Context: IFC Support for Infrastructure and Other Drivers of Deforestation
After months of project monitoring, BIC along with our Brazilian partner, the Institute for Socioeconomic Studies (INESC), published a report on the environmental and social impacts of the International Finance Corporation (IFC) backed Hidrovias do Brasil (HDB) project. The report focuses on the project’s impacts on the local communities of Miritituba and Itaituba — two cities in the state of Pará. In recent years, Pará has become an important transportation hub for the global commodities supply chain connecting the state of Mato Grosso to the Atlantic, playing a fundamental role in the reestablishment of the Brazilian Amazon as a pathway for grain exports.
Although from an environmental standpoint, a river transport project is far preferable to building new roads in the region, we found the project still caused several environmental and social harms. This resulted from HDB, the IFC’s client in this project, failing to meet the IFC’s Performance Standards (PSs) and, critically, the IFC’s failure to effectively enforce them. While the IFC claims it applied PS 7, a safeguard to protect Indigenous Peoples, we found no evidence of its application in the Environmental and Social Review Summary (ESRS) or by the client. This continued adverse environmental and social impact is consistent with the findings from our assessment of the World Bank’s 2016-20 Forest Action Plan (FAP) that revealed that while the Bank had increased forest investments by almost 16 percent relative to the prior period (2013-16), the Bank is failing to reduce the negative impacts on forests and forest people of projects in the sectors most responsible for deforestation: infrastructure, energy, extractives, and agriculture.[1] Consequently, the WBG’s investments in these sectors pose serious risks for forests and forest peoples. In the case of Brazil, BIC identified that projects expected to negatively impact forests increased both in number and funding.[2] The HDB project is particularly critical in this respect because the projects linked to negative forest impacts in Brazil are mostly IFC-funded projects related to sugarcane production and expansion, meat export, industrial development, unsustainable power generation, and transportation and infrastructure.
Findings: Hidrovias do Brasil Fails to Comply with Performance Standards
In the report, we analyze how IFC’s client did not properly implement the Performance Standards (PSs) and link these failures to adverse impacts identified by local project-affected communities, providing recommendations for the IFC moving forward. Specifically, we found compliance issues with respect to engaging local stakeholders, acquiring the Free Prior Informed Consent of Indigenous Peoples, identification of project risks and impacts, minimization of health and environmental impacts, involuntary resettlement, and economic displacement.
For the Munduruku Indigenous People, the failure to apply specific protections for Indigenous Peoples caused the impact of the ports to spread through the kinship network that links their communities and led to negative effects on other Indigenous territories in the region, harming over 800 Indigenous inhabitants. Project-affected people also asserted that the intense traffic in the small district increased soybean powder pollution, escalated violence, and disrupted their ability to carry out daily activities. Furthermore, we learned that the port’s construction and operation caused many fishermen to lose their livelihoods and forced them to travel up to four hours along the river, spending the week away from Miritituba and living in their boats.
Despite several attempts to discuss these findings with the IFC, they have not yet effectively rectified the PS implementation failures nor mitigated their resulting negative impacts on the communities.
As a development finance institution and shareholder of HDB, the IFC has a responsibility to take prompt action to enforce its PSs so that their client does not continue to infringe on the rights of the communities and exacerbate environmental degradation. Based on our analysis, we recommend the IFC strengthen environmental and social monitoring, including hosting effective consultations with the affected communities, in particular fishermen and Indigenous Peoples (aligned with the Munduruku Consultation Protocol and other local protocols). The IFC should also update the Environmental and Social Review Summary to show that PS 7 applies and enhances studies on the social and environmental impact of HDB to inform a detailed action plan to mitigate environmental and social impacts. Finally, the IFC must supervise and work with HDB to construct an alternative route for port traffic transport that avoids Itaituba’s center, as well as, develop actions to compensate and restore livelihoods for project-affected populations.
As the IFC is working to strengthen its accountability system so the institution can “pay more attention to communities” and “do more to engage with them in a meaningful way,”[3] the need for action is urgent as the project continues to negatively affect the livelihoods of project-affected communities. The IFC must promptly work with these communities to address these issues to avoid further local environmental degradation, loss of livelihoods, and growing social conflicts on the ground.
For a more in depth look at the findings and recommendations, please see the full report here:
[1] BIC’s findings showed that WBG succeeded in increasing investments and funding for projects with positive impacts on forests by 69 percent after the adoption of the FAP (most of these projects are forestry-sector projects). However, funding for projects that pose negative impacts to forests increased by 70 percent in the same period.
[2] Funding of projects in Brazil that were expected to have a direct and/or indirect negative impact on forests and forest dependent people increased by more than 50 percent after the FAP adoption.
[3] Le Houerou, Philippe (June 13, 2019) Opinion: Stepping up our game on environment and social issues, Devex.