Recent conflicts surrounding World Bank-supported projects in Honduras demonstrate that the World Bank is beyond reform, and needs to be shut down.
The World Bank came under fire again last week when its ombudsman revealed that the bank’s investment in a palm oil project in Honduras worsened human rights abuses and violent conflicts.
The World Bank’s Compliance Advisor Ombudsman (CAO), the independent auditor for the International Finance Corporation (IFC), the bank’s private sector arm in charge of providing investments in developing countries in order to spur private sector growth, investigated a $30 million loan (half of which has been released thus far) to Corporación Dinant, a Honduran palm oil and snack food giant. The loan to Dinant was made just five months after a 2009 military coup in the country removed President Manuel Zelaya, a democratically-elected president seeking moderate labor and land reforms. Zelaya was replaced by a de-facto dictator who used the country’s military and security apparatuses to violently oppress social movements and political opposition.
Such investment on the part of the World Bank has further undermined democracy in the country and empowered Honduran elites profiting from recent political turmoil.
The CAO report suggests that there is an institutional culture of indifference at the World Bank that incentivizes staff “to overlook, fail to articulate, or even conceal potential environmental, social and conflict risk” in order to streamline the approval of loans, while failing to follow its own policies and procedures to prevent such things.
“The IFC loaned millions of dollars to a project, even though it was known that its operations were already enmeshed in killings and other violence… the Dinant case should serve as a warning about the pitfalls of investing without proper oversight,” said Jessica Evans, senior international financial institutions researcher and advocate at Human Rights Watch.
The CAO cited reports by human rights groups which documented the murder of 102 people associated with peasant movements in the Bajo Aguán Valley of Honduras, where Dinant’s operations escalated decades-long land disputes. Most of the deaths are blamed on death squads composed of Dinant’s private security working in concert with US-backed Honduran military forces. The company refuses to accept any responsibility.
The IFC has denied many of the CAO’s findings. However, it stated that it would work with Dinant to reform its security operations, along with environmental and social management procedures, even though a company spokesperson told Al Jazeera that its security forces were not responsible for any violence surrounding land disputes—and in fact were victims, while suggesting a number of the CAO’s other allegations were “unfounded.”
Kris Genovese, senior researcher at the Centre for Research on Multinational Corporations, called the IFC’s response “totally inadequate” and that any future funding should be suspended.
“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,” Genovese explained.
The CAO is also investigating the IFC’s investment in Ficohsa, a Honduran bank with a long relationship with Dinant. Peter Chowla, coordinator of the UK-based Bretton Woods Project, told the Financial Times, “The IFC was wildly irresponsible in investing in a private commercial bank, Ficohsa, in 2011 despite knowing that the bank’s third-largest client was Dinant and the IFC being well aware of the allegations of human rights abuses surrounding Dinant’s palm oil plantations. It highlights yet again IFC staff’s recklessness towards the impacts of its investments on poor people, while ensuring their corporate partners profit.”
The IFC’s investments with third party lenders such as Fichosa have been a long-standing problem; the relationship was audited by the CAO in February 2013. The Inter Press Service noted that a majority of the IFC’s third party lenders “failed to improve their environment and social practices following IFC investment” and that the IFC’s “oversight mechanisms include no capability to assess whether that lending…is helping or harming local communities and overall development indicators.”
The World Bank’s history of investing in projects resulting in murder and human rights abuses suggests that efforts to reform the bank is a fool’s errand. During the early 1980s, in neighboring Guatemala the World Bank lent hundreds of millions of dollars for the Chixoy Hydroelectric Dam project during the bloody military dictatorships of Fernando Romeo Lucas García and Efraín Ríos Montt. One of the results of the World Bank’s project was a series of planned massacres that left 440 Mayan Achi men, women, and children murdered.
A little over 20 years later the World Bank lent Canadian mining giant Goldcorp (then Glamis Gold) $45 million for an unpopular gold mine in Guatemala which not only spilled more indigenous blood, but was also an investment marred by violating indigenous rights and the improper evaluation of the project’s environmental impacts.
Around the world, from Ethiopia to Indonesia and Peru, the World Bank finds itself embroiled in controversies surrounding human rights violations, environmental destruction, and social discord. NGO’s for years have been calling for sweeping reforms at the World Bank, but to no avail.
It’s time to recognize that the World Bank is an institution incapable of reform, and is indeed unworthy of reform efforts. The only humane option is to focus efforts to close the bank immediately and to start building alternative financial institutions that promote local, community-led development projects guided by the principals of sustainability and solidarity rather than free market doctrine.
Otherwise, the pile of corpses will continue to grow in the name of progress and development—and reform.
Cyril Mychalejko is an editor at www.UpsideDownWorld.org, an online magazine covering politics and activism in Latin America.