Compliance Advisor Ombudsman

Complaint

Agrokasa, an IFC client since 1999, is a leading Peruvian grower and exporter of fresh asparagus, table grapes, and avocados. The company operates three farms, two of which -Santa Rita and La Catalina - are located 300 km south of Lima in the Ica valley.

In June 2009, six complaints were filed by various stakeholder groups regarding the impact of Agrokasa’s operations on the Ica aquifer. Two of the complaints were signed by ground-water users’ associations - one by the Junta de Usuarios de Rio Seco, and one by the Junta de Usuarios de Aguas Subterraneas del Valle de Ica (JUASVI). One complaint was signed jointly by the NGOs Progressio and Water Witness International, but was later formally withdrawn by Progressio’s executive director. Three of the complaints requested confidentiality.

The complaints raised concerns about depletion of the aquifer due to excessive drilling throughout the valley, and question the legality of some of Agrokasa’s operations. Several of the complaints also question the licensing and permitting process for an Agrokasa water transfer project, and state that complete information about the project was not disclosed to other growers and municipalities in the region.

CAO Action

In July 2009, a CAO Ombudsman team traveled to Peru to meet with key stakeholders in Lima and Ica to conduct an assessment of the situation and assess options for resolution of the issues with the parties.

In an assessment report distributed to the parties in December 2009, the Ombudsman team identified areas of common ground shared by all the parties, and recommended they undertake a process of assisted negotiation to address the area’s critical water situation collaboratively. The Ombudsman team also identified several issues the parties were not willing to negotiate, and recommended those be transferred to CAO Compliance for appraisal.

After a period of assisted negotiation, the two ground-water users’ associations whose complaints are public launched in March 2010 a Working Group involving the other two water users’ associations (who depend primarily on surface water) and the two local water authorities from the Ica and Rio Seco sections of the valley. As a member of JUASVI, Agrokasa is participating in and supporting the Working Group’s efforts to jointly address the shared concerns regarding the water situation – including the concerns raised in the complaints.

During the CAO assessment trip in July 2009, the company announced that it planned to withdraw its request for financing of IFC project # 26821, which would have been its third IFC loan. In September 2009, Agrokasa formally notified IFC that it had cancelled the loan request.

Status

The CAO Ombudsman team continues to work with the parties and is currently serving as facilitator for the Working Group, whose aim is to jointly develop short- medium- and long-term strategies for managing the water resources in the Ica basin. Issues that the parties were not willing to negotiate were transferred to CAO Compliance in March 2010 for appraisal.

CAO's appraisal, disclosed June 2010, determined that an audit of IFC was merited on the basis that CAO finds it unclear whether IFC policy provisions have been applied properly and whether the IFC policy provisions provided an adequate level of protection. CAO will develop a Terms of Reference and conduct an audit of IFC's appraisal and monitoring of its investments in Agrokasa and Corporacion Drokasa, and whether or not IFC complied with its own policy provisions. CAO does not audit IFC's client, and will not pose any judgment on the performance of the client.