The Pangue Hydroelectric Project involved a series of proposed hydroelectric dams on the upper BioBio River, Chile. In July 2002, a group of Pehuenche women lodged a complaint with CAO in relation to the following concerns:

1. Inappropriate and weak social and environmental mitigation measures; and

2. Lack of adequate compensation for those individuals affected by the project.

IFC held 2.5 percent of the equity interest in the Pangue Project from October 1993 until divestment in July 2002. As a result of various complaints lodged by local groups and NGOs at the time of dam construction, the President of the World Bank Group seconded Jay Hair, President of the International Union for the Conservation of Nature, to undertake an independent inquiry into the complaints, which became known as the Hair Report.

Despite divestment in July 2002, CAO accepted the complaint based on the fact that the complaint related directly to IFC’s role in the project over a number of years; to promises and commitments made; and to previous opinion by independent investigations and consultant reports requiring certain actions be undertaken by IFC. CAO commenced assessment in October 2002. The Assessment Report, completed in May 2003, recommended that IFC disclose the Hair Report and disseminate documents it had commissioned including emergency response plans and downstream impact studies.

In March 2006, a settlement agreement was finalized that focused on supporting and providing funds for local development capacity building. At the request of the complainants, CAO Ombudsman continued to monitor the settlement by working with local and indigenous organizations to address broader cultural impacts of the project. The CAO worked with the Mapuche University, local Pehuenche institutions, and We Monguen, an indigenous organization based in the Alto Bio Bio.