Project Cycle Stage

Pasto Mocoa CVIS Coca Codo Sinclair Villa Tunari-San José

Moxos

1. Originating of the Project: Political Advocacy level

Bolivia-Brazil agreement facilitated a contract with OAS that lacked

technical analysis, leaving in question the role of BNDES and its

social and environmental policy.

2. Evaluation: Quality of the EIA o SEA

Early application of an EAR

(2008)

The EIAs were not integral but

were performed in stretches (2, 3 and

4). Influenced by the characteristics of the Concession Agreement (BOT).

The SEA, under the ESMP I

finished three years after the

signing ESMP I. The implementation of ESMP II has taken several years; it

has been started this year when it should have

started in 2011.

Analysis accelerated, producing an EIA in four months,

approved in a week without SEA or public

consultation.

Gap from the EIA and SEA after contract (decision making in favor of the

project implementation design) without FPIC.


Project Cycle Stage

Pasto Mocoa CVIS Coca Codo Sinclair Villa Tunari-San José

Moxos

3. Negotiation, acceptance and contractingDefining the size and budget of the Mitigation and Development Program

The consultation on the IGAS, as a proposal that came to the

incorporation of PMASIS (US $ 11.4 million)

in the loan (November

2010)

Approval of a mitigation

Program with insufficient of the budget (ESMP I $ 17 million in July

2006) and an excessive delay to start ESMP II (US $ 26.4 million, 2014).

The negotiations lasted a year without

transparency.

4. Implementation:Effectiveness of the complaint mechanism

Complaint issued by

indigenous peoples to the

ICIM (2012)

Implementation interrupted by

domestic criticism on the lack of indigenous

consultation and other deficiencies, leading to the termination of

the contract OAS (April 2012).

5. Implementation:

Gap in the PMASIS

implementation and the

construction of the project

(2013-14)

3. ABOUT THE POLICY OF TRANSPARENCY AND ACCESS TO INFORMATION

Each institution issues a series of documents that define the application of its social and environmental safeguards during the project cycle. At the time of collecting the material for this analysis, it was clear that in most analyzed institutions, the level of public transparency is reduced or almost nulled. Except for the IDB, which has an information access policy, other financial institutions do not have an Operational Policy on transparency and information access.

In the case of IDB, the implemented safeguards policy has different positive aspects. Firstly, it is fundamental the disclosure of documents and information to understand the project (i.e. country and sector strategies, drafts, terms of reference, assessment, financial information among others). In total we identified various documents related to the project (approximately sixty), several of them which were translated into different languages. Its institutional portal has a fairly complete virtual search engine on projects with public access to most documents of the project cycle, being each of them even divided in stages. While some documents belonging to the implementation phase of the Pasto Mocoa project were not available, the access to them was able through requests for access to information, although the process to obtain the documents took a long time.

Regarding the other financial institutions, they lack a system similar to the IDB, being in such cases impossible to access information through their institutional portals. In some cases it is not possible through a request for access to information, as in the case of the CAF, BNDES and China ExIm Bank.

Concerning the level of transparency of the CAF, there are several aspects that should be improved. It is not possible to obtain information on the projects the CAF finances

Source: Elaborated by the authors.


through its institutional portal. Although it has been recently renovated, it has not been considered the publication of information related to project financing, except for the annual Corporate Reports and thematic publications related to the institution. Generally speaking, it is not possible to access the documents that evaluate and monitor projects. However, it was possible to obtain relevant information from interviews and meetings with officials of the CAF itself which served as the main reference for this analysis. In addition to this, the openness of its officials who have contributed to requests for interviews and to obtain information from the CAF project cycle.

The lack of transparency makes it difficult to know in depth the operations of the CAF and the follow-up or monitoring of the projects it finances. Although from the research and interviews cycle emerges quite a defined project, lack of transparency does not show the efforts the CAF may be making, such as the initiatives of the Environmental and Social Management Programs (ESMP I and II).

In the case of China ExIm Bank, there is also a significant difference between disclosure mechanisms that this Bank has and the ones made available by institutions like the IDB, CAF or the World Bank. Mainly, it was found that the information published by the bank on its website is really insufficient, since it does not provide specific information about their projects and operations in each country. Neither the annual reports published by the institution provide information about its operations on every continent or region of the planet. Moreover, beyond the transparency policies or mechanisms disclosure of China ExIm Bank is necessary to add that the real possibilities of access to the institution, whether to requests for information or to transmit complaints are reduced considerably either for language barriers or for the geographical distances, which makes it even more difficult to access to information.

Although since 2007 the BNDES has a section called “Transparent BNDES” this cannot be considered as an operational policy of the Bank. Most significant developments have taken place since 2012 with the adoption of the Law on Access to Information, but there are still limits as bank secrecy, the dependence of Brazilian foreign policy and sovereignty of States not to provide information regarding projects outside Brazil, as evidenced in the interview with the head of the Department of Foreign Trade Bank. The Bank’s interests are the interests of Brazil and its Brazilian companies. The argument of bank secrecy is overcome if we ponder other rights at stake, such as environmental and social rights of populations that may be affected by the projects.

So even though the documents that may shed light on the application of safeguards are numerous, the level of transparency does not help that these are made public and the actual implementation of its social and environmental policies are put in evidence, and moreover when a large number of documents are related to the management of social and environmental risks of the projects concerned.

In conclusion, we note that the lack of transparency in most of these institutions- except in the case of the IDB - is one of the biggest gaps that must be addressed for a full understanding of compliance with social and environmental safeguards. It is therefore necessary to make a priority focus on this aspect to achieve harmonization of standards that should be applied uniformly by all financial institutions.

4. ABOUT THE QUALITY OF THE ASSESSMENT PROCESS AND ENVIRONMENTAL AND SOCIAL MANAGEMENT

In addition to instruments for measuring social or environmental risks (EIA) required on the country’s systems, each analyzed bank has its own instruments.


To analyze the environmental and social risks, the CAF produces a Matrix Preliminary of Social and Environmental Risks Analysis, using as main input, the feasibility study of the project, the State is obliged to provide the highest level of information to the financial institution; complementing that, the CAF is also responsible to obtain information on their own. This information will be complemented by a mission of evaluation and a field visit that will serve to corroborate the information of the project. All information the CAF obtains will be reflected in the Social and Environmental Reporting (SER)) that it is issued at the end of the evaluation phase. This report may establish conditions and recommendations so the client can carry an adequate socio-environmental management according to current national legislation and applicable to the operation as the standards set by the CAF.

The Matrix is an internal document and we cannot know what way or technique is used to assess environmental risks in particular. Also as part of the conditions for loan approval for the implementation of stretches 2, 3 and 4 of CVIS, CAF conditioned on the implementation of the ESMP I. However, one of the environmental tools contained there -the SEA- finished three years after the start of the project implementation. Nonetheless, the institution recognizes that the evaluation of indirect impacts should be performed prior, which did not happen in the case of CVIS.

In the case of the IDB, this entity set as a condition to approve the loan, the analysis of the leading environmental and social risks of Protective Forest Reserve of Upper Mocoa River Basin and common lands and reservations of indigenous peoples. Thus, through the development of PMASIS, the project has a management plan specifically oriented to the protection of risks that will imminently be presented in the affected reserve area, which includes two of the five stretches that make up the project in whole and which are fundamental to its configuration.

In the case of BNDES, the project can prove some issues. The contract between the BNDES and the Plurinational State of Bolivia as a borrower states that the project for which the goods and services financed are allocated should observe all the applicable environmental regulations in force in the State Borrower, including one that indicates that “the signing of the contract and the compliance with the obligations arising from it do not cause conflicts or result in violations of treaties, agreements, contracts or other instruments in which the borrower is a party. “Linked with the system of the country, seems to be the only “extra” requirement considered by the Bank to support a funding initiative. Also, this case shows that the implementation of the Operational and Social Environmental Policies of the Bank on a project outside Brazil is subject to political processes and decisions, even to overlook public engagements, internal regulations of the Bank and countries. At the same time, it shows a process of relaxation of standards as well as social and environmental standards, in addition to the infringement of other laws of the country and internal systems, such as public investment, depending on the decision to do investments socially questioned.

5. ABOUT THE LEVELS OF DEPENDENCE ON THE OWN REQUIREMENTS OF THE FINANCIAL INSTITUTIONS REGARDING THE USE OF NATIONAL SYSTEMS FOR RISK MANAGEMENT

It should be noted the relationship that all financial institutions studied here hold with the domestic law of each of the countries in which the funded project is implemented. In principle, each bank trusts, supports or uses national social and environmental risk management systems to varying degrees as a principle of their policies or strategies,


but also as a central element in the design and implementation of the project.

To a formal policy level, the norms and standards of institutions like the CAF251, China ExIm Bank and BNDES seem confident in the ability of the borrower’s laws and institutions regarding administration of risk management.

In the case of the CAF, it implements a system of risk analysis of internal character that allows it to validate if the transaction meets all environmental and social safeguards established by the CAF as an entity, as well as those that are set by national environmental legislation force in the country where the project is developed. This risk analysis may include alternative studies in environmental matters that complement the national legislation, as in the case of the CVIS and its ecosystem evaluation pointing CAF that it developed. However, this has not been corroborated as it is internal documents of impossible access.

Also, for risk analysis, the CAF draws the Matrix of Social and Environmental Risks Analysis mentioned above. Such documents are discussed in the institution, especially in the early stages of the project cycle, corresponding to the identification, eligibility and evaluation of the project. In that sense, the CAF itself has a risk analysis system that allows you to identify gaps that may exist between the social environmental legislation of the country and its guidelines and social environmental safeguards posed as an institution.

In the case of China ExIm Bank, it does not have an explicit safeguard policy relying solely on its Guidelines for Environmental and Social Impact Assessments of loan projects that exhort the application of national legislation. These guidelines were the product of a series of initiatives in environmental matters –applicable to banks-which has been adopted by the Chinese government in recent years to improve their social-environmental practices.

In 2003 the Law on Environmental Impact Assessment (EIA) of the People’s Republic of China (PRC) is issued, and entered into force in September of that year. From this law, the EIA is officially established as an important environmental tool for decision-making in the continuation or not of a project. In this context, the China ExIm Bank decided to adopt the above guidelines in 2008, which seek to strengthen the need for critical analysis of social and environmental impact during the loan approval. An ex ante and ex post EIA is required as well a regular assessment of project implementation, the EIA will be based on the legislation of the debtor country and its non-compliance could result in the seizure of the loan by the China ExIm Bank or the demand of a prepayment252.

Importantly, the China ExIm Bank does not perform compulsorily an independent assessment of environmental and social impact. Environmental policy provides only that such studies should be subject to the policies and environmental standards of the host country, and that promoters and implementers of projects must obtain environmental permits. Even in projects with serious negative impacts on the local environment, it is not considered mandatory to have an independent evaluation of the bank, although it is established the need for public consultation in accordance with the requirements of the host country253. While there is an interesting regulatory framework of the PRC for their

251 As noted in the CAF Chapter, the social environmental standards of this institution include: (i) Environmental Strategy, (ii) Guidelines on environmental and social aspects; (iii) environmental and social safeguards, (iv)the User Guides and evaluation of a domestic nature

252 Gallagher, Kevin; Amos Irwin and Katherine Koleski. “The new banks in town: Chinese finance in Latin America”. Report Inter-American Dialogue, March 2012, pp. 20-23.

253 China Exim Bank, Guide for the Evaluation of Environmental and Social Impact Project Loan, 2008: Article 12 (unofficial translation).


investments abroad, little is known about the specific mechanisms used by Chinese banks or Chinese agencies on control and supervision to ensure compliance with these regulations. Unlike what happens with institutions like the WB, IDB and IFC, Chinese banks seem not to have developed the necessary conditions to ensure compliance with the regulations of their investments abroad, such as having teams specialized, budget, and a clear policy on access to information and instances that enable its application.

Financial institutions such as the IDB maintains its own policy on implementation of safeguards, which allows for an independent analysis regarding the national legislation of existing social and environmental risks in certain project. The situation in the IDB’s case is different because it does have an explicit policy254 that requires its borrowers to apply safeguards available to the Bank. This was evident in the project implementation of Pasto Mocoa when the specific operational policies were adopted as the OP-703 (environmental policy), OP-765 (Indigenous Peoples Policy), OP-710 (involuntary resettlement policy) and OP-704 (policy on natural disasters). These policies must be complied with by the executing Colombian agency, demonstrating the level of autonomy that the IDB have within the national law of their borrowers.

The BNDES clearly establishes the obligation to respect and comply with the legislation of the country where it operates. However, in the present case, compliance with policies, laws and regulations, as much as from the borrower as from the Bank country, would be subject to political agreements. Thus came the infringement to the Constitution of the Plurinational State of Bolivia when the prior consultation about the financing decision and project contracting and other laws of the country was not made before, without this situation, neither the public local, national or international rejection, reach to influence the decision to finance the project. What it is outlined above demonstrates that stages and levels of preparation and approval of loan within the Bank would become receivers and managers of decisions taken by the central government.

This different approach on the banks in relation to the implementation of its safeguards or the system of the country can explain the level of flexibility and discretion that characterizes the safeguards tools of each institution. Flexibility in the sense that it can be adapted to national law and be left to the executing safeguards agency or discretion when the bank has the power to define what legislations or policies will apply. And a midpoint between the two would be to rely on the formal level system in the country, but in practice to implement a system of independent and internal analysis that ensures the Bank that the safeguards are being met or ,before a possible breach, to complement them with internal assessments.

On the other hand, in two cases in particular-the CVIS and Pasto Mocoa-, the institutional weakening of the national system for risk management was revealed. Aspects such as institutional capacity of the country to ensure full implementation of the environmental and social safeguards from the banks were, for example, identified in the case of CVIS-the CAF identified institutional shortcomings, such as the elimination of INRENA and the subsequent creation of MINAM - and as far as possible it sought to contribute with a solution. This was shown to boost investment in entities like DGASA, part of the MTC, project implementing entity. Likewise it is understood that the Supervisory Agency for Investment in Public Transport Infrastructure (OSITRAN) also benefited from the support of the CAF to enhance their technical capacity. Similarly, in the case Pasto Mocoa, it was criticized the weak implementation capacity of organizations like INVÍAS- which was the executor organ- and Corpoamazonía, which was responsible for executing the PMASIS

254 This policy has high standards, backed by experts to monitor compliance. Such is the case of CATI group of experts to monitor compliance with environmental and social parameters required by the Bank since before the signing of the loan agreement.


and at the same time -complied a role of judge and part- was in charged to control the implementation of the PMASIS.

All these aspects are considered by each institution and definitely influence when evaluating whether to approve a project-since the institutional weaknesses can slow the performance of the project - and determined to strengthen risk analysis of internal character from each institution.

6. ABOUT ENVIRONMENTAL MITIGATION PROGRAMS

The average term of mitigation programs are three to six years, when most concession projects have a minimum of twenty-five. Consideration should be given to programs in proportion to the lifetime of the projects. Also, a comprehensive approach is not been given.

In the case of CVIS, CAF raises a number of conditions and recommendations before the disbursement of a loan. It was the case of the ESMP I, which aimed to cover the indirect impacts of stretches 2, 3 and 4. The budget for the program was inadequate compared to programs for similar projects in other countries in the Amazon ranging between 5% and 20% of the final cost of the work. However, the objectives and areas of focus proposed in the SEA were treated. As for the second stage of the ESMP, the budget -US $ 26.4 million- is still insufficient to address the identification and management of indirect impacts. Another area of weakness was the late implementation of these programs: SEA within the ESMP I ended three years after the signing of the contract between CAF and the Peruvian Government, despite being a key tool for environmental assessment on the identification of indirect impacts, and even more important is to identify them prior to the start of project operations. For its part, the ESMP II has taken three years to be implemented: according to the CAF it should have started in 2011 and only in April this year the loan contract was signed, the executive director of the Program was designated in September and the first disbursement was made in October.

The IDB Mitigation Program was innovative and included several measures of social control that included a PMASIS focused on the area of Protected Forest Reserve of Upper Mocoa River Basin. Also, The IDB financed the Environmental Management Plan of the project for $ 2.5 million and four technical nonrefundable operations.

Incorporating a PMASIS in the project was essential; the budget allocated by the IDB to PMASIS was $ 11.4 million -signified more than 20% of the total IDB financing amounting that ascended to US $ 53 million- representing approximately 6% of the total cost of the road (US $ 203 million), one of the highest costs per kilometer across Latin America. It should be noted that the Pasto Mocoa Project has a special character because of the high level of environmental risk involved in traversing the forest reserve, so PMASIS financing entailed a greater outlay.

7. ABOUT THE QUALITY OF INDIGENOUS CONSULTATION PROCESSES AND PUBLIC CONSULTATION

Often there is confusion between free and informed indigenous prior consultation and citizen participation through public consultation. This confusion is part of the social organizations and population, officials of banks, governments and businesses.

Of the four cases presented, only projects financed by BNDES and IDB involve indigenous


peoples and communities and, therefore, the quality of the free and informed prior consultation can be analyzed comparatively regarding the application of standards of both institutions. In the other two projects funded by the CAF and China ExIm Bank quality of citizen participation will be analyzed.

In both projects we can implement the Convention 169 of the OIT, the consultation has been made subsequent to the adoption of decisions. In the case of the project financed by BNDES, the “prior consultation” with indigenous peoples and performed after funding decisions, construction and commencement of works, was implemented in a context of questioning its legality, opportunity, institutional, embodiment and respect for indigenous collective rights. In the other case, it appears that it cannot be considered a proper consultation process for several reasons: they are informative workshops, the affected population is not involved and it is the companies not States who organize meetings and apply the consultation, despite of being a State obligation.

In the case of BNDES, internally the Constitution of the Plurinational State of Bolivia and international treaties in defense of human rights and indigenous rights ratified by Bolivia and that has the force of law in the country was violated, by not doing the consultation before the decision to proceed with the project: agreeing funding, hiring the project and starting the construction. The so-called “consultation” with indigenous peoples and performed after funding decisions, construction and commencement of works, was conducted in a framework of questioning its legality, opportunity, institutions, embodiment and respect for indigenous collective rights .

With regard to the public consultation, established in general in the environmental legislation of the countries as an instrument for participation and to respond to the concerns of society with regard to projects and their impacts on the population and territory; although in the early stage of its implementation in many cases came to meet objectives in terms of improving the management and implementation of projects, and involving people in their planning and execution, it has increasingly become a mere bureaucratic process fulfilled to meet the standards of the country and / or funding requirements.

Resulting in many cases in informational workshops and propaganda of project benefits or in collecting public concerns about the investment that is intended to run and other necessities without warranty of effective and wide participation, response to these concerns and reach consensus. This fails to provide opportunities for analysis and discussion about the investment and the project, and rarely the population concerns reach the influence of the decisions of the authorities and funders.

In general, financial institutions contribute to the flexibility of this instrument and to the reduction of public participation and quality in decision-making, as the trend is the formal verification process embodiment (existence of records and lists participants), not from their quality and certainty that it has achieved an effective and wide participation. In cases like the ones financed by BNDES, public consultation was the responsibility of the company in charge of the construction of the project, whose main priority and objective at all times was the job that corresponds to their specialty (building infrastructure) and not to give answers to the concerns of different parts involved in the process, even much less engaging TIPNIS indigenous communities which for years expressed its concerns and opposition to the project.

This shows that, in the case of contracts for financing operations outside Brazil, the


application framework of social and environmental policies of the Bank or the social clause is not defined.

In the case of IDB, the project has a broad consultation and participation, given that consultation took place during the making of the original EIA, the TDR for updating and complementation of the EAR and BESMP, public consultation was held in the case of EIA on June 11, 2006 and TDR on November 1, 2006. Likewise, its content was discussed in meetings with local people and NGOs, where different suggestions were collected, although all were not included in the final documents of the studies. Here is a difference between consultation with indigenous communities required by Colombian law and public consultation that the IDB demands as part of its social policy. While dialogue with civil society was opened in the latter process, this was not fully taken into account when completing the studies required to be approved by the bank.

On the subject of prior consultation, communities were not consulted on the project design. It is highlighted the process that is currently taking place in front of the nature reserve area, where although there are not living communities in the area, it does border on its territory, which means, it affects them. It is emphasized that no formal information about the process that is taking place and both the Bank and the State merely indicate that the process is following its corresponding course.

8. ABOUT COMPLAINTS MECHANISMS

Regarding the complaints mechanisms, experiences in each of the banks are particularly different. In the case of ExIm Bank it has not been able to verify that the Bank have its own mechanism, effective and available to the public. In this sense, just as with the mechanisms of disclosure, again important limitations are presented in the operation of the Bank, since receiving complaints rests with the contracting company or supervisory body.

In the case of CAF, although similarly to the China ExIm Bank where there is no mechanism or an explicit policy for tracking complaints, there is an informal process that goes from referring the state sectors involved in the complaint to processing to the president of the CAF himself. In all cases, if the complaint is serious, it remains as reference.

For the IDB, there is an Independent Consultation and Investigation Mechanism (ICIM) to control the projects it finances, constituting a breakthrough in terms of accountability and access to justice for affected communities, although in the specific case, the application was declared ineligible because there “were no conditions for a dialogue process”. Currently this mechanism is under revision.

The mechanism of BNDES called Ombudsperson is not a space to receive demands regarding the impacts of projects and other operations, but rather receive suggestions, complaints and take a role in mediating conflicts between people and the institution. In Brazil, it is used to receive the complaints related to difficulties in accessing information and it was not used in the case presented. Therefore, one cannot consider the Ombudsperson as a complaint mechanism per se.


rECOmmENDaTiONs

The trend towards reduction of environmental and social standards as evidenced by the review and updating of the World Bank Operational Policies should alert the other international financial institutions-including those studied in this analysis-and avoid taking lower standards, as this will adversely impact the populations and the environment of the influenced area of the projects funded. Therefore, in order to strengthen the safeguard policies on the basis of the cases analyzed in this paper, it is suggested to international financial institutions to adopt the following recommendations:

The harmonization of the policy of transparency and access to information which will allow a better understanding of the financial institution itself, project funding, the criteria considered for investment, and environmental and social management that applies to its project portfolio. The diffusion of institutional management not only will benefit the communities involved, third parties and the general public, also serves as the window for the institution to publicize the positive initiatives that may be promoting on their projects.

The optimal scenario is that the financial institution holds the active transparency and ensures the availability and accessibility of most of its information on their websites and spaces available, without waiting for this to be requested. In case there is information that cannot be included in the websites, this decision must be based on objective reasons and grounds.

In the case of national development banks, although these claim to invoke national laws on access to information that does not mean that they cannot create and implement their own policies on transparency and access to information, for which it is important to account the processes developed by civil society. For example, it has been developed a proposal of guidelines for implementing a policy of access to information for the BNDES255, which can be taken as a reference and applied within the Operational Policies of other national development banks.

1.

2.

3.

255 Guidelines for discussion. Implementation of an Access Information Policy for the BNDES. Available at: http://www.dar.org.pe/archivos/publicacion/134_Lineamientos_de_Politica.pdf


Transparency is closely linked to participation. Therefore, international financial institutions should create opportunities for participation in which the exchange of information and dialogue with the interested civil society (national or international) and communities involved in projects funded is promoted.

Safeguard policies or environmental and social regulations issued by different financial institutions must clearly establish and strengthen its criteria for the evaluation of each stage of the project cycle, such as EIA, EIS, environmental management plan, prior consultation, and etcetera. It is vital that these institutions have internal and independent mechanisms for assessment of these requirements and not rely solely on the assessment made by the official institutions of the host country. Thus ensuring its relevance to their own criteria, parameters and standards as sine qua non condition for the approval and disbursement of any credit.

The independent assessment by financial institutions must be accompanied by a transparent, representative and effective social participation process to which, such institutions should coordinate with the public institutions in charge of promoting control and effective social participation in each country, such as councils for citizen participation, public defenders, among others.

On accountability, it must be public and accessible, in addition to the documentation for each stage of the project cycle, it should be clearly established those who are responsible for the decisions made at each stage. In that sense, the production and circulation of annual reports on compliance and performance of environmental and social safeguards in projects financed is needed.

The financing Banks must have clear mechanisms for the assessment of the development of the processes of free and informed prior consultation in countries where investment is executed, according to the established requirements of most of these institutions as part of its project cycle it should monitor the compliance stipulated by Convention 169 of the ILO and the specific constitutional requirements of each host country, ensuring that this is done prior to the signing of any credit agreement and / or work. This also considering that in many countries there are still no internal enforcement mechanisms that provide an enabling legal framework for the implementation of the Convention. Proof of this is that there is no Act of prior consultation in many countries, much less a regulation, which is used as an excuse for not doing feasible the implementation of free and informed prior consultation on projects. These mechanisms that develop free and informed prior consultation processes must identify clearly the difference between the concepts of consultation (according to Convention 169) and public consultation or information workshops that take part of the concept of participation in a broader sense.

4.

5.

6.

7.

8.


The direct and indirect impacts must be previously identified at the beginning of the works. The budget allocation for both should be proportional to the total investment in the project. Early identification of impacts, whether direct or indirect, allows different stakeholders (State, concessionaire, and financial institution) face and mitigate if applicable, otherwise it would prevent timely participation in decision-making on environmental and social sustainability of the project.

The International Financial institutions should condition the disbursement to the fulfillment of their environmental and social safeguards. Depending on the severity and environmental and social impacts arising from such failure, they could suspend absolutely the loan.

If the financial institution holds an Operational Policy of safeguards, it should have a manual or guide which define and establish the specific methodologies to be followed by the borrower to achieve satisfactory compliance with the policies and requirements of the institution. In the event that the financial institution applies the “country system” it should seek through mechanisms of internal and independent evaluation that the borrower is complying national legislation in environmental and social matters and applicable to the project area.

The list of borrowers should be made public–from the public and / or private- sector that have the highest rates of default. This will track the environmental and social performance of borrowers effectively.

It is necessary to implement an institutionalized system of ex post monitoring and supervision to assess the achievement of objectives and performance indicators of the project (economic, social and environmental) over the lifetime of it, not only during the first years of implementation and operation.

In that sense, better coordination among stakeholders for environmental management and institutionalize monitoring alternatives involving other stakeholders, including communities and civil society must be forested. Both should participate in the management of monitoring, through the issuance of reports (not just the state regulatory body, or the concessionaire) but of the communities themselves. It is important to establish dynamics to create long-term commitments to allow monitoring each of the parts involved in a project.

9.

10.

11.

12.

13.

14.


International financial institutions should establish a formal, accessible and effective complaint mechanism that meets complaints for possible breaches during project implementation, regardless of the existence of similar mechanisms within promoting companies or contractors of projects or those provided by public institutions in the host country.

The accessibility of such complaint mechanisms must be guaranteed by the availability of a number of communication channels that adapts to the cultural and socioeconomic diversity of the population of the host country, including: electronic means, telephone station, conventional mail and Office(s) to the public, among others. The existence of these mechanisms should be publicized and their use should be encouraged by IFI’s.

Furthermore, the functioning of these mechanisms must be clearly defined and regulated by establishing requirements to access to them, management protocol of the submitted complaints or concerns, opening hours, deadlines to give answers, among others. Ensuring, in this way, that the complaints presented are given due diligence.

15.

16.

17.


aNNEXEs

1. INTER-AMERICAN DEVELOPMENT BANK (IDB)

ANNEX 1: IDB PROJECT CYCLE

Process of Analysis, Evaluation, Approval, Financing and Monitoring.

Sieving/

Classification

Verification of Environmental"

conditions"

Loan Proposal

Environmental Requirements

Comply of Environmental requirements y

previous conditions

Comply/ contractual

management terms

Definition of the scope of Environmental Strategy

(ESS)

Impact Identification

IGAS

Management protocols Monitoring of compliance

of safeguards

(ESMR)


ANNEX 2: PROJECT TIMELINE

The highlighted times correspond to the identified milestones of negotiation.

RESULT PROJECT STAGE TIME RESULT

1994 – 1998 Before Ernesto Samper Government

Government marked by capital granted by the drug trafficking to the presidential campaign, which caused serious problems in economic matters such as low incentive to foreign investment.

1996 BeforeAlternatives Environmental Assessment prepared by Hidroestudios SA

Ministry of Environment determines the non-feasibility of alternatives to the project.

Sept-15-98 Pre identification Interior Ministry Certificate Existence of indigenous peoples

1998 Pre identification Ministry of the Environment DAA responds negatively.

July-25-99 Pre identificationAuto 202 Ministry of Environment

The auto requested the submission of the EIA and required to initiate the process of prior consultation.

July-99 Pre identification Public hearing in MocoaAdvocacy and lobbying on Corpoamazonía for the comply of the project.

Aug-01 Pre identification Decree 1735 2001Includes the project under the name “Transversal Tumaco Leticia”.

Aug-01 Pre identification First term of Alvaro Uribe

Oct-25-01 Pre identification Interior Ministry CertificateIt certifies INVÍAS about the existence of indigenous communities.

2002 Pre identification Interior Ministry CertificateCertification of non-existence of indigenous communities that may be affected by the project.

ene-03 Pre identification EIA Environmental Impact Study Done.

2005 Pre identification EIA INVÍAS presents the EIA.

Aug-06 Pre identification Second term of Alvaro Uribe

Oct-06 Identification TDR publication of the three studies previous to the project profile

Nov-06 Identification Publication of intent: summary of the project profile

The IDB published the project profile of San Francisco Mocoa Alternate Road.

2007Analysis and due diligence

Phase II of the EAR consultation

Nov-12-07Analysis and due diligence

Preparation of the project profile

Project Profile.

29/06/1905Analysis and due diligence

IDB technical cooperation Preparation of SEA nearly US $ 1.7 million.

July-08Analysis and due diligence

Strategic studies adjustments Adjustments to EIA, BESMP and EAR.

2008Analysis and due diligence

Interior Ministry CertificateNew certificate: there are no indigenous communities, PCPLI is performed.

Mar-08Analysis and due diligence

Consultations of the project following IDB policy

Phase IV Consultations on the phase of the Regional Environmental Assessment and Action Plan, final report.

Apr 08Analysis and due diligence

termination EAR Publication of the EAR.

Ago-08Analysis and due diligence

termination PMASISThe IDB publishes PMASIS and indebtedness document CONPES is prepared (National Council for Economic and Social Policy).



Ago-08Analysis and due diligence

Completion of EIA, EAR, BESMP Studies.

05 Dec-08Analysis and due diligence

Resolution 2170 of the Ministry of Environment

Approval of the environmental permit for the project.

Oct 08Analysis and due diligence

Start of concertation PMASISConcertation PMASIS, interagency process that culminated in the “Institutional Agreement for Wills San Francisco-MocoaAlternate Road”.

Jan-09Analysis and due diligence

CONPES 3610

“Favorable concept to the nation to hire outside loans with multilateral banking for the amount of US $ 203 million, or its equivalent in other currencies, for the partial financing of the construction of San Francisco-Mocoa alternate Road (Phase I)” .

Oct-20-09Analysis and due diligence

Termination IGAS Publication of the ESMR.

Oct 09 NegotiationOpening reception of comments IGAS

The comments space opens against the contents of the ESMR

Nov 09 Negotiation Closing comments IGAS

Jul 05 NegotiationIDB approves four studies as technical cooperation

(i) extension of the Forest Reserve; (ii) feasibility of REDD projects; (iii) indigenous mining area, and (iv) modifications to the POT and POMCAS.

Dec-14-09 NegotiationApproval of the project at the IDB

Project approved by the Board of the Bank, listed as CO-L1019.

Dec-17-09 Negotiation Proposal of loan The proposal of the loan occurs.

Mar-29-10 NegotiationSocialization of a technical consultancy

Results technical-legal consultancy to assess and promote the viability of the proposed extension of Protective Forest Reserve of Upper Mocoa River Basin.

May-03-10 NegotiationSigning of the credit agreement or loan (2271 / OC-CO)

US $ 53 million with the IDB.

May-04-10 NegotiationContractual Stage: Start of Public Tendering process

Opening of the call for contracting for the project.

Jun-26-10 Negotiation Indigenous MarchLack of FPIC right of indigenous peoples in the project.

Jul-26-10 Negotiation Resolution 3332 of INVÍASAward: ICB the proponent “the Consortium South Road “.

Jul 10 Negotiation Indigenous MarchLack of FPIC right of indigenous peoples in the project.

Aug-01-10 NegotiationMobilization and indigenous protest around the Putumayo

Roundtable and Permanent Dialogue of Putumayo and Cauca Boot.

Sep-10 NegotiationTutelage action by the indigenous peoples of Putumayo

Refused at first and second instances, and the Constitutional Court did not select it for review on December 10, 2010.

Aug-10 NegotiationJuan Manuel Santos first government

Sep-30-10 NegotiationResolution 4493 creation of CATI

Three experts on: (i) environmental management issues in road infrastructure; (ii) in protected areas, and (iii) sociocultural issues.

Nov 10 Negotiation Mass ActionClass action filed in the court of Pasto in request of the fundamental human rights of indigenous peoples.


FECHAETAPA

PROYECTOMOMENTO RESULTADO

Jun-29-11First disbursement

First disbursement IDB first disbursement is made.

Aug-16-11First disbursement

Memorandum of ICIM Ombudsperson

The request is eligible within the consultation phase.

Dec-11First disbursement

Complaint of Indigenous Peoples before the ICIM

Opening proceedings before the ICIM of IDB for violation of their own policies.

Dec-11First disbursement

Complaint of Indigenous Peoples before the ICIM

Opening proceedings before the ICIM of IDB for violation of their own policies.

Jan-23-12 Implementation Start of Works

Construction of the Alternate Road starts from the visit of President Juan Manuel Santos to the municipality of San Francisco in the department of Putumayo. In his speech he said the project is important within their government strategy by building infrastructure to achieve integration with South America.

Mar-31-12 Implementation Progress Monitoring ReportIt is recognized to date the disbursement of US $ 5.3 trillion IDB, which means, 10% of total.

Jun-19-12 Implementation Court Decision Mass action Mass Action rejected by the court.

May-26-12 ImplementationNo objection BID versus San Francisco

The IDB delivers no objection to the start of construction activities in San Francisco Mocoa Alternate Road in the San Francisco front.

Jul-09-12 Implementation

Communication of environmental legal consultant Mr. Gustavo Adolfo Duque from Invías

Determines that there are aspects in the biotic, abiotic and socio-economic environmental system in the area that were not identified and assessed within the EIA, and therefore were not included in Resolution 2170 that grants the environmental permit for the project variant San Francisco - Mocoa .

Oct-31-12 Implementation No objection BID versus MocoaThe IDB delivery no objection to the start of construction activities in San Francisco Mocoa Alternate Road in front of Mocoa.

Dec-12 Implementation Mass Action AppealAppeal to the State Council against the judgment of the Court.

2012 ImplementationAmendment to Resolution 2170 / 05.12.2008

Relocation of ZODME areas as requested by the INVÍAS.

2012 ImplementationConstitution of the Unit of Implementation PMASIS

Corpoamazonía constitutes PMASIS Implementation Unit, the INVÍAS monitors the PMASIS through the coordinating unit with specific equipment for it.

Feb 12 13 ImplementationResolution 0135 ANLA confirms amendment to the environmental permit

The resolution incorporates the San Carlos campus as a site for disposal of excess excavation and an industrial area.

Feb 13- 13 ImplementationInterposed Action for annulment

The purpose is to obtain the annulment of Resolution 2170/2008 “Environmental Permit of the San Francisco-Mocoa Alternate Road project”.

2013 Implementation Approaches under the FPICINVÍAS initiated approaches with indigenous peoples against the FPIC process of enlargement of the reserve area.



May-13 ImplementationStart of the process before the Compliance Review Panel

Indigenous Peoples request for an investigation to the Compliance Review Panel for the purpose of determining the transgressions IDB to its own operational policies of environmental safeguards (OP-703), Involuntary Resettlement Policy (OP-710) Policy on Indigenous peoples (OP-765) and policy on disaster risk management (OP-704), the “Construction of Alternative San Francisco-Mocoa” phase 1 (2271 / OC-CO) project.

Jul-01-13 ImplementationMobilization and concentration of the Minga resistance

In the pronouncements includes the bypass project violated the collective rights of indigenous peoples of Putumayo.

Jul-19-13 Implementation913 Certification Ministry of Interior

The director of consultation in exercising the statutory and regulatory authority determines that: the presence of “Yanakona Villa Maria Anamú” community (recognized by DAIRM with Resolution 067) 20/08/09) is recorded in the project “on the municipality of Mocoa, Department of Putumayo.

oct-01-13 ImplementationSpanish Notification Panel of Compliance Review.

Ineligible application and close of the case before the mechanism.

Feb-01- 14 ImplementationApproaches under the FPIC on the exploitation of materials in rivers

Indigenous communities and the Consortium South Road sign agreements of the methodology to be held for the FPIC process with communities on the extraction of materials from the river.

01-feb-14 Implementation Executive Report Disbursement US $ 37 947 341 580 000 - 71.60%

May-14 ImplementationStarting the process of Clearance IDB sector 4

Intervention of the sectors 1 and 4 (42% implemented) no-objection procedure starts at the IDB sector 5.

Aug-14 ImplementationSecond term of Juan Manuel Santos

According to the report PMASIS, from January to June 2014, the electoral political scene did not alter the progress in implementing the PMASIS, in Corpoamazonía it was articulated the PMASIS to the processes of project implementation of the Action Plan 2012-2015 “Amazonia, an environmental commitment to include “, a fact that is embodied in the various Technical Committees made with Corpoamazonía256.

ANNEX 3: LIST OF INTERVIEWS

The highlighted times correspond to the identified milestones of negotiation

Official’s Name Entity

• MauricioBayona Environmental Consultant of the IDB

• JuanDavidQuintero CATI Member

• AnaMaríaPinto Transport specialist at the IDB

• VeraLucíaVicentini Environmental engineer responsible for the supervision of PMASIS. INVÍAS

• LuisaNarvaez• PaolaFabianaChacón

Project Manager in the sub direction of large projects

• FreddySierra Engineer in charge of the project in the sub direction of study and innovation


256 Semi-Annual Report, agreement 682 from 2010 between Corpoamazonía and INVÍAS. Project “Construction of the San Francisco Mocoa Phase I variant” Plan of Integrated Environmental and Social Management and Sustainable PMASIS. Reported period from January 1 to June 30, 2014, p. 5.

2. NATIONAL BANK FOR ECONOMIC AND SOCIAL DEVELOPMENT (BNDES)

ANNEX 1. ORGANIZATIONAL CHART OF THE BNDES

Source: Coutinho BNDES Financiamiento al comercio exterior. UNASUR GTIF- GT-3, October 2012

INTERNAL ORGANIZATION

Board of Directors 2Luiz Eduardo Melin

Board of Directors 3Mauricio B. Lemos

Board of Directors 4Julio Cesar Ramundo

Board of Directors 5Guilherme Lacerda

Board of Directors 2Fernado M. Santos

ExecutiveSecretary

Auditing Division Carlos Tadeu

AdvisoryBoard

PresidentLuciano Coutinho

Vice PresidentJoao Carlos Ferraz

Credit

Planning

RiskManagement

EconomicRescarch Division

President’s OfficeAlvaro L. Correa

LegalDivisión

Board of Directors 1Roberto Zurli

Infraestructure Administration Capitals Market Agroindustry and Social Inclusion

Information Technology International

Basic Imputs Financial Enterprising Capital Social Infrastructure Human ResourcesForeign Trade

Project Structuring Indirect Operations Industrial Environmental AGIR Project Management Agency


ANNEX 2: PROJECT TIMELINE AND MILESTONES

Decree Law 07401 dated November 22, 1964, creating of the Isiboro Secure National Park (TIPNIS) in order to “protect the integrity of renewable natural resources and scenic beauty of the region against the serious dangers of road construction marginal of the forest and settlement schemes “.

Law 676 dated December 7, 1984, declaring the Cochabamba-Trinidad road construction.as national priority

Supreme Decree 22610 of September 24, 1990, declaring the Ancestral Territory Park from the Mojeño, Yuracaré and Chimán villages, and renamed them as Indian Territory Isiboro Secure National Park (TIPNIS).

Administrative decision of INRA TCO-NAL-000002 issued in 1997, which recognizes space as common property in favor of indigenous peoples Mojeño, Yuracaré and Tsimane under the guise of Communal Land (TCO), granting property title of TCO (provisional), with an area of 1,236,296 ha. The basis for co-management between Subcentral TIPNIS and the National Service of Protected Areas (SERNANP) are established and for the first time the “red line” is delimited.

Supreme Decree 26996 dated April 17, 2003 incorporating the Villa Tunari-San Ignacio de Moxos road within the Core Road Network.

Law 2530 of 24 October 2003 on financing for the implementation of Linking Caminera Cochabamba-Beni Project.

Ratification of the Memorandum of Understanding between the prefectures of Beni and Cochabamba and Agreement with the National Roads Service dated January 13, 2006 to implement the pre-investment stage: feasibility study, EIA and final design.

Law 3477 of 22 September 2006 declaring national and departmental priority the preparation of studies and construction of the road Villa Tunari - San Ignacio de Moxos.

National Competitive Proposals CPN 015/2007 for the recruitment of Technical Economic Feasibility Study, Environmental Impact and Final Design, canceled by Administrative Resolution ABC / 030/2008 of February 29, 2008.

Joint Declaration “Brazil-Bolivia: Moving towards a strategic partnership”, December 17, 2008, which states the need to establish conditions for Brazil to make viable a credit for infrastructure projects for the Plan of National Development of Bolivia, using guarantees payment from the Plurinational State of Bolivia through the Convention mechanisms of Reciprocal payments and Credit (CCR), LAIA “.

Calls for International Competitive Tendering LPI 001/2008 “Construction of the road Villa Tunari - San Ignacio de Moxos of Route F-24 under the turnkey with funding managed by the proponent” dated March 4, 2008.

Signing of Contract ABC 218/08 GCT - OBR - BNDES of “Building the road Villa Tunari - San Ignacio de Moxos Route F-24” signed on August 4, 2008.

Public briefing organized by the construction company OAS in San Ignacio de Moxos directed to municipal authorities, farmers, indigenous people and traders, among others. Attendees asked to continue the process of information. The Subcentral TIPNIS was absent. It takes place on October 14, 2009.


Signing of the Protocol of the Project Financing road Villa Tunari - San Ignacio de Moxos,on November 22, 2009 between Evo Morales and Luiz Inacio Lula da Silva.

XXIX Extraordinary Meeting of Aldermen of the TIPNIS, held on May 18, 2010 in the community of San Miguelito, confirms the rejection of the project that would cross and divide the TIPNIS, rejection that was expressed in letters, resolutions and meetings with government officials.

Briefing organized by OAS in the settled area of TIPNIS, held in May 2010. Participating cocaleros, traders, municipal authorities and CONISUR, among others. Participants requested the extension of Stretch I of the project until Ichoa River. The Subcentral TIPNIS, organization owner of TIPNIS were absent.

Introducing Studies of the Environmental Impact Assessment stretch 1 and stretch 3 dated July 5, 2010, to the National Environmental Authority.

Resignation of Deputy Minister of Environment and National Environmental Authority, Juan Pablo Ramos and Director Environment Luis Beltrán, in July 2010. They alleged that government officials tried to force them to sign environmental permits.

Issuance of Environmental Impact Declarations or Environmental Permits for stretches 1 and 3, by AAC, dated August 5, 2010, by the new Deputy Minister of Environment, Cinthia Silva.

Signing of Financial Cooperation Agreement by discounting receivables 10219991 that the BNDES and the Plurinational State of Bolivia celebrate with the intervention of the construction company OAS Ltda. and the Bolivian Highway Administration, signed on February 15, 2011.

Enactment of Act 112 approving Financial Collaboration Contract, dated May 7, 2011.

Issuance of Notice to Proceed and disbursement of 20% corresponding to the Bolivian counterpart advance, held on June 3, 2011.

Beginning of VIII Indigenous March of Indigenous Peoples of the East, Chaco and Amazon in Trinidad. The event has a platform of thirteen demands; the most important is that which relates to the defense of the TIPNIS. Leaving August 15, 2011 and arriving in the city of La Paz on October 19.

Government intervention in the VIII Indigenous March Chaparina, which occurred on September 25, 2011. It was organized by the state through the ministry in charge (Ministry of Government and Armed Forces).

Enactment of Act 180 TIPNIS Protection, dated October 24, 2011. It establishes, among other things, that the Villa Tunari - San Ignacio de Moxos road, like any other, will not cross the TIPNIS. Article 4 (Protection) said that, given the intangible nature of the TIPNIS, it shall be taken appropriate legal steps to reverse, cancel or annul the acts that violate this law.

Enactment of Act 222 of Consultation to the TIPNIS peoples, dated 10 February 2012 , aims “to summon the process of free and informed consent to the indigenous peoples from Indigenous Territory and from the Isiboro Secure National Park (TIPNIS)”, set the content of this process and its procedures to “define whether


the Indigenous Territory and Isiboro Secure National Park (TIPNIS) Territory must be intangible area or not, to make the development of the activities of indigenous peoples Mojeño-Trinitario, Chimane and Yuracaré as well as the construction of the Villa Tunari-San Ignacio de Moxos “road. The government’s decision to boost the consultation was taken after the arrival of the march of the Indigenous Council of the South (CONISUR) –pro-government- to La Paz to demand the construction of the highway through TIPNIS.

Letter of notification of the decision of the Government to terminate his contract with OAS Ltda dated April 9, 2012. Publicly government officials said the technical and legal reasons to terminate the contract with the company are the failure to mobilize works, demobilization and firing, removal of machinery from construction site, refusal to accept the methodology on measurement of work completion and the respective payments, delayed of work completion. The status of the contract with the BNDES is not established.

Report monitor compliance with the right to prior consultation as part of the construction of the road Villa Tunari-San Ignacio de Moxos. Publicly presented on April 14, 2012 by the International Federation for Human Rights and the Permanent Assembly for Human Rights. The mission entrusted was in the TIPNIS between November 29 and December 14, 2012,

Final report of the consultation process carried out in the TIPNIS. Between 27 July 2012 and 7 December the same year. On April 23, 2011, the Ministry of Public Works publicly presented the final report of the process.

Beginning of the IX Indigenous March in defense of TIPNIS, collective rights and rejection of prior consultation. The mobilization is guided by a seven Platform demands257, among which are the fulfillment by the government of the agreements in the VIII March and the abrogation of the Law 222 of Prior Consultation (post consultation). On April 27, 2012, indigenous marchers left Trinidad to start the second march in less than a year, in defense of TIPNIS.

Signing of the Final Certificate ABC - OAS Ltda. On November 29, 2012, final settlement amount between ABC and OAS Ltda. The contract situation is not established with BNDES.

257 See: http://somossur.net/index.php/bolivia/economia/no-a-la-carretera-por-el-tipnis/892-plataforma-de-demandas-de-la-9na-marcha-indigena


ANNEX 3: STUDIES AND RELATED DOCUMENTS PROJECT MILESTONES

DocumentDocument date

Responsible for the creation of

Characteristics of the document and the information contained

Management plan of TIPNIS

It was made in 2001 and 2004

SERNAP

Set goals of shared management of the area between the SERNAP and indigenous people in short and long term, expected results and milestones to reach. It also analyzes existing plans and plans for the future these specific plans and projects

Strategic Environmental Site Assessment of the TIPNIS

2011 SERNAP

The document establishes a comprehensive social and environmental base line TIPNIS and analyzes possible scenarios in relation to the application and no application of policies and programs in this TCO and AP. It establishes recommendations and a Strategic Action Plan.

Study of Environmental Impact Assessment Stretch 1

July 5, 2010 ABC/OAS

Study Category 1- Integral Analytical Environmental Impact Assessment with PPM and PASA. General Document of description of the region Stretch 1 of the project and establishment of general mitigation measures listed for works of this kind, does not consider future or cumulative impacts, or the influence of this stretch in the TIPNIS. The elaboration of the IAES is the responsibility of the construction company OAS Ltd. who hires a consulting firm.

Environmental Permit Sector 1 Environmental Impact Statement NO. 031003-06-DIA-3784/10

August 5, 2010

MMAyA

The document does not provide a comprehensive social and environmental base line of the TIPNIS and analyzes possible scenarios in relation to the application and not application of policies, plans and programs in this TCO and AP. Establishes recommendations and a Strategic Action Plan.

Study of Environmental Impact Assessment of Sector 3

July 5, 2010 ABC/OAS

Study Category 1- Integral Analytical Environmental Impact Assessment with PPM and PASA. General Document of description of the region Stretch 1 of the project and establishment of general mitigation measures listed for works of this kind, does not consider future or cumulative impacts, or the influence of this stretch in the TIPNIS. The elaboration of the IAES is the responsibility of the construction company OAS Ltd. who hires a consulting firm.

Environmental Permit Sector 3

August 5, 2010

MMAyA

Issued by the National Environmental Authority, with recommendations for developing standards to protect the TIPNIS, conducting the consultation, elaboration and implementation of a Strategic Action Plan.


DocumentDocument date

Responsible for the creation of

Characteristics of the document and the information contained

Hiring Process Assessment for the Construction of Villa Tunari- San Ignacio de Moxos road, turnkey with funding from the proponent

June 14, 2010

Comptroller General of the State

Study Category 1- Document prepared by the Senate instruction that sets the violation of procurement rules and responsibilities (administrative only) of officials involved in the process. While the analysis is detailed and shows the clear violation of the rules, it does not establish whether there was damage to the state and responsibilities of the ABC executives.

Notice to proceed and payment of the advance.

June 3, 2011

ABC

The disbursement to the company of the 20% of the advance payment only to the Bolivian counterpart is not established in the commercial contract with the company or the Financial Collaboration with BNDES. This decision would have been adopted unilaterally by the Bolivian government.

Protection Act 180 to TIPNIS.

October 24, 2011

Legislative and President

Set amongst other issues that the Tunari- Villa San Ignacio de Moxos road, like any other, will not cross the TIPNIS. Article 4 (Protection) states that given the intangible nature of the TIPNIS appropriate legal steps should be taken to reverse, cancel or annul the acts that violate this law.

Law No.222 Consultation on people of TIPNIS

February 10, 2010

Legislative and President

It summons the process of free and informed consent to the indigenous peoples from Indigenous Territory and from the Isiboro Secure National Park (TIPNIS)”, set the content of this process and its procedures to “define whether the Indigenous Territory and Isiboro Secure National Park (TIPNIS) Territory must be intangible area or not, to make the development of the activities of indigenous peoples Mojeño-Trinitario, Chimane and Yuracaré as well as the construction of the Villa Tunari-San Ignacio de Moxos “road.

Letter of notification of the decision of the Government to terminate his contract with OAS Ltda.

April 9, 2012

ABC/ Ministry of Public Works

The technical and legal reasons to terminate the contract with the company are the failure to mobilize works, demobilization and firing, removal of machinery from construction site, refusal to accept the methodology on measurement of work completion and the respective payments, delayed of work completion. The status of the contract with the BNDES is not established.

Final Certificate ABC- OAS Ltda

November 29, 2012

ABCFinal amount reconciliation between ABC and OAS Ltda.


3. EXPORT-IMPORT BANK OF CHINA (CHINA EXIM BANK)

ANNEX 1: FUNCTIONS OF THE MAIN CHINESE AGENCIES OF CONTROL OVER INVESTMENTS ABROAD

Agency Function

State Council Approves investments that involve greater extraction of natural resources to US $ 200 million.

Ministry of Commerce

Develops policies and regulations for contractor companies owned by the State (ECPE).

Negotiates and ensures compliance with the investment treaties and trade.

Approves and monitors the ECPE.

Approves dam construction projects with smaller amounts to $ 100 million.

Ministry of Foreign Affairs Monitors the work of Chinese companies through embassies.

Ministry of Environmental Protection

Develops policies, laws and environmental regulations at the household level.

It has an office for International Economic Cooperation accountability and address complaints.

Supervision and Administration Commission of the Central Business Assets

Issued regulations for ECPE and guide its reform and restructuring.

Has a role in approving investment projects of the ECPE.

Source: Garzón (2014). Legal Manual on Environmental Regulations and Social Chinese Loans and Investments Abroad.


ANNEX 2: ORGANIZATIONAL CHART OF THE CHINA EXIM BANK

Source: China Exim Bank (2014). Annual Report 2013.

16

组织机构Organizational Chart中

国进出口银行 2

01

3

年年度报告　TH

E EXPORT-IM

PORT BAN

K OF CH

INA ANN

UAL REPORT 2013

董事会Board of Directors

监事会Board of Supervisors

董事长、行长Chairman & President

总行各部室Departments at the Head Office

办公室Executive Office

人力资源部Human Resources Department

监察室Supervision Office

经济研究部Economic Research Department

业务开发与创新部Business Development and Innovation Department

公司业务部Corporate Business Department

交通运输融资部Transport Financing Department

特别融资账户部Special Account Financing Department

优惠贷款部Concessional Loan Department

转贷部On-lending Department

计划财务部Planning and Financial Management Department

资金营运部Treasury Department

风险管理部Risk Management Department

评估审查部Evaluation Department

内控合规部Internal Control and Compliance Department

稽核评价部Auditing Department

会计管理部Accounting Department

法律事务部Legal Affairs Department

国际业务部International Business Department

海外机构管理部Overseas Institutions Management Department

信息技术部Information Technology Department

软件开发部Software Development Department

党团工作部Party and Youth League Affairs Department

老干部服务工作部Retired Personnel Service Department

中共中国进出口银行党校Party School

工会Workers’ Union

行政部Administration Department

基建办公室Office for Bank Building Construction


AN

NE

X 3

: CH

RO

NO

LOG

Y O

F C

OC

A C

OD

O S

INC

LAIR

HY

DR

OEL

ECTR

IC P

RO

JEC

T

208

ANNEX 3: C

hron

ology of Coca Co

do Sinclair h

ydroelectric project

Pr

evio

us g

over

nmen

ts

Raf

ael C

orre

a G

over

nmen

t

Yea

rs 8

0’s a

nd 9

0’s

2008

20

09

2010

20

11

19

86

1992

Ja

n- 0

8 Fe

b- 0

8 A

pril-

08

May

- 08

Mar

ch-0

9 M

ay- 0

9 Ju

ne- 0

9 Ju

ly-0

9 O

ct- 0

9

Nov

-09

Jan-

10

May

- 10

Jun-

10

Jul-

10

May

- 11

Jun-

11

Evol

utio

n of

th

e Pr

ojec

t

It is

hi

red

the

com

plet

ion

of

the

Feas

ibili

ty

Stud

ies

of

the

Proj

ect.

Feas

ibili

ty

Stud

ies

Proj

ect

deliv

ered

(c

apac

ity

859

MW

)

CO

NEL

EC

stat

es

of

high

nat

iona

l pr

iorit

y to

C

CS

proj

ect

CO

CA

SIN

CLA

IR

SA is

est

ablis

hed

to

mak

e po

ssib

le

proj

ect f

undi

ng.

Pres

iden

t R

afae

l C

orre

a la

id

the

foun

datio

n st

one

of

the

proj

ect

Prel

imin

ary

EIA

is

el

abor

ated

an

d TD

R fo

r fin

al

EIA

A

n up

date

on

pr

ojec

t fe

asib

ility

st

udie

s do

ne f

or

1500

M

W

CO

CA

SIN

CLA

IR

SA

an

d Si

nohy

dro

si

gned

EP

C

cont

ract

fo

r pr

ojec

t de

velo

pm

ent

The

trans

form

atio

n of

C

OC

ASI

NC

LAIR

is

dec

reed

in

co

mpa

ny

publ

ishe

s

Th

e C

onst

ruct

ion

of

the

Proj

ect

star

ts

Con

tract

m

anag

em

ent

and

over

sigh

t is

si

gned

.

The

proj

ect

area

is

de

clar

ed

safe

ar

ea f

or

its

stra

tegi

c na

ture

.

Mile

ston

es

of th

e Pr

ojec

t C

ycle

of

Chi

na E

xim

B

ank.

Effic

acita

s cons

ulta

nt

is h

ired

to

deve

lop

EIA

D,

PMA

and

m

etho

dol

ogy

for

citiz

en

parti

cipa

tion

Publ

ic

cons

ulta

tion

proc

ess

of

EIA

D

and

PMA

is

perf

orm

ed.

M

inis

try

of

Envi

ron

men

t ap

prov

es a

nd

gran

ts

EIA

D

envi

ron

men

tal

perm

it fo

r CC

S pr

ojec

ts.

Neg

otia

tion

of c

redi

t ag

reem

ent

with

Chi

na

Exim

Ban

k

MoU

fo

r de

velo

pm

ent o

f cr

edit

agre

eme

nt

(Bei

jing

) subs

crib

e.

Th

e se

cond

ro

und

of

nego

tiat

ion

is

perf

orm

ed w

ith

the

CH

EXI

M

(Qui

to)

The

third

ro

und

of

nego

tiat

ion

is

perf

orm

ed w

ith

the

CH

EXI

M

(Qui

to)

The

four

th

roun

d of

ne

gotia

tio

n is

pe

rfor

med

with

th

e C

HEX

IM

(Q

uito

)

The

fifth

ro

und

of

nego

tiatio

n is

pe

rfor

med

w

ith th

e C

HEX

IM

(Qui

to)

Th

e cr

edit

agre

eme

nt

betw

een

the

Stat

e an

d C

HEX

IM

is

subs

crib

ed.


ANNEX 4: TIMELINE OF COCA CODO SINCLAIR HYDROELECTRIC PROJECT

1986-1992 First feasibility studies

January 2008 CCS is declared high priority by CONELEC.

February 2008 COCASINCLAIR SA is established.

April 2008 President Correa laid the first stone of the project.

May 2008 Preliminary EIA is elaborated and TDR for final EIA

February 2009 The credit agreement between the State and CHEXIM is subscribed.

March 2009 EIAD, PMA and citizen participation methodology is developed.

May 2009 Public consultation process of EIAD and PMA is performed.

June 2009 MOU is signed for processing credit agreement (Beijing)

July 2009 Ministry of Environment approves and grants EIAD Environmental Permit.

October 2009 EPC contract signed with Sinohydro.

May 2010 COCASINCLAIR SA transforming to a public company is decreed.

June 2010 The credit agreement between the Ecuadorian State and CHEXIM is subscribed.

July 2010 Construction of the project begins.

May 2011 Management and inspection contract is signed.

June 2011 The project area is declared safe area for its strategic nature.


ANNEX 5: PUBLISHED DOCUMENTS IN RELATION TO MAJOR MILESTONES OF PROJECT CYCLE OF THE CHINA EXIM BANK AND CONTRACTING PROCESS

Source: COCASINCLAIR EP (2014), http://www.cocacodosinclair.gob.ec / Own elaboration

Major milestones identified in the project cycle and contractingprocess

12009 (March) Hiring consultants to conduct the DEIA, the Environmental Management Plan and Methodology for Implementing Mechanisms of Citizen Participation.

DEIA report is published.

2

2009 (May) The process of social participation (public consultation and free, prior and informed consultation) of the Environmental Impact Assessment and Environmental Management Plan Project is performed.

published citizen participation report (Section IX of EIAD)

32009 (July) The Ministry of Environment approves the project and gives EIAD environmental permit for the project.

Environmental Permit is issued.

42009 (October) The contract between Coca Codo Sinclair Hydroelectric Company SA is signed and the company Sinohydro.

EPC contract is published.

52010 (June) The Ecuadorian State and the China Exim Bank signed credit agreement for US $ 1.6827 billion.

Credit agreement is not published.

62011 (May) Contract management and oversight of the project with the Ica Association is signed with a value of US $ 72 436 633.

Contract is published


ANNEX 6: ESTIMATED COSTS FOR IMPLEMENTATION OF PMA OF COCA CODO SINCLAIR HYDROELECTRIC PROJECT

ESTIMATED COSTS FOR IMPLEMENTING P.M.A. COCA CODO SINCLAIR PROJECT

PHASES OF CONSTRUCTION AND FILLING RESERVOIR

CATEGORY COST RANGE (USD) STAGE

Compensation and resettlement of IDPs 4.550.000 5.316.000 2 years

Control of air emissions 100.000 120.000During project construction

Solid Waste Management 50.500 72.000During project construction

Management of domestic and industrial wastewater

32.000 41.000During project construction

Construction Material Management 4.500 6.000During project construction

Management of petroleum fuels 30.000 40.000During project construction

Management of chemicals and hydrocarbons


Borrow Areas Management 23.500 43.000 4 years

Biological resources (flora and fauna) 268.000 328.6000Varies according to specific program.

Occupational health and safety 23.000 68.000During project construction

Prevention and control of erosion and sediment transport (soil)


TOTAL 1 5.135.000 6.118.600

IMPLEMENTATION OF P.M.A SCHEDULE OF VALUES

PHASE OF OPERATION

CATEGORY COST RANGE (USD) STAGE

Water quality in the water system 625.000 1.263.000

Soil quality and waste management 35.000 50.000

Flora and fauna preservation 43.000 65.000

Compensation and socioeconomic development

336.000 494.000

Cultural and architectural resource management

338.000 359.000

Health and Safety 20.000 25.000

Training 20.000 30.000

TOTAL 2 1.417.000 2.286.000

TOTAL 1 + TOTAL 2 6.552.000 8.404.600


4. ANDEAN DEVELOPMENT CORPORATION (CAF)

ANNEX 1 - CYCLE PROJECT FOR CAF FUNDING

Source: CAF, Estrategia Ambiental.

ORIGINATION

EVALUATION

FORMALIZATION

Management and Disbursement

Corporate BusinessCommittee (CNC)

Loans and Investment Committee (CPI)

Loan Contract

Disbursement Request

Preliminary Risk Report/Environmental and Social Vulnerable Areas

Enviromental and Social Report

Contractual Environmental and socialConditions

Bus

ines

s P

orta

l

Technical Criteria for Environmental and Social Monitoring

Matrix of Preliminary Risk Analysis / Vulnerable Areas / Environmental and Social

Guide to Environmental Assessment and Social Infrastructure Operations / Social Development / Environmental Development

CREDIT CYCLEINSTRUMENTS OF ENVIRONMENTAL

AND SOCIAL REPORTTECHNICAL INSTRUMENTS FOR

ENVIRONMENTAL AND SOCIAL MANAGEMENT

Geographic Information System CONDOR

Guide to Environmental and Social Assessment of Industrial Operations

Evaluation Guide of Environmental and Social Management Operations to Corporations

Manual for Determining Environmental Investment Partnership for Elementary and Secondary Road

Guide to Environmental and Social Monitoring Operations

Tracking Operation Guide to Environmental and Social Monitoring End of operations

Inte

rnal

Ass

emen

t M

anua

l Soc

ial a

nd E

nvir

onm

enta

l M

onit

orin

g an

d O

pera

tion

s


ANNEX 2 – TIMELINE PROJECT

2001. Presidential elections in which Alejandro Toledo was elected president for 2001-2006.

2003. The prefeasibility study that selected the three routes was developed. The prefeasibility study is made viable approved by the IPO of MTC and MEF.

2004. On April 1, by Supreme Decree 018-2004-MTC, the priority of the Project for Road Interconnection Iñapari-South Seaport is confirmed and notes that it will comply with current regulations of the National Public Investment System (SNIP).

2004. In November a bilateral agreement between the presidents of Peru and Brazil was signed to ensure the financing of “Peru-Brazil-IIRSA-South Interoceanic Highway Corridor” and immediately build the Interoceanic highway linking the two countries.

2004. November 25. The feasibility study (prepared during this year) and approved by PROVIAS NATIONAL through Directorial Resolution 828-2004-MTC / 20 is approved.

2004. The DGASA issued the Directorial Resolution 006-2004-MTC / 16: Approval of the Regulations for Consultation and Public Participation in the Environmental and Social Process in Subsector Transport of the Ministry of Transport and Communications (MTC) and the Evaluation and Executive Resolution 007-2004-MTC / 16: Approval of the document containing guidelines for the development and implementation of compensation plans and Involuntary Resettlement (PACRI).

2004. In December 2004, the MEF and CAF signed a memorandum of understanding in which the interest that the CAF fund the CVIS is manifested.

2005. In January, PROINVERSIÓN approves the base of the contest of integral project for the concession of the works and maintenance of road stretches of the Southern Interoceanic Road Corridor, Peru-Brazil.

2005. In February, it is excepted stretches included in the concession of the Interoceanic Corridor Project Peru-Brazil-IIRSA-SUR application of standards (SNIP) concerning the pre investment phase.

2005. In June The concesiion of stretches 2,3 y 4 is granted.

2005. On August 4 The concession contract for stretches 2, 3 and 4 of CVIS was signed258.

2006. In February, the two guarantees granted in favor of the CAF are approved by Supreme Decree 022-2006-EF: Warranty for stretch 2: US $ 59.08 million and a guarantee for stretch 3: US $ 91,380,000.

2006. In May, the provision of guarantee in favor of the CAF, approved by Supreme Decree 057-2006-EF for stretch 4 US $ 49 540 000. In total, in 2006, Peru put under warranty US $ 200 million for the CAF for the construction of stretches 2, 3 and 4.

258 Stretch 2: between the Southern Interoceanic Higway Concessionaire Company - stretch 2 SA, acting as concessionaire and Peru (MTC) as grantor. Stretch 3: between the Southern Interoceanic Concessionaire Company - stretch 3 SA, acting as concessionaire and Peru (MTC) as grantor. Stretch 4: between the Intersur Concesiones company SA, acting as concessionaire, and Peru (MTC) as grantor


2006. On March 24 of this year the operations of stretches 2 and 3 of CVIS start, and on April 17 Tranche 4 operations start.

2006. Presidential Election in which Alan García Pérez was elected President of the Republic for 2006-2011.

2006. In July the Peruvian state indebtedness with the CAF approves US $ 10 million to fund the Program for Environmental and Social Management of Indirect Impacts of Southern Interoceanic Highway. This program would be implemented by INRENA.

2006. Workshop in Lima with CAF, GOP, BIC, SPDA, ProNaturaleza, etc., to present the study of the case of the Interoceanic Highway in Peru’s southern Amazon.

2006. In November the Implementation Agreement was signed between INRENA and CONAM for this to take care of the implementation of the SEA.

2007. Final report of socio-environmental study of stretches 2, 3 and 4 of CVIS.

2008. MINAM is created.

2009. Facing the unexpected rise in overall costs by 50%, on November 24 a new loan to Peru by CAF is approved by Supreme Decree 235-2010-EF, $ 200 million to partially finance the remaining works of stretches 2, 3 and 4 of CVIS.

2009. In December, the consulting company MAXIMIXE Consult SA delivers the final report of SEA that was part of the Environmental and Social Management I.

2009. The ESMP I is concluded and proposes ESMP II.

2010. Signing of the Peru-Brazil energy agreement, which although has not yet been approved by the parliaments of both countries, involved the construction of the Inambari hydroelectric that was going to flood one of the stretches of the newly constructed road. This shows a lack of planning by the State.

2010. In July, the new bridge Puerto Maldonado on the Madre de Dios River was opened.

2010. In November, the workshop DAR, CAF, MINAM was conducted to present the evaluation of the ESMP I.

2010. In December, GTSCIOS and regional governments gave an alternative proposal for ESMP II on the basis of the principle of forest governance.

2011. Suspension of the project of the Inambari Hydroelectric.

2011. Presidential elections in which Ollanta Humala Tasso is elected president for 2011-2016.

2012. On June 20, 2012, the Directorate General of Investment Policy states viability to the Public Investment Program Strengthening Environmental and Social Management of Indirect Impacts of the Southern Interoceanic Highway Corridor, stretches 2, 3 and 4 - Phase II.

2014. In August 2014 had not yet begun the ESMP II.


ANNEX 3 - LIST OF INTERVIEWS

Most of the information reflected in this document was obtained through personal interviews with experts, officials and former officials who were part of the process of CVIS. Please find attached a table with data from the interviewees.

First and Last Name Company Position Entity

René Gómez-García CAF Officer of the Environmental and Social Sector in Peru

CAF

Claudio Higa CAF Officer Public Sector in Peru Corporación Andina de Fomento (CAF)

CAF

Paola Naccarato DGASA Former DirectorMinistry of Transport and Communications (MTC)

Luis DávalosFormer coordinator of the Concession Area of DGASA

Ministry of Transport and Communications (MTC)

Martin AranaFormer specialist of Environmental Tranche 3 of the CVIS of DGASA

Ministry of Transport and Communications (MTC)

Jannet Benavides Project Manager Odebrecht

Fernando Llanos Road Project Manager Odebrecht


BiBLiOGraPHy

1. INTER-AMERICAN DEVELOPMENT BANK (IDB)

Inter-American Development Bank (2003). Estudio de impacto ambiental Fase III. Corredor vial Pasto-Mocoa Variante San Francisco Mocoa. January 2003. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=837350

Inter-American Development Bank (2006). Apoyo a la Preparación del Programa de Infraestructura de Integración Regional Corredor Vial Pasto-Mocoa, Variante San Francisco-Mocoa (CO-T1038). Bogotá.

Inter-American Development Bank (2006). Política de medio ambiente y cumplimiento de salvaguardas.

Inter-American Development Bank (2007). Perfil de proyecto (pp). Colombia. Corredor vial Pasto-Mocoa, Variante San Francisco - Mocoa. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=1469791

Inter-American Development Bank (2008). Estudio Ambiental Regional, Vol. IX Informe del Proceso de Consulta. Bogotá.

Inter-American Development Bank (2009). Informe de gestión ambiental y social (IGAS) Corredor vial Pasto-Mocoa Variante San Francisco Mocoa. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=2222785

Inter-American Development Bank (2010). Política de Acceso a la Información. http://www.iadb.org/es/noticias/comunicados-de-prensa/2010-05-12/nueva-politica-de-acceso-a-la-informacion-del-bid,7133.html

Inter-American Development Bank (2013). Informe de seguimiento de progreso del proyecto. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=38266644

Inter-American Development Bank. Documentos Pasto Mocoa. http://www.iadb.org/es/proyectos/project-information-page,1303.html?id=co-l1019

Bank Information Center (BIC), Instituto Latinoamericano de Estudios Legales Alternativos (ILSA) & World Wildlife Fund (2009). Observaciones y preguntas del IGAS para el Corredor Vial Pasto-Mocoa (CO-L1019) y Solicitud para Clarificación sobre la Veeduría Ambiental.

BICECA. Corredor Multimodal Pasto-Mocoa e Hidrovía del Putumayo. http://www.bicusa.org/es/feature/corredor-multimodal-pasto-mocoa-e-hidrovia-del-putumayo-es/


FLÓREZ, Margarita (ILSA) (2007). Selva abierta: Vía Pasto-Mocoa e Hidrovía del Putumayo. Bogotá. http://www.bicusa.org/wp-content/uploads/2013/01/Estudio+de+Caso-Selva+Abierta.pdf

Guzmán, David (2009). Plan de Desarrollo Departamental (PDD) 2008-2011 “Oportunidades para todos”

KUARAN, Jorge (2012). “La verdad sobre la construcción de la Variante Mocoa - San Francisco a un año de inicio de la obra”. Digital Informative Magazine of Putumayo. Bogotá, October 2012. http://miputumayo.com.co/2012/10/18/la-verdad-sobre-la-construccion-de-la-variante-mocoa-san-francisco-a-un-ano-de-inicio-de-la-obra/

MESQUITA MOREIRA, Mauricio (2011). Tumbando la pared: Comercio e Integración entre Brasil y Colombia. BID.

ILSA Official website. www.ilsa.org.co

IDB Official website: http://www.iadb.org/es

Departamental Development Plan (PDD) 2008-2011.

Republic of Colombia Distrital Council of Barranquilla (2008). Plan de Desarrollo Social, Económico y de Obras Públicas 2008-2011 “Oportunidades para todos”. May 30.

SALAZAR, Carolina; MCELHINNY, Vince (2008). “Carretera Pasto Mocoa - Colombia: BID Compromiso a la Sostenibilidad en la Mira”. BICECA Monthly Bulletin, pp. 3-10. http://www.bicusa.org/wp-content/uploads/2013/08/Boletin-mensual-Oct-2008.pdf

TAU (Unión temporal Consultora ambiental PROINTEC y ambiental consultores). EAR (2008). Bogotá D.C. Volume IV, pp. 60-66. Extracted data from the Report description of the San Francisco – Moco, DIN-SEDIC Consortium. Study magnetically supplied by engineer Blanca Hernández, Environment Subdivision of INVÍAS. 8.6.16.

Unión Temporal Consultora Ambiental PROINTEC y Ambiental Consultores (2008). Evaluación Ambiental Regional (EAR). Volume IV. Bogotá.


2. BRAZILIAN NATIONAL BANK FOR ECONOMIC AND SOCIAL DEVELOPMENT (BNDES)

ABC - Bolivian Highway Administration’s (2010). Estudio de Evaluación de Impacto Ambiental Analítico Integral Tramo I: Villa Tunari - Isinuta. La Paz.

ABC - Bolivian Highway Administration’s (2010). Estudio de Evaluación de Impacto Ambiental Analítico Integral Tramo III: Monte Grande del Apere - San Ignacio de Moxos. La Paz.

BNDES (2010). Resolution 2013, Creación de la Política de Responsabilidad Social y Ambiental del Sistema BNDES.

BNDES (2010). Resolution 2025, Aprovacao da Politica Socioambiental do Sistema BNDES em substituicao a atual Politica Ambiental integrante das Politicas Operacionais. “Política Socio Ambiental”.

Comptroller General. Letter of Transmittal evaluation of the hiring process for the Construction of Villa Tunari - San Ignacio de Moxos Highway, turnkey financing of the proponent. Carta GPAE/847/2010, 14/06/2010.

Financial Collaboration Agreement by discounting accounts receivable 10219991 signed between the Plurinational State of Bolivia and BNDES with the intervention of the Construction OAS Ltda. And the Bolivian Highway Administration. February 15, 2011.Contrato de obra ABC 218/08 GCT-OBR-BNDES entre la Administradora Boliviana de Carreteras y la Empresa Constructora OAS Ltda. 4 de agosto de 2008.

Decree 4.418, Statute of BNDES. October 11, 2001.

Decree 0740, Creating the Isiboro - Secure National Park. November 22, 1965.

Supreme Decree 22610, Declares Indigenous Territory and Isiboro - Secure National Park. September 24, 1990.

Supreme Decree 26996, incorporates the Stretch between Villa Tunari and San Ignacio de Moxos to the Fundamental Road Network, April 17, 2003.

Supreme Decree 62, authorizes the signing of the financing with the Federative Republic of Brazil, March 1, 2009.

Dias dos Santos, A. Lessa de Barros, F. (2011). “A integração sulamericana na perspectiva de um banco nacional de desenvolvimento - o caso do BNDES”. XVIII Congresso Internacional da ALAS. UFPE, Recife-PE.

Base Document Contracting, International Public Tender LPI 001/2008, Construction of Villa Tunari-San Ignacio de Moxos Highway, Route F-24 Turnkey Financed by the Proponent. August 4, 2008.

El Deber, Brazil confirms funding for road through the TIPNIS (2012). http://www.eldeber.com.bo/nota.php?id=111025185047


García, Álvaro. “Posición oficial del gobierno boliviano sobre el TIPNIS: 4 motivos por qué se debe construir la carretera”. La Razón, 2011. Available at http://www.larazón.com/versionphp?Articled=142174.

Act 005, approved the Financial Protocol between the Bolivian State and the BNDES. April 7, 2010.

Act 112, Approves the Financial Collaboration 10219991, May 7, 2011.

Act 1185, Authorization to arrange financing studies of the Villa Tunari-San Ignacio de Moxos road, September 18, 1990.

Act 180, Of Protection of Indigenous Land and Isiboro - Secure National Park, October 24, 2011.

Act 2530, authorizes the Executive to seek financing for the construction and paving of the Cochabamba - Trinidad highway, October 24, 2003.

Act 3477, declares national and departmental priority to the development of Studies of the Final Design and Construction of the stretch Villa Tunari - San Ignacio de Moxos. September 22, 2006.

Ministry of Environment and Water. Referral letter of Environmental Permit for Construction Project of Highway Villa Tunari - San Ignacio de Moxos: Stretch I. MMAyA / VMA 1513/10. 2010.

Ministry of Environment and Water. Referral letter of Environmental Permit for Construction Project of Highway Villa Tunari - San Ignacio de Moxos: Stretch II. MMAyA/VMA 1512/10. 2010.

Ministry of Environment and Water. Referral letter of Environmental Permit for Construction Project of Highway Villa Tunari - San Ignacio de Moxos: Stretch I: Villa Tunari - Isinuta, August 5, 2010.

Ministry of Environment and Water. Referral letter of Environmental Permit for Construction Project of Highway Villa Tunari - San Ignacio de Moxos: Stretch I: Monte Grande del Apere - San Ignacio de Moxos, August 5, 2010.

Ministry of Foreign Affairs of Brazil. Statement to the press: Meeting of Presidents Evo Morales and Luiz Inacio Lula da Silva in Villa Tunari. Brasilia. August 22, 2009.

Molina, S, Lora, M. (2010). Costos sociales y ambientales de la carretera Villa Tunari – San Ignacio de Moxos. Available at www.bolpress.com/art.php?Cod=2010050704

Molina, Silvia (2009). BNDES: Nuevas formas de acceso y control de los capitales transnacionales a recursos naturales de Bolivia. La Paz. http://www.fobomade.org.bo/art-331

Novoa, Luis Fernando (2009). O Brasil e seu “desbordamento”: o papel central do BNDES na expansao das empresas transnacionais brasileiras na America do Sul, en Empresas


transnacionais brasileiras na America Ltina, um debate necesario. Organization: Instituto Rosa Luxemburg Stiftung. São Paulo Expressao Popular.

Pinto, Joao Roberto Lopes, org. (2013). “Ambientalização dos Bancos e Financeirização da Natureza, Um debate sobre a política ambiental do BNDES e a responsabilização das Instituições Financeiras”. Brasilia: Rede Brasil sobre Instituciones Financieras Multilaterais.

Financial Protocol between the Plurinational State of Bolivia and the Federative Republic of Brazil on the financing of highway project “Villa Tunari - San Ignacio de Moxos”. August 22, 2009.

Reporter Brasil (2011). “BNDES e sua politica socioambiental, Uma crítica sob a perspectiva da sociedade civil organizada”. ONG Repórter Brasil.

Widmer, Roland (2013). “BNDES Development Finance in a Changing Environment”. PowerPoint Presentation. WRI World Resources Institute.


3. EXPORT-IMPORT BANK OF CHINA (CHINA EXIM BANK)

ASAMBLEA NACIONAL DEL ECUADOR (2008). Constitución Política del Ecuador.

(2014). Ley Orgánica de Transparencia y Acceso a la Información Pública (LOTAIP).

COCASINCLAIR S.A. (2009). Contrato para el desarrollo de ingeniería, provisionamiento de equipos y materiales, construcción de obras civiles, montaje de equipos y puesta en marcha del proyecto hidroeléctrico Coca Codo Sinclair (1500 MW)

COCASINCLAIR EP (2014). Accountability Report 2013.

BANKTRACK y Friends of the Earth. (2012) China Development Bank’s Overseas Investments: An Assessment of Environmental and Social Policies and Practices

CHINA EXIM BANK (2008). Guidelines for the social and environmental impacts assessment of loans

(2012) Annual Report.(2013) Annual Report.

GALLAGHER, Amos IRWIN y Katherine KOLESKI (2012). The New Banks in Town: Chinese Finance in Latin America, Inter-American Dialogue

GALLAGHER and IRWIN (2014). Exporting National Champions: China’s OFDI Finance in Comparative Perspective, Global Economic Governance Initiative Working Paper.

GARZÓN, Paulina (2014) Manual legal sobre regulaciones ambientales y sociales chinas para los préstamos e inversiones en el exterior.

GRIMSDITCH M. y Yu Yin (2014). Development Finance in the BRICS Countries: A Review from China.

EFFICÁTICAS (2009) Estudio de Impacto Ambiental Definitivo Proyecto Hidroeléctrico COCA CODO SINCLAIR.

INTERNATIONAL RIVERS (2012). The New Great Walls: A Guide to China’s Overseas Dam Industry.

MINISTRY OF ENVIRONMENT OF ECUADOR (2009). Resolution 215

TOH HAN SHIH (2013). China to Provide Africa with $US 1 trillion Financing, South China Morning Post, 18 November.


4. ANDEAN DEVELOPMENT CORPORATION (CAF)

Balvín Doris and Patricia Patrón. Carretera Interoceánica Sur. Consideraciones para su aprovechamiento sostenible. Lima. April, 2008.

BICECA. Monthly Bulletin BICECA. Washington D.C. July, 2009.

BICECA. Trimestral Bulletin BICECA. Washington D.C. January, 2005.

Bonifaz, José Luis y Roberto Urrunaga. Beneficios económicos de la carretera interoceánica. Lima: Universidad del Pacífico. Centro de Investigación, 2008.

Consortium BWAS-BADALLSA. Prefeasibility study analysis of alternatives to Iñapari-South Seaport road interconnection. Lima. This document was prepared by the BWAS-BADALLSA Consortium to Ministry of Transport and Communications. Lima, 2003.

Consorcio Vial Sur. Feasibility study of Iñapari-South Seaport road interconnection. Lima: Ministry of Transport and Communications. Lima, 2004.

Andean Development Corporation (CAF). “Carretera Interoceánica Sur del Perú. Retos e innovación”. Bogotá, Colombia. Agosto, 2013.

Andean Development Corporation (CAF). Annual Report 2005.





Supreme Decree 022-2005-EF. “Exceptúan a tramos incluidos en concesión del Proyecto Corredor Interoceánico Perú-Brasil-IIRSA-SUR de la aplicación de normas del Sistema Nacional de Inversión Pública referidas a la fase de preinversión”. February, 2005.

Supreme Decree 022-2006-EF. “Otorgan garantías a favor de la CAF”. Febrero, 2006.

Supreme Decree 057-2006-EF. “Otorgan garantía a favor de la Corporación Andina de Fomento – CAF”. Mayo, 2006.

Supreme Decree 113-2006-EF. “Aprueban operación de endeudamiento externo con la CAF”. Julio, 2006.

Supreme Decree 235-2010-EF. “Aprueban Operación de Endeudamiento Externo de la CAF”. Noviembre, 2009.

Dourojeanni, Marc. “Estudio de caso sobre la Carretera Interoceánica en la Amazonía sur del Perú”. Lima. Junio, 2006.

Enrique Fernández, Claudia and Vanessa Cueto La Rosa (2010). Propuestas para


construir gobernanza en la Amazonía a través del transporte sostenible. Análisis de la eficacia del Programa para la Gestión Ambiental y Social de los Impactos Indirectos del Corredor Vial Interoceánico Sur - tramos 2, 3 y 4. Lima. Primera edición: November 2010.

Hamerschlag, Kari. “Corporación Andina de Fomento (CAF). Guión Básico para la Sociedad Civil”. Washington D.C. June, 2008

Law 28214. “Ley que declara de necesidad pública y de preferente interés nacional la ejecución del proyecto Corredor Interoceánico Perú-Brasil-IIRSA Sur”.

Lincoln, Flor y Óscar Rojas. “¿Existe regulación por incentivos en las concesiones viales?: el caso peruano”. Revista de la Competencia y la Propiedad Intelectual 5.

Ministry of Economy and Finance (MEF). Informe Técnico Nº 066-2012-EF/63.01. Investment Program “Fortalecimiento de la Gestión Ambiental y Social de los Impactos Indirectos del Corredor Vial Interoceánico Sur - II Etapa”.

Ministry of Transport and Communications (MTC). Directorate General of Social and Environmental Affairs Transport Subsector. Directorial Resolution 006-2004-MTC/16. Regulation of consultation and citizen participation in the process of environmental and social assessment in Transport Subsector - MTC. January 16 2014.

Ministry of Transport and Communications (MTC). Directorate General of Social and Environmental Affairs Transport Subsector. Directorial Resolution 007-2004-MTC/16. Reglamento de consulta y participación ciudadana en el proceso de evaluación ambiental y social en el Subsector Transportes - MTC. 19 de enero de 2014.

Ministry of Environment (MINAM). “Evaluación Ambiental Estratégica y Prospectiva del Corredor Vial Interoceánico Sur”. Lima, 2009.

Ministry of Environment (MINAM). “Programa de Gestión Ambiental y Social para mitigar los impactos indirectos en el Corredor Vial Interoceánico Sur - II Etapa (PGAS CVIS 2), tramos 2, 3 y 4”.

PROINVERSIÓN. “Bases. Concurso de proyectos integrales para la concesión de las obras y el mantenimiento de los tramos viales del Proyecto Corredor Vial Interoceánico Sur, Perú-Brasil”. Lima. January, 2005.

PROINVERSIÓN. “Contrato de Concesión del Tramo Inambari-Iñapari del Proyecto Corredor Vial Interoceánico Sur, Perú-Brasil”. Lima. August 2006.

PROINVERSIÓN. “Contrato de Concesión del Tramo Vial Inambari-Azángaro del Proyecto Corredor Vial Interoceánico Sur, Perú-Brasil”. Lima. August 2006.

PROINVERSIÓN. “Contrato de Concesión del Tramo Vial Urcos-Inambari del Proyecto Corredor Vial Interoceánico Sur, Perú-Brasil”. Lima. August 2006.

Highs and Lows on Safeguards. How do BNDES,China ExIm Bank, IDB and CAF work?

Se terminó de imprimir en los talleres de REALIDADES S.A. Los Jazmines # 423, Lince

Correo electrónico: [email protected] Página web: www.realidades.pe

Abril, 2015

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