CAO Cases

Arne Hoel, The World Bank

Latin America & the Caribbean

Peru / Quellaveco-01/Moquegua

Complainant
Local NGO and local water users association
Date Filed
November 26, 2011
Concerns
Water quality and quantity, pollution control, community health & safety, EIA, community consultation and information disclosure
Case Status
Closed
 

Synopsis

Complaint

 

Currently in the pre-construction stage, Quellaveco is a large scale copper mining concession located in the Department of Moquegua in southeastern Peru. The concession was nationalized in the 1960s, and was the first copper prospect to be privatized in 1993. That same year, the IFC Board approved an equity investment in Anglo American Quellaveco for the acquisition and feasibility work of the mining company, comprising a 20 percent equity stake in the company. By 2011, IFC maintained an 18 percent equity stake, which was sold in February 2012.

 

In November 2011, the CAO received a complaint from a local environmental NGO raising concerns about the mine’s anticipated impacts on local populations and the environment. As part of its eligibility screening, the CAO requested documentation verifying the participation of project-affected groups, which was received in March 2012. At this point, CAO accepted the complaint, informed all stakeholders, and started its assessment process. Collectively, the complainants raise concerns regarding impacts to water quality and quantity in an arid area characterized by rising competition over water sources. The complaint also questions the proposed handling of toxic wastes and the impact this could have on communities’ health. Other issues in the complaint reference IFC’s due diligence including the quality of the EIA, community consultation and disclosure of project information.

 

 

CAO Action

 

The CAO found the complaint eligible in March 2012, and a CAO team conducted an assessment to explore options for resolution with the relevant parties. CAO's assessment does not entail a judgment on the merits of the complaint. Rather, the aim is to listen to people's concerns, understand the different perspectives, and gauge whether it is possible to address the concerns in a collaborative process.

 

Following the assessment, a collaborative resolution to the complaint was not found to be possible and CAO released a final assessment report. In accordance with CAO’s Operational Guidelines, the case was transferred to CAO Compliance in December 2012 to ascertain whether there were any outstanding concerns regarding IFC’s compliance with applicable requirements.

 

CAO completed the compliance appraisal on May 15 2013, concluding that a review of certain aspects of this project was warranted. CAO’s investigation focused on the effectiveness of IFC’s policies and procedures in the context of this project, in particular with regard to project categorization, rights issues, and divestment.

 

CAO released its compliance investigation report and IFC’s response in September 2014.

CAO’s investigation finds that IFC’s 1993 investment agreement with the Company omitted IFC’s E&S requirements, which made effective supervision of the project difficult. Nevertheless, CAO notes that IFC supervised the project with reference to its evolving E&S standards and policies, which represented good practice. However, key issues identified during supervision were not translated into corrective action plans which would have been of particular relevance in relation to resettlement, the impact of land acquisition on Indigenous people, stakeholder engagement, and the more technical elements of project design and environmental impact assessment.

 

- With regard to project categorization, IFC assigned this investment Category B (limited E&S risk). CAO finds the project would properly have been categorized A (significant E&S risk) given the magnitude of the potential impacts of the proposed mine; IFC’s view that it had a high likelihood of moving to development within a relatively short period of time; and the potential E&S impacts of the project in the pre-development phase, particularly on Indigenous People.

 

- With regard to additional financing, CAO finds that IFC complied with relevant operational procedures. CAO, however, also notes significant risks involved in providing additional finance to a project that has inadequate or outdated E&S obligations, or where there is evidence of non-compliance with existing E&S obligations. In this context, CAO finds that IFC’s procedures for processing rights issues are inconsistent with its E&S commitments as articulated in its Sustainability Framework.

 

- Prior to divestment, IFC’s Operational Procedures require an analysis of whether the investment’s purpose has been “substantially fulfilled”. In circumstances where IFC’s additionally is framed in terms of E&S issues, as was the case in relation to Quellaveco, this requires an analysis of E&S achievements and future risks. CAO finds no evidence that such analysis informed IFC’s decision to divest from the company.

 

IFC has issued a formal response to CAO’s investigation, and CAO monitors IFC’s actions in response to the investigation findings.

 

CAO released its first monitoring report in October 2015. CAO notes that, during the period covered by this monitoring report, IFC has not reported any action that addresses CAO’s project level findings. IFC has, however, reported several steps that are being taken to address CAO’s findings at the level of policy, procedures, practice or knowledge, in relation to IFC’s approach to categorization of early equity mining projects, its procedures for providing additional financing, and its decision making process around divestment and E&S considerations.

 

CAO released its second monitoring report in March 2017. Overall, CAO's report concludes that IFC’s response has not substantially addressed the investigation findings. Nevertheless, CAO has decided to close its monitoring of this investigation considering the time that has passed since IFC’s divestment from the project, and IFC’s decision not to engage in a project level response with its former client or the affected communities.


 

Status

 

In March 2017, CAO released its second monitoring report, and has decided to close the case. The monitoring report and IFC's response are available in "View Documents" below.


 

Status as of March 24, 2017

Project information

Institution
IFC
Project Name & Number
Quellaveco 3823
Department
Oil, Gas, Mining, & Chemicals
Company
Anglo American Quellaveco S.A.
Sector
Mining
Region
Latin America & the Caribbean
Country
Peru
Environmental Category
B
Commitment
$60 million equity (currently divested)

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Transferred

Compliance

  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: Closed