World Bank to Bill Its Victims

By Abid Aslam, IPS, 25 June 1998

WASHINGTON, Jun 25 (IPS)—The World Bank, found by its own inspection panel to have botched one of the world's most ambitious hydroelectric projects, is offering to correct some of its mistakes—if its Paraguayan victims foot the bill.

The Bank is drafting proposals to help resettle tens of thousands of Paraguayans whose homes and livelihoods have or will be flooded by the 67-km Yacyreta dam, according to officials here. The proposals would involve a mix of new loans and redirected revenues from sales of the dam's electricity, said Tony Gaeta, spokesman for the Bank's Latin America department.

Under such a scheme, the Paraguayan people will be paying for damage wrought by Bank loans to Argentina, warned Dana Clark, senior attorney at the Centre for International Environmental Law (CIEL).

Yacyreta straddles the Parana river on the Argentine-Paraguayan border. Both countries own the dam, partly financed with 1.8 billion dollars in Argentine loans from the World Bank and Inter-American Development Bank.

Bank staff, aware of the problems for more than five years and under scrutiny for nearly two years over violations of agency policy, have yet to work out basic details of the package, according to internal sources.

We're doing everything possible to do whatever we can, as soon as we can, Gaeta told IPS.

The Bank's independent Inspection Panel said last year that meeting the needs of neglected communities would cost at least 130 million dollars and take until 2000.

Officials still had to decide the number of people involved, and the likely size of the new loans, but would work furiously to come up with a broad outline to submit to the government of President-elect Raul Cubas, which takes office in August, Gaeta said.

The dam is run by the binational Entidad Binacional Yacyreta (EBY), itself assailed for corruption and suppressing local dissent. The organisation in February transported riot police from Paraguay's capital, Asuncion, to clamp down on groups protesting flood conditions in their communities. Some 20 protesters were hospitalised after being attacked with lead pipes, according to local media reports.

Yacyreta originally was expected to cost 2.6 billion dollars but recent estimates put the price tag at 8.5–12 billion dollars. It was built to provide cheap electricity for Argentina and revenues for Paraguay, which would sell the power to its neighbour. However, internal documents reveal demand for that electricity fell 25 percent even before construction began in 1983, and suggest the project's costs may never be recouped. Meanwhile, 50,000-plus people, mainly Paraguayans, have lost or face losing their homes and livelihoods.

The latest efforts to address local grievances follow a series of embarrassing Bank maneouvres which moved agency President James Wolfensohn to meet representatives of Sobrevivencia, the Paraguayan affiliate of Friends of the Earth. Last month he opened a direct line of communication with the victims' advocates, and recently dispatched Shahid Javed Burki, vice president for Latin America and the Caribbean, to the project site.

Burki, a Pakistani economist, later was quoted as saying, I come from one of the poorest countries on Earth, and I have never seen such misery as I have seen today.

The Bank's independent Inspection Panel, acting on a 1996 complaint by Sobrevivencia, confirmed in September 1997 that project staff had neglected communities in and around the city of Encarnacion. They had violated a litany of agency policies on environment, resettlement, and project supervision, it said.

The internal watchdog faulted Bank officials for filling Yacyreta's reservoir although required resettlement and environmental mitigation measures had not been implemented, creating a dangerous situation for local residents. Staff also were assailed for tolerating major violations of loan agreements rather than suspending funds.

Management action plans, designed to right those wrongs, were insufficient and lacked community input, the Panel said. A rough Spanish translation of the Panel report was not made available to the Paraguayans until this month, Bank and Panel sources said.

Isabel Guerrero, then acting vice president for Latin America, appeared to take advantage of that local lack of information in February, when she wrote to concerned groups that the Panel report showed no evidence of wrongdoing.

The Bank is satisfied with the conclusions of the report which confirm that the Bank's policies on resettlement, the environment, community participation and all other areas were fully met and implemented in the case of Yacyreta, she said. Her letter was published by EBY as a full-page advertisement in the Paraguayan press.

The Bank, under pressure from 90 organisations worldwide, last month admitted Guerrero had conveyed an erroneous description of the (Panel's) findings.

In recent weeks, the agency refuted assertions by EBY that Sobrevivencia was boycotting a Bank loan to help Paraguay cope with the ravaging effects of the 'El Nino' weather phenomenon. In fact, officials said, that loan was still under preparation.

Bank directors and senior officials have voiced unease with EBY but have left it to the commission and their own errant project staff to implement the remedies already deemed inadequate. Citing Paraguayan government objections, they also have prohibited the Panel from returning to the project area.

Executive directors said after a meeting Tuesday that more needed to be done on Yacyreta and another high-profile case—involving 400 million dollars in loans to expand coal-fired power plants in Singrauli, Central India, run by the state-owned National Thermal Power Corporation. The Inspection Panel faulted Bank staff for speeding loan approval, resulting in policy violations and uncompensated losses for Indian peasant farmers.

The Indian government barred the watchdog group from conducting a full on-site evaluation. Executive directors on Tuesday declined to authorise closer Panel supervision of relief efforts despite urging from Human Rights Watch/Asia, which in April highlighted reprisals against villagers by security forces.

It was an informal meeting, subject to a gag order, with no new outcome, a well-informed source told IPS. Draw your own conclusion.