This update was written in collaboration with Anne Bordatto.
The Santa Rita Hydroelectric Project in Guatemala, which the International Financial Corporation (IFC) indirectly supported through its equity investment in Real Latin Renewable Infrastructure Fund LP (LRIF-01/Cobán) demonstrates the need for the strong application of IFC’s recently approved Remedial Action Framework (RAF) and Responsible Exit (RE) Principles, and where gaps in the frameworks remain. In 2014, IFC’s accountability mechanism, the Compliance Advisor Ombudsman (CAO), received a complaint from Indigenous Maya Q’eqchi’ communities affected by the Santa Rita Hydroelectric Project, a 23-megawatt power plant planned for the Río Icbolay in Alta Verapaz, Guatemala. LRIF, which IFC supported through an equity investment in 2012, financed the project developer, Hidroeléctrica Santa Rita. At the time of publication, we understand that IFC still holds a 35 percent equity stake in the project. Despite this, we also understand that IFC has not yet applied the RAF or RE Principles to the project.
Construction on the Santa Rita Hydroelectric Project began in 2013 but was halted due to conflict with project-affected communities. It has not resumed since. In the CAO complaint, community members raise serious concerns that the project advanced without the proper application of Free, Prior, and Informed Consent (FPIC), a requirement in all projects affecting Indigenous communities. The complaint also cites a range of environmental and social issues, including inadequate IFC due diligence, lack of transparency and consultation, potential impacts on local water sources, displacement, lack of contextual risk assessment, and disruption of community life, including the deaths of five community members (two of whom were children) and imprisonment of eleven community members. The CAO investigation concluded that IFC’s non-compliance with its Performance Standards resulted in significant harm to project-affected communities. Despite this finding, the resulting IFC Management Action Plan failed to offer a path to remedy. To date, communities remain without redress. CAO has continued to monitor the case.
Now, nearly a decade later, the communities have come together with a constructive proposal: they seek to repurchase the land originally acquired by the client for the Santa Rita Hydroelectric Project, which was never built. This land holds deep cultural and economic significance for more than twenty communities. Importantly, the communities are not asking IFC to fund the purchase — they are ready to mobilize their own resources. Instead, they are asking IFC to engage in the discussions with the client and the communities around the purchase of the land. Communities have also requested that IFC’s client formally respond to the Guatemala Ministry of Energy and Mining to authorize the administrative closure of the project.(1) This closure would help to clarify the status of the project and ease ongoing social tensions on the ground, which have been exacerbated by the project, and allow for the restoration of community cohesion.
Rather than engaging with communities that have been harmed by the project and supporting meaningful remedy, IFC first refused to act, claiming that the fund is dissolving despite IFC still holding shares in LRIF. Then, after BIC and partners sent an email to the Vice President of Financial Intermediaries, IFC confirmed that it had communicated the request to LRIF but that it would not facilitate conversations with its client, and shared the contact information of LRIF for communities to reach out to them directly. IFC’s responses raise serious concerns. First, IFC’s response ignores the history of retaliation and tension between the LRIF and Hidroeléctrica Santa Rita and the communities, which has been raised repeatedly by CAO and the communities. Ignoring that information is concerning. It reflects a troubling disregard for the power imbalances and protection risks that communities face when engaging directly with financial actors and project sponsors, especially in a context like this one, where retaliation has already occurred, including killings, imprisonment, and ongoing arrest warrants against community members.
Then, the response ignores the recently approved RAF and RE Principles. Although it is unclear whether the dissolution of the LRIF fund is classified as IFC’s exit as active or passive, the institution still holds influence and responsibility because IFC remains engaged with the fund. There is no evidence that communities have been consulted as part of a potential exit process, in line with the RE Principles. Further, IFC has not transparently disclosed the nature of the fund dissolving —whether this is the result of the client's repayment or a deliberate decision to divest by IFC. Given that the project remains active and IFC retains a stake of 35%, this is precisely the type of case where the RAF and RE Principles should be applied.
The Boards of IFC and MIGA approval of the RAF and RE Principles was a necessary first step. But the true test lies in implementation, especially in complex cases like Santa Rita. The case presents a timely and important opportunity for IFC to demonstrate its commitment to the principles outlined in these documents. The constructive proposal from affected communities aligns with the very objectives these frameworks were designed to advance: meaningful engagement, prevention of harm, and responsible transition out of high-risk investments. Meanwhile, IFC’s response denies the communities’ proposal due consideration. While IFC claims it is in the process of exiting the fund, communities on the ground have not been informed of this, and the project is still listed as active on IFC’s website. Therefore, IFC's continued equity stake and influence in LRIF make this a clear instance where both frameworks should be actively applied. A failure to do so risks undermining the credibility of these new institutional commitments.
IFC should take immediate steps to engage with communities and support the conditions necessary for remedy, as envisioned in its own approved frameworks. IFC cannot claim to champion responsible exit and remedy while failing to apply its own frameworks when they matter most. The communities have put forward a reasonable, actionable proposal, and the Guatemalan government has expressed willingness to engage in dialogue. What’s missing is IFC’s leadership and commitment. All actors who contributed to this harm must come to the table—especially IFC, which retains an equity stake and influence. Turning away now would not only deepen the harm but also call into question the integrity of IFC’s new approach to remedy and accountability. It’s time for IFC to live up to its responsibilities.
(1) - “IFC’s and Asset Management Company (AMC)’s equity investments represented 15 and 20 percent of Real LRIF, respectively”. See CAO report