World Bank funding a company implicated in human rights abuses in Honduras

An internal investigation has revealed that the World Bank has invested in a palm oil and food company implicated in serious rights abuses in Honduras. The investigation is one of the most damning ever issued by the Bank’s internal watchdog, the Office of the Compliance Advisor/Ombudsman (CAO), and concludes that the Bank’s private-sector lending arm, the International Finance Corporation (IFC):

• Failed to adhere to its own policies meant to protect local communities;
• Either failed to spot the serious social, political and human rights context in which this company is operating or where it did, failed to act effectively on the information;
• Failed to disclose vital project information, consult with local communities, or to identify the project as a high-risk investment.

The CAO found that these failures arose, in part, from staff incentives “to overlook, fail to articulate, or even conceal potential environmental, social and conflict risk” and that staff felt pressured to “get money out the door” and discouraged from “making waves.”

Human rights violations

The investigation centers on a $30 million loan to palm oil and food company Corporación Dinant by the IFC. The expansion of palm oil plantations in the Aguán Valley has long been associated with extensive abuses, including the killing, kidnapping and forced eviction of farmers. The CAO cites allegations that 102 members of peasant associations in the Aguán Valley have been murdered in the last four years, 40 of these associated with Dinant property or its security guards.

The CAO has however noted Dinant’s position that the killings of peasants reported in the Aguán are either unconnected to Dinant and its security personnel, or involve acts of legitimate self-defense on behalf its security personnel.

World Bank must act

Global and Honduran civil society groups – including Movement of Unified Campesinos in Aguan (Honduras), Movimiento Madre Tierra (Honduras), Rights Action, SOMO (Netherlands), Urgewald (Germany), Bank Information Center, Oxfam, Global Witness, and the Center for International Environmental Law - are now calling on World Bank President Jim Yong Kim to take immediate action to withhold funding to Dinant, to require Dinant to halt all violence directed at local farmers and find a peaceful and sustainable resolution to conflict over land. Further, Kim should ensure that appropriate incentives are in place to secure IFC staff’s adherence to its policies and procedures.

Juan Almendarez, Director of Friends of the Earth Honduras (Movimiento Madre Tierra) and member of the Plataforma Agraria said: "We condemn the policies of the World Bank that have failed to avoid the human rights violations of poor farmers´ families and cooperatives in the Aguán Valley, and we consider the World Bank´s response to the result of the CAO audit to be unjust and inhuman."

Knud Voecking of German NGO Urgewald said: “The World Bank’s investments should improve the lives of local communities, or at the very least not endanger them. This report reveals that in the case of Dinant the World Bank failed massively on both fronts. The World Bank must halt all further disbursements to Dinant until decisive action is taken to ensure justice for crimes committed, and to prevent further abuses.”

IFC response inadequate

In its response to the CAO investigation, the IFC rejected some of the findings, without specifying which ones or providing evidence to support this rejection. It also pointed to support it had given Dinant since 2010 to improve its policies and practices and produced a short Action Plan (2).

Yoni Rivas, General Secretary of the Movement of Unified Campesinos in Aguan (MUCA) and member of the Honduran agrarian group Plataforma Agraria said: "We are deeply disappointed that the World Bank's response to this investigation has not taken into account the violations of the human rights of poor farmers in the Aguán Valley who have been the direct victims of Corporación Dinant."

Rivas added, "We regret that the president of the World Bank, Jim Kim, despite the expressions of deep concern from different sectors, has not taken enough into account the demands of farmers' organizations affected by Corporación Dinant when issuing the declaration and plan of action in response the conclusions of the CAO audit."

Kris Genovese, senior researcher at SOMO said: “While the willingness from President Kim to answer the findings of the CAO is welcome, the content of the IFC Action Plan is totally inadequate and could more accurately be described as an inaction plan. The CAO notes that Dinant was not in compliance with the IFC’s policies on the day the loan was made, and over five years later, continues to be out of compliance. An Action Plan that makes the same commitments that have gone unfulfilled this whole time holds little promise. The immediate appropriate response from the IFC is to withhold the pending $15 million disbursement.”

Peter Chowla, Coordinator of the UK-based Bretton Woods Project said: “The CAO report shows that the IFC's policy and procedures are fundamentally flawed given the 'conflicts of interest and conflicting incentives' for IFC staff. For example, that the lead environmental specialist working on the project was replaced after proposing a stricter compliance-based approach to the project speaks volumes about an internal culture at the IFC that emphasises making money over addressing environmental and social harms. This is unacceptable for a public institution.”

Jocelyn Medallo, senior attorney at the Washington-based Center for International Environmental Law (CIEL) said: “This is a test case of President Kim’s commitment to learn from past mistakes. The Dinant case tragically underscores the need to overhaul the World Bank Group’s approach to managing human rights risks."