Social and Environmental Safeguards in International Development Finance Case Study PULP Mills in Fray Bentos - Uruguay Presented by Center for Human Rights.

Social and Environmental Safeguards in International Development Finance

Case StudyPULP Mills in Fray Bentos - Uruguay

Presented by Center for Human Rights and Environment (CEDHA) - Argentina

Harvard Extension Program - June 19, 2007Jorge Daniel Taillant – [email protected]

Argentina Uruguay

Rio

Uru

guay

Botnia

Ence

Principal Proponents

• Companies - Botnia/ENCE• IFC• MIGA• Private Banks (ING / BBVA / Nordea / NIB)• Finnvera (Finnish Export Credit Agency)• Uruguayan Government

(National and Local)

Uruguayan Gov Netherlands

Spain

Key Source of Problem

• Environmental Impact Assessment Summary – Orion – April 20, 2005– Two Mills ENCE/Botnia measured separately– Incomplete EIAs and failed engagement generate speculation and mistrust– “Consultations indicate that the project enjoys broad public support”

Broad Public Support!Just 10 Days Later!

Broad Public Support!

Principal Oposition• Gualeguaychu Assembly (40,000 personas)

(Public/Business/NGOs)

• Select NGOs and Public in Uruguay • Argentine Government (National, Provincial and Municipal)• Uruguayan Prosecutor• Press• CEDHA

Gualeguaychu Assembly40,000 persons

Entre RíosGov

UruguayanNGOs

Argentine GovTaking to Bridge

What to do?

A Few Questions to Answer

• What is the case about? Contamination? Business? Politics?

• Who governs the situation? (what rules?)

• Who is responsible?

• Where can we go with the case? (Media, Streets, Court, Government, World Bank)

• We chose Accountability thru Finance.

Definition of Accountability"Accountability is the means by which power is used responsibly"

This goes beyond an exclusive focus on the process of reporting upon - or accounting for - decisions and actions. Accountability also involves taking account of the needs, concerns, capacities and dispositions of affected parties, and explaining the meaning and implications of, and the reasons for, actions and decisions. Accountability is thus a measure of the quality of the relationship between an agent (a body offering a service or product) and a principal (the person or group for whom the service or product is intended). The more powerful the agent, the greater potential there is for abuse and exploitation of the principals. Accountability is the countervailing force which confronts power and ensures that it is exercised responsibly.

-Humanitarian Accountability Partnership

Possible Channels of Action

• CAO• Inter-American Commission of Human Rights• European Commission for Violations to

European Citizens• Spanish/Finish Courts (Finnvera - ECA)• Criminal Actions in Argentina against CEOs• International Court of Justice• Legal Action in Uruguay• Equator Bank Compliance Claim (to BBVA and ING)

• OECD Guidelines for Multinational Enterprises• UN Human Rights Norms for Transnational

Corporations• UN Global Compact• Generally on Corporate Social Responsibility

Commitments

Corte Internacional de

Justicia

Complaints – What We Did

Grounds of Action at CAO

• Violations to Environmental and Social Safeguards

• Violations to Disclosure Policy• Violations to International

Waterways Policy• Poor Stakeholder Consultation• Poor EIAs• Violations of International

Treaties

CAO Audit

Findings

• Complaint by 40,000 Stakeholders – “IFC’s due diligence to satisfy itself that the EAs

were complete in all material respects was inadequate and not incompliance with the organization’s Disclosure Policy” (CAO, Feb 22, 2006)

– Insufficient evidence that proper consultation has occurred

– No cumulative impact study; IFC Fosters Separation of Projects!

– Need to generate transboundary trust in Local Communities

– Botnia’s beginning construction undermines legitimacy

– Special Efforts must be made to legitimize future studies

– Must study impacts of eucalyptus tree farming on water

– Must examine International Law Obligations; MIGA says not needed!

– Establishes legitimacy of (Gualeguaychú Assembly)– IFC Fails to Give Clarity on how it will address Study

Flaws– “Further technical information and facts will not

be sufficient”

International Waterways

International Waterways policy (OP 7.50)

International Court of Justice

ICJ Ruling

Grounds of Action at IAHRC (for Responsibility of Uruguayan Gov. To Project)

• Right to Life• Right to Physical Integrity• Rights of the Child• Judicial Process• Progressive Realization of ESCR• Right to Health• Right to a Healthy Environment• Access to Information• Access to Justice

We asked for Preventive Measures

Mixed Results• Withdrawal of One Pulp Mill• Withdrawal of One Major Financial Bank (480m)• Posibility New Compliance Procedure at Equator Banks• Debate Opening at OECD of Bank Liability to Guidelines• Improvement of Remaining Mill• 18 Month Delay Board Vote Date @ WB• Investigation process initiated at IAHRC• Greater Attention to Policy Procedures• Awareness Building /• Experience

What we discovered

• Finance Network is Precisely Crafted• Actors are far more related than they

seem• World Bank (through IFC) plays a critical

role in technical and financial legitimacy• Government and State Actors are far more

related than it seems• The network is self sustaining and

legitimizing

Exploratory StrategiesArticulation of Actions

IACHR Indep. Control Mechs

Social Movements

Human Rights

NGOs

Prvt Banks

IFIs

Safeguards

Others?

OECD -NCPs

CSR

Press

UN CAOWorld BankBoard

NationalGovernments

Companies

Jorge Daniel [email protected]

Center for Human Rights and Environment