Colombian labor unions, with the support of global trade unions
Labor standards, rights of free association, due diligence
$ 50 million corporate loan
Aerovias del Continente Americano S.A. (Avianca) is a commercial airline based in Colombia providing air transportation services to domestic and international destinations. Avianca plans to renew its fleet over the period 2008-2012 to reduce costs, improve efficiency and safety as well as provide better passenger service. The company has negotiated the purchase of 42 aircraft over this period to achieve these goals. The IFC will provide a $50 million corporate loan to the company and its subsidiaries to help finance the implementation of the company’s fleet renewal program.
In November 2011, a complaint was submitted to the CAO by the International Trade Union Confederation/Global Unions Washington Office with supported by the International Transport Workers’ Federation as well as the AFL-CIO Solidarity Center on behalf of three Colombian labor unions representing Avianca civil aviation and airline workers.
The complainants raise various concerns related to labor rights violations at Avianca, as well as violations surrounding the right of free association. The complaint also articulates issues regarding IFC’s due diligence on the project, particularly as it pertains to performance standards on labor and working conditions.
The CAO found the complaint eligible for further assessment in December 2011 and a CAO team traveled to the field in February 2012 to meet with the relevant parties to discuss available options for addressing the issues raised in the complaint.
During the assessment process, the CAO understood from the company that pursuing a dispute resolution process was not an option at this point in time. Given the voluntary nature of a dispute resolution process, the CAO team finalized its assessment report and concluded its involvement in the case. The assessment report is available at the below links in English and Spanish.
As per CAO's Operational Guidelines, the case was formally referred to compliance for appraisal on June 19, 2013. An appraisal determines whether or not an audit/investigation of IFC’s role in the project is merited to provide assurance to the President and public that IFC is complying with relevant policies and procedures.
CAO completed the appraisal in January 2014. Having held discussions with the IFC team and reviewed relevant documentation, CAO had questions as to the extent of implementation of IFC’s policies and procedures, and concluded that a compliance investigation of IFC in relation to this investment was merited.
The CAO compliance investigation was made public on May 18, 2015. Key findings from the investigation include:
- E&S Review
In relation to the pre-commitment phase of the project cycle, CAO finds that IFC did not adequately understand the PS2 risk attached to this investment prior to commitment. In particular CAO finds that IFC’s pre-investment E&S Review did not ensure that its client had conducted an integrated process of E&S Assessment that covered “all relevant E&S risks and impacts of the project” including PS2 issues “and those who are likely to be affected by such risks and impacts” as required by PS1. Rather, in response to concerns being raised by unions a separate Labor Assessment was proposed as a condition of disbursement.
CAO finds that IFC did not give appropriate consideration to the adequacy of the initial Labor Assessment required from the client as a condition of disbursement. As a result the basis for IFC’s engagement with its client around PS2 issues was significantly weakened. CAO finds that IFC’s decision to disburse US$35 million to the client in July 2009 was made without sufficient basis to meet the requirement of the 2006 Sustainability Policy that “IFC does not finance new business activity that cannot be expected to meet the Performance Standards over a reasonable period of time” (para. 17).
- General Supervision
CAO finds that the IFC team responded to PS2 concerns by requiring a series of Labor Assessments and negotiating corresponding action plans with its client. As part of this process, the IFC team identified compliance issues and as required under the Sustainability Policy “worked with the client to bring it back into compliance”. Weaknesses in supervision, however, meant that IFC staff struggled to understand the Freedom of Association issues raised by the complainants at the level of detail needed to ensure that they were being adequately addressed. As a result, CAO finds that IFC did not develop and retain the information needed to assess the status of its client’s compliance with the Performance Standards (PSs) as required by its project supervision procedures. Of broader importance, CAO notes that IFC’s policies and procedures provide staff with limited guidance on how to respond to complaints regarding a client’s E&S performance.
- Disclosure and Consultation
In relation to its own disclosure duties, CAO finds IFC to have met then current policy requirements. On the other hand, CAO finds non-compliance in relation to IFC’s supervision of its client’s consultation and disclosure requirements under PS1. In CAO’s view, these shortcomings in IFC’s supervision of its client’s consultation and disclosure requirements were significant in that they contributed to the difficulties that IFC had in assessing the status of its client’s compliance with the substantive requirements of PS2.
- Adequacy of IFC policies, procedures and staffing structures
CAO observes limitations with regard to: (a) the depth and expertise of IFC E&S staff in relation to PS2 issues; (b) IFC’s methodology in relation to pre-investment review of PS2 issues; and (c) the leverage, tools and resources that the IFC team working project had to address the PS2 issues with its client during supervision.
CAO completed a monitoring report in relation to this investigation in May 2017. Overall CAO found that IFC’s response to the compliance investigation had only partially addressed its compliance findings. Nevertheless, CAO decided to close its monitoring of the investigation considering the time that had passed since the client’s repayment of the IFC loan, and IFC’s decision not to engage in a project level response with its former client or the complainants. Findings from CAO’s investigation that require a response at the level of IFC’s policies, procedures and practices may be addressed through CAO’s ongoing compliance and advisory work.
CAO released a monitoring report in May 2017, and closed the case. A Spanish version of the monitoring report will be available in due course.
CAO's Investigation Report is available in English and Spanish, together with IFC's Response, as well as CAO's Monitoring Report, under 'View Documents' below.
Status as of May 16, 2017