The Inter-American Development Bank’s accountability mechanism officially closed its case on the Alto Maipo Hydroelectric Project after a flawed investigation and an ineffective action plan left communities with little to show for their years-long pursuit of accountability.
At the end of November, the accountability mechanism of the Inter-American Development Bank (IDB) officially closed its case on the Alto Maipo Hydroelectric Project in Chile. The closure of this complaint marks the formal end of a nearly six-year struggle by affected communities to pursue justice from the IDB for its role in financing and facilitating the construction of Alto Maipo, which has had devastating consequences for local communities and the environment. The Center for International Environmental Law (CIEL) has supported Chilean communities in their advocacy since 2015. In closing the case, the IDB’s Independent Consultation and Investigation Mechanism (MICI) issued its final monitoring report, which underscored the bank’s failures, documented reprisals against community members, and offered a series of recommendations for the bank to improve its response in the future.
Filed in 2017, the Alto Maipo case was the first complaint of this magnitude to be brought to the IDB’s reformed accountability mechanism. The complaint highlighted how the massive hydroelectric project has exacerbated water scarcity in a drought-stricken region, causing irreversible damage to farming, ecotourism, and the environment. In addition to diverting the Maipo River and its tributaries, Alto Maipo also damaged nearby aquifers and surrounding glaciers. The entire watershed has been affected by the project, risking access to water not only for residents of the Maipo region but also for the millions of people in the Santiago metropolitan area who depend on the Maipo for water.
Communities Organized Against Alto Maipo for Years
Since Alto Maipo’s inception in 2007, affected community members have organized in opposition to the project’s foreseeable adverse consequences. In particular, Chilean organizations Ecosistemas and the Coordinadora Ciudadana No Alto Maipo (CCNAM) have been engaged in a struggle that has taken them to multiple international fora to highlight Alto Maipo’s environmental and social harms with the goal of halting this devastating project. From the outset, their advocacy focused on the risks of tunneling through the Andes mountains to divert rivers, asserting that initial tunneling and construction errors foreshadowed the project’s eventual failure. This failure became a reality at the end of 2022, when a tunnel incident halted operations at the Las Lajas power plant.
The MICI’s Investigation Was Inherently Flawed
When the MICI issued its investigation report in 2020, it found that the IDB had breached its own policies on numerous occasions due to a lack of oversight, monitoring, and due diligence with regard to its client, energy company AES Gener. In particular, the MICI identified that the IDB had failed to:
- ensure proper assessment of gender-differentiated impacts resulting from the high influx of construction workers into the region;
- accurately evaluate the project’s impacts on recreational uses of the river, despite the fact that the main economic activities in the area are water sports and tourism; and
- assess the project’s impact on cattle drivers’ traditional activities.
The MICI also identified other breaches, including failures to conduct adequate consultations with project-affected people.
However, the MICI neglected to consider environmental issues that were central to communities’ claims in this case, such as access to water, changes to existing river flows, and risks to potable water sources for communities. As a result, the MICI’s investigation and subsequent recommendations were deeply flawed. These omissions occurred due to an arcane provision in the MICI’s policies, known as the “legal exclusion clause.” The application of the clause in this case resulted in the project’s impacts on vital water sources and the environment being left out of the investigation altogether because they were already the subject of domestic litigation in Chile.
The IDB Group Failed to Set a Strong Precedent for Accountability
The Alto Maipo case put the IDB Group’s accountability system to the test. Unfortunately, the system failed the affected communities in Chile. Because the MICI’s investigation omitted the crucial aspects of Alto Maipo’s impacts on water sources and the environment, it was inevitable that the IDB’s resulting Action Plan — which should ideally serve to address such impacts — would be ineffectual. Even though the MICI continued to monitor and report on the implementation of this Action Plan in the years that followed, the process was so deeply flawed from the outset that the exercise was rendered hollow, leaving affected communities with nothing concrete to show for their efforts.
Nevertheless, it is important to note that this case was the catalyst that finally led to the removal of the legal exclusion clause — a major change that will have positive ramifications for communities who file cases with the MICI in the future. Similarly, the case led to the adoption of a policy of zero tolerance for gender-based violence at the IDB. Unfortunately, such forward-looking improvements have not been accompanied by the necessary actions to address the harms to Chilean communities that have already been caused by the Alto Maipo project.
The Bank Exited Without Proper Provisions to Ensure Remedy
Complicating matters further, the fact that the IDB had exited the Alto Maipo project by early 2022 greatly diminished the prospects of the bank taking action to resolve or address the ongoing environmental and social harms. CIEL has witnessed a trend of development finance institutions (DFIs) leaving problematic projects; for this reason, we have been a part of ongoing advocacy with the IDB and other development banks to create procedures and policies to inform and involve communities in order to ensure that decisions about exiting such projects are taken responsibly.
The MICI reiterated this recommendation in its final monitoring report in November by emphasizing the need for the IDB Group to develop and implement guidelines regarding the different ways the bank can exit a project, while ensuring that the decisions to exit are based on the principles of responsibility and doing good beyond doing no harm.
DFIs Must Make Significant Reforms to Fulfill Their Mandate
DFIs are mandated to create opportunities to improve people’s lives with the goal of eliminating poverty. But too often, the projects they finance end up harming those most in need. For decades, CIEL and civil society partners have advocated for strong environmental and social safeguards and effective accountability systems at DFIs worldwide. Today, there is growing recognition in the international community that when DFIs contribute to harm to communities or the environment, they should contribute to remedying these harms.
The Alto Maipo case clearly demonstrates that the IDB needs to urgently develop and implement policies to provide remedy to communities harmed by its projects. The MICI recognized this need in its final report on the Alto Maipo case, in which it emphasized that actions taken in response to accountability mechanisms’ findings should serve to repair harm when necessary.
The Alto Maipo Case Is Setting the Stage for Systemic Changes at the IDB
The Alto Maipo case is a landmark in the fight for effective accountability within the IDB. Although justice was not served for communities affected by Alto Maipo, this case has already led to important policy and system changes at the IDB, such as the removal of the legal exclusion clause and the adoption of a policy of zero tolerance for gender-based violence at the IDB, both of which will benefit communities who are affected by IDB-financed projects in the future. At the same time, this case sounds a clarion call for DFIs — including the IDB — to urgently take action to ensure that when communities are harmed by their projects, remedy is guaranteed.
In the coming weeks, the International Finance Corporation (IFC), where our Chilean partners filed a parallel complaint on Alto Maipo with the Compliance Advisor Ombudsman, is poised to release a framework on remedial action that could set a standard for development finance institutions around the world to follow. If DFIs choose to learn the lessons from the emblematic Alto Maipo case, the failed outcome for project-affected communities could serve as a watershed moment that ushers in changes to finally ensure that from now on, when institutions finance projects that cause harm, they will contribute to remedying those harms.
Published December 2022.