Human rights violations follow the money

Do institutions like the World Bank need to consider international human rights when they make loan decisions? Or are human rights merely political considerations that are outside the scope of responsibility the Bank and other financial institutions?

These were the questions taken up by the Organization of American States' Inter-American Commission on Human Rights in a special session to discuss "Human Rights Violations and the Responsibility of International Financial Institutions."

Financial institutions like the Inter-American Development Bank loan huge sums to governments and companies in Latin America. In 2006 it provided more than $6 billion for 112 projects. World Bank lending in the region was more than $5 billion in 2005. Yet despite the power to affect the lives of millions across the region, these bodies have always claimed they are not bound by international human rights law.

"This was the first time the Inter-American Commission on Human Rights has held a hearing on this topic, and they seemed quite enthusiastic about becoming more engaged on the issue," said Ian Gary, Oxfam America's policy advisor on extractive industries. He delivered remarks specifically on the $1.7 billion Camisea gas pipeline in Peru, which benefited from $135 million in financial support from the Inter-American Development Bank. Broader legal arguments regarding the need for international financial institutions to comply with human rights norms in their projects were made by representatives of the Indian Law Resource Center and the Center on International Environmental Law.

Critics of the pipeline charge that it runs through national parks and environmentally sensitive areas of Peru without the proper consultation of indigenous communities living there, a violation of the International Labour Organization's Convention Concerning Indigenous and Tribal People in Independent Countries. The five spills since the pipeline was completed in 2004 have affected the right to a livelihood of indigenous communities – communities say project impacts have contributed to a decline in fish stocks and access to wild game.. A delegation of NGO representatives led by Oxfam America visiting the pipeline area in 2006 were told by local groups that little of the gas royalties given to local government had been used for social programs, such as schools or health clinics, to help the indigenous people in the area.

"This hearing was an important first step to bring public agencies like the World Bank or the Inter-American Development Bank within a system of accountability to address human rights abuses," Gary said. "Our prospects for sustainable reforms are greatly enhanced when we support local partners to defend their rights and, at the same time, make these arguments in important venues such as this."

Inter-American Commission on Human Rights Hearing on Multilateral Development Banks and Human Rights

"The Inter-American Development Bank, the Camisea Gas Project and Human Rights"

Oral Presentation by Ian Gary, Policy Advisor for Extractive Industries, Oxfam America, March 1, 2007

• The World Bank Group and the Inter-American Development Bank (IDB) provide significant amounts of financial and technical assistance to Organization of American States Member States with the purpose of promoting investment in the region and contributing to economic growth and poverty alleviation. In 2006 the IDB provided the largest amount of multilateral lending for Latin America and the Caribbean, approving over 112 projects totaling close to $6.4 billion.
• Despite the enormous influence that the World Bank Group and the IDB wield in the region, these international financial institutions have long asserted that they are not bound by international human rights law because their Charters, known as Articles of Agreement, do not include explicit references to human rights.
• The case of the Camisea natural gas project in Peru, funded by the Inter-American Development Bank, illustrates the impacts on the full range of human rights that can result from IFI-financed activities.
• The Camisea project, a $1.7 billion investment, is one of the most controversial energy projects in the world, taking place in a region of notable biodiversity, national parks and reserves, and the home of recently contacted indigenous communities and indigenous communities in voluntary isolation.
• (By way of introduction, Oxfam America has worked with indigenous communities in the project zone for more than a decade and has supported indigenous federations in the project zone, in addition to policy and research work in Washington. I organized a high-level delegation from Washington to visit the project zone in April 2006.)

Camisea project background

• Companies – upstream operator Pluspetrol - Argentina (40%), Hunt – U.S. (40%), SK Corporation – South Korea (20%) – downstream TGP/Techint operator - Argentina
• Location of blocks in Lower Urubamba - 75 percent of the producing Block 88 is located in the Nahua Kugapakori reserve for isolated indigenous people.
• Pipeline became operational in August 2004

Role of IDB ($135 million A and B loans) and justification

• $75 million to TGP for pipeline – 12/2004
• Syndicated B loan of $65 million
• $5 million to GOP for capacity building
• Value added – bring higher standards to companies and government
• U.S. Export Import Bank declined based upon woefully inadequate environmental impact mitigation measures

Indigenous groups, Peruvian and international environmental and human rights NGOs expressed serious concerns about the project prior to the IDB's decision to co-finance the project. Unfortunately, many of the concerns related to the rights of indigenous peoples and environmental damage have been borne out.

A few examples of violations of human rights:

• Communities in the project zone did not have the right to Free, Prior and Informed Consent as enshrined in ILO Convention 169.
• Problems with consultation included a lack of information prior to consultations
• Low levels of compensation for communities providing pipeline right-of-way, etc.
• Five spills in first 18 months of operation – A February 2006 report by E-Tech International, a non-profit engineering consultancy, alleged that the pipeline was constructed, in part, by unqualified and untrained welders using corroded piping and rushing to avoid onerous late completion fees that would have totaled $90 million.
• Loss of livelihoods – Examples include:
  • Soil erosion and increased river traffic have been blamed by communities for decreased fish stocks
  • Hunting has been affected by noise created by helicopter overflights
  • Health impacts, including the introduction of new diseases
  • A May 2004 report, published by the Peruvian health ministry's General Office of Epidemiology noted that incidences of infectious diseases had increased in the reserve among one isolated group, the Nanti, 25% of children now reach adolescence
  • There has been little in the way of increased social spending on the part of the central and local governments, in part due to extremely low capacity levels on the part of local governments to manage funds and execute projects. In 2005, the Municipality of Echarate received around $22m in gas royalties but has had difficulty programming these funds.
  • There has been no independent monitoring system for the project put in place.
• IDB is currently undertaking due diligence for the second phase of the Camisea project (referred to by the IDB externally as "Peru LNG") which involves the construction of an Liquid Natural Gas export plant, additional pipelines and the development of gas fields in Block 56, adjacent to Block 88.
  • While the IDB says its new Indigenous People's Policy will be observed for the second phase, there are concerns that the IDB is refusing to address the lessons and problems of Camisea before embarking on $400 million in financing for a second phase later in 2007. It remains to be seen whether the IDB will repeat the mistakes of the past and contribute to more human rights violations in the Peruvian Amazon.