Ethical Performance
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IFC to be investigated over investments in Honduras

March 2014

The World Bank’s lender has come under fire for granting a large loan to a company said to have killed while taking land for palm oil cultivation in Honduras.

Corporación Dinant, which is based in Honduras and has operations throughout Central America and the Caribbean, has been accused of grabbing land in Bajo Aguán, evicting farmers by force, and being responsible for multiple killings by private and government security squads under its control or influence.

One estimate from local villagers puts the death toll at 80, including some killed in a drive-by shooting.

Dinant has already received half of a $30m (£18.3m, €22m) loan from the International Finance Corporation (IFC), the World Bank lending arm, which is now being attacked internally and by outside critics.

IFC staff did not adequately assess and react to the risks of violence and forced evictions when it made the investment and had too much discretion in considering applications, reported the compliance adviser ombudsman, the independent body established by the World Bank to monitor its lending.

This, said the ombudsman unit, violated the IFC’s own rules.

It reported further that staff handling the investment failed to tell other IFC specialists about the environmental and social risks of which they were aware, and did not properly oversee Dinant’s obligation to investigate complaints of violence.

The international group Human Rights Watch responded that the issue emphasised how important it was for the IFC to supervise its investments.

The IFC has now admitted that the allegations against Dinant should be investigated and has given an undertaking to “assess the feasibility of remediation to affected parties”.

However, it is leaving investigations to Dinant and the Honduran authorities.

The decision troubles Jessica Evans, senior financial institutions researcher and advocate at Human Rights Watch.
Evans protests: “Instead of the accurate, adequate and objective assessment of the allegations its policies require, the IFC is leaving the job to the fox that raided the chicken coop in the first place.

“Human lives and livelihoods are at stake here. The IFC should demand an external expert investigation that could create a framework for Dinant to remedy any violations of its responsibility to respect human rights.”

The ombudsman unit is conducting a related inquiry into a $70m IFC loan to Ficohsa, the third largest Honduran bank. In an interim report the investigators question whether Ficohsa operated adequate environmental and social safeguards when it in turn loaned money to Dinant.

Evans said: “This investigation was an opportunity for the IFC to evaluate why its systems clearly failed and determine how to prevent future human rights problems.

“But the IFC has instead, once again, asked the public to blindly trust the institution, even as the basis for such trust is shaken by the revelations in this report.”

Global | Corporate governance

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