An internal report on the World Bank’s multimillion dollar loan to a palm oil company embroiled in human rights allegations has concluded that the investment bank should have been more diligent in its assessments.
The private-sector arm of the bank, International Finance Corporation (IFC), received criticism for the $30m (€21.9m) corporate loan granted to the Honduras palm oil and food firm Corporación Dinant, after allegations of violence against farmers emerged.
In its latest statement, the IFC accepted shortcomings in its implementation of environmental and social policies and procedures in this case. The response has been marked as a U-turn after an initial tepid response.
Investing in violence
The bank’s internal watchdog, Office of the Compliance Advisor Ombudsman (CAO), began an investigation in April 2012 after its vice president received a letter alleging that violence against farmers on and around Dinant plantations in the Aguan Valley had occurred because of inappropriate use of private and public security forces under Dinant’s control or influence.
As part of the report CAO also said that the IFC should have been aware of a series of public allegations and negative perceptions in relation to its client, namely later acquitted murder charges. CAO said NGOs had accused Dinant of conducting, facilitating or supporting forced evictions of farmers in the Aguan Valley.
In a statement Dinant said it did not agree with certain comments in the report, which it felt were unfounded. “Dinant takes the allegations in the report very seriously and will use all mechanisms at its disposal to defend its reputation, as well as that of its founder and executive president, Miguel Facusse, and its staff,” it said.
The company said that it would release a more in-depth analysis of CAO’s report soon, which it said would be in-keeping with the spirit of CAO's statement that: “Allegations are recognised as such and should not be confused with findings of fact."
It said it will continue to work closely with IFC and is willing to cooperate with all authorities in any investigation process.
The IFC said it had not disbursed funds to Dinant since 2009, and would not give further funding until Dinant fulfils commitments of an action plan laid out by the organisation. “Should Dinant fail to meet these commitments, IFC stands prepared to exercise all remedies available, including cancelling the loan,” it said.
The Aguán Region
In 2011 violence erupted in the Aguán region, a fertile palm oil producing region, when locals occupied land being cultivated by large privately owned agricultural firms, according to the pressure group Human Rights Watch.
The CAO report said: “In a sector and country where risks of conflict and violence around land were or should have been known to the team, CAO finds that IFC’s review was not “commensurate to risk”, and thus did not meet a key requirement of the sustainability policy.”
Responding to the criticism, IFC said it was deeply saddened by the loss of life resulting from the conflict in the Aguan Valley, and the violence that has affected all sides. “The World Bank Group continues to urge the government of Honduras, and to press Dinant, to ensure that crimes highlighted in the CAO Audit are investigated and that remedies are available where wrongdoing is found.”
Commenting on the violence, Dinant said: “The company, its owner and employees, have always publicly made a strong stand for a peaceful and final resolution of the fragile and delicate situation in the Aguán Region, with respect for the lives of all individuals and in compliance with all laws.”