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World Bank inspection panel denies jurisdiction over IFC in Chilean Bio Bio River claim

Bank president promises internal investigation
19 December 1995

A claim filed by Chilean citizens with the World Bank's Inspection Panel in November has been rejected by the panel on the grounds that the resolution which sett up the panel does not permit them to investigate loans of the International Finance Corporation (IFC). The IFC is the arm of the Bank which provides loans to private companies.

The claim, brought by nearly 400 Chileans including Pehuenche Indians, alleged that the IFC violated Bank policies requiring adequate environmental review, and that Bank policies on environment, indigenous peoples, wildlans, management of cultural property, and involuntary resettlement were not followed by the IFC in their loan to ENDESA, a private Chilean utility, for construction of the Pangue Dam on the Biobio River.

After the Panel denied their jurisdiction in the case, World Bank President James D.Wolfensohn promised the claimants on December 6 that he would "undertake an impartial internal review of the environmental and social issues associated with the Pangue project."

Juan Pablo Orrego and Cristian Opaso, of the Chilean NGO Grupo de Accion por el Biobio (Biobio Action Group) responded to Wolfensohn's commitment with cautious optimism. Nonetheless, they stressed in a letter to Wolfensohn that the failure of the IFC to publicly disclose key documents on the loan have hindered the Chilean public's right for public participation in decisions relating to the project.

"It would be an important step forward to at this time strengthen IFC public disclosure policy (and) key documents, among them loan agreements, compensation, mitigation and resettlement plans, and evaluation mission reports" should be made public, they said.

Beyond the alleged Bank misconduct regarding the Pangue loan, concern has focused on ENDESA's announced plans to begin construction of a larger dam, Ralco, in 1996. Though no financing has yet to be secured for Ralco, the IFC owns a 2.5% stake in the ENDESA subsidiary which plans construction of Ralco.