Latin America & the Caribbean
Panama / Panama Canal Expansion-01/Gatún
IFC’s Panama Canal project is designed to increase the capacity and efficiency of the Panama Canal. The project includes construction of a third set of locks, including two lock facilities with water-saving basins at the Atlantic and Pacific ends of the Canal; the deepening of the Pacific and Atlantic entrances of the Canal; and the deepening and widening of the navigational channels of the Gatún Lake, the deepening of the Culebra Cut, and the elevation of Gatún Lake’s maximum operational level. IFC’s $500 million investment (of a total $5.25 billion project costs) was approved in November 2008 and is pending disbursement. The project is Category A.
In May 2011, the CAO received letters of complaint from several local and national environmental and citizens’ rights organizations. The complainants cited concerns related to IFC’s due diligence process in assessing and approving the project and outlined specific environmental and social concerns related to community health and safety due to the dam’s site close to seismic fault lines, impacts to the marine ecology and water sources, and issues related to the relocation of communities.
CAO accepted the complaint for further assessment in July 2011 and initiated an assessment, traveling to Panama in October 2011 to explain CAO’s work to the key stakeholders and listen to their views on the issues. A complaint on the same project was also filed with the complaints mechanisms of the European Investment Bank and InterAmerican Development Bank, with whom CAO coordinated.
During the assessment process, CAO understood from community members, civil society organizations, and the company that pursuing a dispute resolution process was not an option at this point in time. In line with CAO’s Operational Guidelines, the complaint was transferred to CAO's compliance function for appraisal. The purpose of the appraisal is to determine whether or not an investigation of IFC's role in the project is merited in order to provide assurance to the President and public that IFC is complying with relevant social and environmental policies and procedures.
CAO completed the appraisal in June 2013. Having considered the complaint and conducted a review of documentation related to the investment, CAO found that the identification and management of environmental and social risks and impacts around this project has generally been commensurate to its risks and impacts. Nevertheless, CAO identified some questions on specific issues, in particular:
(a) whether IFC adequately assured itself that salinity levels at Gatun Lake would remain below the fresh water limit given the information available at the time of appraisal;
(b) upon the update of the salinity studies post commitment, whether IFC adequately assured itself that salinity levels at the Paraiso water intake station near the Pacific locks would remain below the fresh water limit;
(c) whether IFC adequately reviewed the availability of water for canal operations in the medium to long term;
(d) whether IFC adequately assured itself that ACP responded to the land related impacts of the rise in water level of Gatun Lake in accordance with the Performance Standards; and
(e) whether IFC adequately assured itself of support for the project among directly impacted communities.
These issues notwithstanding, CAO decided to close this case at appraisal. This decision was reached on the basis that: (i) the client has a well developed E&S management and monitoring systems; (ii) the issues of concern relate significantly to future risks which may or may not eventuate; (iii) these risks (should they manifest) could appropriately be addressed during supervision; and (iv) IFC has undertaken to monitor these risks in supervision. In these circumstances, CAO found limited value in conducting a compliance investigation.
CAO officially closed the case on June 26, 2013. CAO's Appraisal Report and Assessment Report are available under 'View Documents' below.
Updated: July 3, 2013
- Project Name & Number
- Panama Canal Expansion 26665
- La Autoridad del Canal de Panama
- Latin America & the Caribbean
- Environmental Category
- $500 million A Loan
- Eligible: Completed
- Assessment Period: Transferred
- Under Appraisal: Closed