Private Sector


IFC investments through financial intermediaries linked to human rights abuses in Honduras, again

5 April 2016

Graffiti remembrance of Berta Cáceres in London

Graffiti remembrance of Berta Cáceres in London

In October 2015 a Honduran indigenous Garifuna community, with support of local NGO the Black Fraternal Organisation of Honduras (OFRANEH), lodged a complaint with the Compliance Advisor Ombudsman (CAO), the accountability mechanism of the International Finance Corporation (IFC, the World Bank’s private sector arm). The complaint alleged a number of breaches stemming from the Tela Bay Tourism development project in Indura, including “land grabbing, community displacement, lack of economic benefits and environmental degradation”. The CAO found the complaint eligible for further assessment in December and is currently assessing the case further. One of the project’s financiers is Banco Ficohsa, Honduras’ third largest bank, in which the IFC has made several investments since 2008, including trade finance, housing and SME loans as well as an equity investment in May 2011. The IFC’s investments through financial intermediaries (FIs) have been repeatedly criticised by the CAO and NGOs claiming that the IFC is unable to determine the development impact of the investments and to ensure they do no harm (see Observer Spring 2015, Winter 2015, and  Spring 2014).

In the complaint OFRANEH sets out the deleterious impact of World Bank involvement in Honduras since the 90s in promoting the “restructuring of land registration systems and cadastre through [development] programmes that affect the rights of Garifuna communities”. OFRANEH concluded “that a set of World Bank projects promoted massive encroachment of Garifunas’ land on the north coast, facilitating illegal [land] titles to third parties of ancestral Garifunas’ land and the IFC financed investments in private sector projects built on this stolen land.” It requested that the CAO investigate the IFC investment in Ficohsa and undertake a “broader review of the World Bank policies and practices that have contributed to the dispossession of large-scale land in Honduras and in particular the Garifunas communities”.

Repeated human rights concerns, same suspects

This is not the first time that the IFC’s investments in Ficohsa have come under scrutiny by the CAO. In August 2013 the CAO initiated a compliance appraisal, triggered by Ficohsa’s significant exposure to Corporación Dinant, a controversial palm oil producer in Honduras, also subject to a CAO audit that was initiated in 2012 due to allegations of human rights violations (see Observer Winter 2014, Bulletin Aug 2014, Update 86).  In January 2016 the CAO released its monitoring report of the Ficohsa investigation, citing repeated concerns about IFC’s management of environmental and social risk in relation to Ficohsa’s lending to Dinant. The CAO concluded that “to date IFC has not assured itself that Ficohsa’s ongoing financing for Dinant is contingent on binding commitments to implement the performance standards, either through its loan agreements or the environmental and social action plan.” The CAO will continue to monitor the IFC’s supervision of Ficohsa and aims to release a follow up monitoring report no later than December 2016.

World Bank projects promoted massive encroachment of Garifunas’ land…, facilitating illegal [land] titles… and the IFC financed investments in private sector projects built on this stolen land.OFRANEH complaint letter to CAO

Honduran activists murdered

In early March Berta Cáceres, leader of Honduran NGO the National Council of Popular and Indigenous Organisations of Honduras (COPINH), was murdered. Cáceres had led the peaceful opposition to the construction of the Agua Zarca dam, arguing it would destroy local indigenous Lenca communities’ farmland and limit their access to drinking water, and received continuous threats, harassment and persecution by the state and others. In October 2013 COPINH registered a complaint with the CAO concerning the Agua Zarca hydropower project, carried out by the company DESA, following the killing of an indigenous protestor, allegedly by the army and the building company, and intimidation of activists and local communities opposing the project (see Bulletin  Dec 2013, Observer Autumn 2013). However, the case did not come to conclusion, as CAMIF, IFC’s client, pulled out its investment in DESA and the Agua Zarca project. CAMIF’s withdrawal was followed by China’s Sinhydro, which cited publicly that its withdrawal was due to conflicts between the company and communities.

Following Cáceres’ murder numerous CSOs, such as COPINH, and  Both ENDS, called on all investors to pull out of the Agua Zarca project and do everything in their power to stop the violence and intimidation against activists. The Netherlands Development Finance Company (FMO) and the Finnish Finnfund suspended their support for the project one day after Nelson García of COPINH was also shot and killed in late March. On the website ‘Justice for Berta’, her children and COPINH demand “immediate cancellation of the Agua Zarca project, justice for the Berta’s murder, an end to the persecution of the Lenca community and justice for projects that threaten the environment and the lives of indigenous communities in Honduras”.

Killings of environmental activists a global trend

In April 2015 Global Witness, a UK based NGO, argued in its report How many more? that 2014 saw an increase in the killings of environmental activists. At least 116 environmental activists worldwide were killed, 40 per cent of which were from indigenous communities, with most working against hydropower, mining and agribusiness projects. The report described Honduras as “the most dangerous country to be an environmental defender” and “emblematic of the systematic targeting of defenders”. Three-quarters took place in Latin America, with South Asia the second-deadliest region. Victoria Tauli-Corpuz, UN special rapporteur on the rights of indigenous peoples, urged governments to give protection to environmental defenders. In March she told Climate Home, a global news agency: “The pattern of killings in many countries is becoming an epidemic definitely.” Tauli-Corpuz called for recognition of land rights and a robust legal system to prosecute perpetrators.

In late March the UN Human Rights Council approved a new resolution on the protection of human rights defenders addressing economic, social and cultural rights. An earlier draft version included a paragraph highlighting the human rights obligations of international financial institutions. This paragraph was removed in the final version due to calls for removal from the EU, China and Canada.