The World Bank Inspection Panel, a legal appeal mechanism recently created to investigate omissions and mistakes of the largest financial institution world-wide, will receive tomorrow the first claim ever from Latin America, regarding a US$ 167m loan to the State Government of Rondonia, in the Western Brazilian Amazon. The project which is being challenged, Planafloro, was aimed at providing remedial action following the disastrous social and environmental consequences of a previous loan, Polonoroeste, in the early '80s. Twenty-five organizations representing rural communities and forest dwellers, environment and development NGOs, including those forming the Rondonia NGO Forum and the Amazonia Program of Friends of the Earth, sent today a claim to the Inspection Panel, alleging serious violations of the World Bank's policies and procedures.

According to the claimants, the World Bank neglected the implementation of several provisions included in the loan and project agreements signed with the Governments of Brazil and Rondonia, as well as of its own sectoral policies and directives on Forests, Wildlife, Indigenous Peoples, Involvement of NGOs, Project Supervision, Project Monitoring and Evaluation, Procurement and Suspension of Disbursement.

NGOs declared that it took over six months, analyzing 14,000 pages of documents, to draft the text of the claim, which is over 80 pages long, with 200 pages of supporting documents. According to Luis Rodrigues, secretary of the Rondonia Forum, "local communities have tried, since the very beginning of the negotiation, to alert Bank's staff and management about the likely failure of the project", which had a significant component aimed at environmental recovery. In the claim, even a letter signed by the rubber tappers' leader Chico Mendes, few weeks before his assassination in 1988, is quoted, as evidence of the early efforts made by the NGO community to prevent those problems that would have risen later. In the letter, it was explained how the lack of involvement of the local beneficiaries was likely to generate the failure of Planafloro.

The claim does not only point at the environmental and social damages caused by the lack of respect for the World Bank's policies and procedures. A number of cases of mismanagement and violations of administrative rules are also described. Confidential Bank memoranda are quoted, where Bank staff discuss how "to avoid embarrassment" to World Bank headquarters while allowing the former Governor of Rondonia to "obtain political return before the elections" out of the money from Planafloro. Another internal document, signed by World Bank Vicepresident for Latin America Shahid J. Burki and addressed to the Board of the Executive Directors, clearly downplays serious cases of mismanagement recorded in an evaluation report. According to Roberto Smeraldi, coordinator of Friends of the Earth's Amazonia Program, the claim is a "decisive test for the effectiveness of the Bank's institutional reforms". "The new President, who took over a few days ago, put emphasis on the need of giving priority to the reforms. The Inspection Panel is the main example of such reforms so far, therefore we hope the Executive Directors will not oppose the Panel investigation". . The Inspection Panel was created in August 1994, as a result of both pressure from citizen's groups and an internal Bank report which showed declining Bank capacity to ensure quality in project implementation. Three highly respected individuals were appointed as members of the Panel for a five-year mandate. They will have now to obtain the authorization of the Bank's Board of Directors before starting an investigation on Planafloro.

FOR FURTHER DETAILS ON THE CONTENTS OF THE CLAIM AND THE INSPECTION PANEL, PLEASE LOOK AT THE ATTACHED SUMMARY.

CONTACT:

RONDONIA NGO FORUM
Phone/Fax: (55-69)223-1116
Email: forumro@ax.apc.org

AMAZONIA PROGRAM - FRIENDS OF THE EARTH
Phones: (55-11)887-8228 and 887-9369 Fax: (55-11)884-2795
Email: foeamazonia@ax.apc.org

BRIEFING PAPER

The following summary is about the claim addressed to the World Bank Inspection Panel by 25 organisations on June 13, 1995, asking to investigate the Rondonia Agricultural, Livestock and Forestry Project (Planafloro).

1. The World Bank Inspection Panel

The Inspection Panel is an independent body established by the Board of the Executive Directors of the World Bank in 1994. Three highly qualified individuals were appointed as members of the Panel, which is chaired by the former President of the European Investment Bank, Ernst Gunther Broder.

The Panel was created with the aim of offering an independent legal mechanism to individuals and organizations whose interests are adversely affected by projects financed by the Bank. Through such mechanism, they can ask that an investigation is conducted, so as to correct mistakes and ensure that the Bank enforces its own policies and operational directives. The Panel forwards its recommendations to the Board of the Executive Directors, which makes a final decision.

2. The Claim on Planafloro.

25 non-profit organisations representing small farmers, rubber tappers, indigenous communities, local rural unions, groups involved in the defense of the environment and human rights submitted a request for investigation to the Inspection Panel about the Planafloro project. Previously, only one claim had been forwarded to the Panel, about the projected Arun dam in Nepal. The claim on Planafloro is therefore the first one from Latin America and also about any project already under implementation phase. The claim is over 80 pages long, with 200 pages of supporting documents.

With an initial budget of US$ 228.9 million, including a US$ 167 million loan from the World Bank (Loan # 3444-BR), the Planafloro project intends to correct those serious problems occurred during the implementation of its predecessor, the Northwest Brazil Integrated Development Program (Polonoroeste). The admission of the failure of Polonoroeste by the former President of the World Bank Barber Conable, in 1987, paved the way to the environmental reforms within the Bank. The basic objective of the Planafloro project is to promote a new model of sustainable development in the State of Rondonia, through a series of initiatives for the protection and management of natual resources, such as socio-economic and ecological zoning, promotion of agroforestry systems, recovery of degraded lands, environmental protection, creation and management of extractive reserves and other conservation units, sustained forest management, environmental education and support to indigenous communities.

Nothwithstanding the importance of Planafloro's general objectives, the actual implementation of the project, since the first disbursements by the Bank in June 1993, has been hindered by a series of impediments, largely caused by omissions of the World Bank and failures in enforcing the contractual agreements and implementing its own sectoral policies and operational directives, including: Project Preparation, Project Supervision, Forest Policy, Wildlands Policy, Directives on Indigenous Peoples, Collaboration with NGOs, Project Monitoring and Evaluation, Procurement, Suspension of Disbursement.

The main issues on which an investigation is requested include public policies and institutional reforms, land tenure policy, zoning and state conservation units, environmental control and protection, investment and media programs, support to indigenous communities and project administration. Each of these issues was analyzed from the following perspectives: (i) planned actions in Planafloro; (ii) evidence of mistakes and malpractices; (iii) attempts to alert the World Bank; (iv) omissions of the World Bank; (v) adverse impact on local populations.

3. Main Failures and Omissions

3.1 Lack of enforcement of legally agreed reforms in public policies and establishement of legal agreements between the various executing agencies of Planafloro, especially in relation to land tenure policies, environmental control, socio-economic and ecological zoning, state conservation units and fiscal incentives; in particular, it was stressed how the Bank has violated its own policies about Forestry and Wildlife. This is confirmed by the lack of establishment, so far, of the agreement between the State of Rondonia and INCRA (the National Institute for Colonization and Agrarian Reform) about land titling, which is the main cause for illegal settling and depletion of natural resources in Rondonia. Several cases of settlement of colonists in conservation units by INCRA led local producers to lose hundreds of thousands of hectares of land of legally established extractive reserves. In addition, the use of irregular land titles issued by INCRA for further illegal activities is frequent, such as concessions for logging and burning in protected areas.

3.2 Failure to adopt adequate provisions and corrective measures, in accordance with the operational rules of the Bank, in relation to the serious lack of technical capacity of those bodies in charge of executing Planafloro, including various state and federal agencies.

3. 3 In the activity of supervision, the lack of enforcement by the World Bank in ensuring implementation by government agencies of various actions outlined in the staff appraisal report, loan agreements and Aide Memoires from previous supervision missions. Such practices contrast with the Bank's operational directives on project supervision and, in some cases, suspension of disbursement. Finally, crucial and substantial information on several controversial components of the project was deliberately omitted to the Executive Directors.

3.4 The lack of orientation and enforcement, on the part of the World Bank, of activities in monitoring and evaluation that were anticipated in the official documents of Planafloro, also in contrast to the operational directive on project monitoring and evaluation.

3.5 The failure in guaranteeing a flux of up-to-date and accurate information on project progress in Planafloro between operational staff and the Executive Directors of the World Bank, in contrast to the operational directive on project supervision and other internal procedures, including the recommendations of the "Wapenhans Report".

3.6 The particularly serious omissions of the World Bank in the design and implementation of the component "Support for Indigenous Communities" of Planafloro, in relation to the extremely strict operational directive of the Bank itself as well as to the contractua agreements of Planafloro, focused on land demarcation and health. In this area, it must be noted that severe adverse impacts have been observed among the already depleted local ethnic groups.

3.7 The continued, deliberate and alarming lack of implementation of World Bank procedures in the activities of procurement, with an immediate effect on the overall project since it blocked any progress in the key project component of zoning. Rules on the use of consultants, as well as on the carrying out of an independent audit of annual project expenses, as defined in the contractual agreements, were also violated.

3.8 The omission of the World Bank with regard to the implementation of measures to ensure the effective participation of the public, as defined in the operational directive on involvement of NGOs in Bank-supported activities.

3.9 The failure in the implementation of the Investment and Media programs defined in the contactual agreements of Planafloro, also resulting in the opening of new roads in conservation units, without respect for the socio-ecological-economic zoning and in advertising campaigns openly estimulating migration to Rondonia, contrary to what established by the project. Eventually, examples were mentioned of concessional loans through the Bank of Amazonia and the Constitutional Fund for the North for cattle-ranching projects in land irregularly titled by INCRA.

The claim is concluded with a series of considerations aimed at asking to the Panel and to the Executive Directors to reognize the need to investigate the reasons which led the Bank to these omissions with the resulting damage to the local populations and environment, as well as to the Brazilian citizens in general. The investigation, it is stressed, would greatly contribute to the solution of the ongoing problems in the execution of Planafloro and, more importantly, to avoiding the repetition of similar problems in other projects supported by the Bank.

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