Panama: PL IV-01/Multi-locations
Lack of consultation and information about the project and its impacts, violation of indigenous peoples’ rights, impact on the livelihood of indigenous people, land displacement, destruction of biodiversity
IFC has advised Panama’s state transmission company, Empresa de Transmisión Eléctrica S.A (ETESA), to help structure and tender a public-private partnership for the financing, construction, and operation of a transmission line project, Transmission Line IV, which will run over 330 kilometers in the Atlantic coast region of Panama.
The expected cost of the transmission line is approximately US$700 million and represents the first public-private partnership for ETESA and for the electricity transmission sector in Panama. Transmission Line IV (PL IV) was initially tendered in December 2018 but not awarded as the bids received in March 2019 did not satisfy the bidding requirements. A re-tendering process is ongoing. IFC was the transaction advisor to ETESA in 2017-2018 in charge of preparing the first tender and was hired again by the new government in November 2020 for a second tender.
In June 2018, CAO received a complaint from community members with the support of local, national, and international NGOs. The complainants allege that the transmission line would lead to land displacement and destruction of biodiversity and livelihoods of the Indigenous communities in the vicinity of the project. They said that the Indigenous communities, whose territory has not been officially recognized by the Government of Panama, have not been consulted about the transmission line and its potential impacts. They also raised concerns regarding the consultation process being conducted by ETESA with the Indigenous communities of the Ňö Kribo region of the Ngäbe-Buglé indigenous territory (Comarca).
CAO found the complaint eligible for assessment in July 2018 and traveled to Panama in October 2018. During the assessment, the complainants expressed interest in engaging in a CAO dispute resolution process to resolve their concerns. However, the company indicated a preference to address the complainants’ concerns through the consultation frameworks already under way or provided for by the law. Since consensus could not be reached to engage in dispute resolution, CAO transferred the case to its compliance function for appraisal. CAO issued its assessment report in April 2019, along with IFC’s response.
CAO completed the compliance appraisal in December 2019, noting that a key requirement for an IFC Advisory Services project is to provide advice consistent with the requirements of IFC’s Performance Standards. Given the questions identified in the appraisal concerning IFC’s compliance with environmental and social standards and the potential for resulting adverse impacts on communities, CAO determined that a compliance investigation in response to the complaint was warranted. The scope of the investigation was defined in the terms of reference annexed to the appraisal report, which was released in January 2020.
CAO's investigation reviewed IFC’s advice to ETESA, particularly in relation to the process of Free, Prior, and Informed Consent (FPIC) and engagement with Indigenous Peoples. The investigation, which was finalized on March 1, 2022, found that IFC’s advice to ETESA was partially consistent with the requirements outlined in the Performance Standards. Positively, IFC has helped to move the development of the PL IV project toward alignment with Performance Standards requirements for consultation with Indigenous Peoples. However, this alignment has been incomplete, and important aspects of IFC’s advice have not been consistent with the Performance Standards.
Key shortcomings in IFC’s advice relate to: (a) the exclusion of several Indigenous communities from the FPIC process; and (b) the design of a consultation process that is insufficiently inclusive of traditional authorities, project-affected communities, and women.
In accordance with the CAO Policy, IFC submitted its Management Report, including a Management Action Plan (MAP) developed in agreement with ETESA, to the IFC Board on May 10, 2022. Both CAO and the complainants submitted separate comments on IFC’s proposed action plan to the Board. The Board approved IFC’s Management Action Plan on June 9, 2022.
The Board-approved Management Action Plan outlines areas of improvement in response to CAO's recommendations. IFC will:
- Provide ongoing advice to ETESA to carry out the Environmental and Social Impact Assessment (ESIA) and the FPIC process in accordance with IFC’s Performance Standards.
- Provide ongoing advice to ETESA on necessary measures to align the ongoing stakeholder engagement process for the project with the requirements of Performance Standard 1 on Assessment and Management of Environmental and Social Risks and Impacts (PS1) and Performance Standard 7 on Indigenous Peoples (PS7).
- Advise ETESA to identify and undertake an engagement process with all impacted Indigenous Peoples that is consistent with IFC’s Performance Standards.
- Hold a workshop with ETESA and its selected environmental and social consultant to explain in more detail the requirements of Performance Standards to be used in the ESIA.
In addition to the actions included in the MAP, Board approval was granted based on IFC’s commitment to include the following points in their reporting on the implementation of the MAP so that CAO can monitor them:
- Reviewing the various outputs of the ESIA process, starting with the consultant’s work plan, to provide recommendations on closing Performance Standard gaps, including recommending supplemental consultant expertise and/or resources as necessary to carry out the ESIA in accordance with the Performance Standards and achieve FPIC;
- Continuing to advise ETESA and its consultant on stakeholder engagement and FPIC (beyond the initial two-day workshop), particularly reviewing the design documentation for, and outputs of, the FPIC process for consistency with the Performance Standards.
- Updating CAO on actions being taken to address systemic recommendations from the investigation report that will develop guidance for staff on IFC's role when providing advice on projects with environmental and social risks or impacts, such as FPIC or land acquisition, that emerge during the course of an IFC Advisory Services engagement.
IFC management continues to implement the action plan and the above actions and report progress to CAO and the Board every six months. According to its policy, CAO is monitoring the effective implementation of the action plan, and all agreed actions as set out above. The first Management Progress Report on the implementation of the Management Action Plan (MAP) was published on January 05, 2023. See joint IFC-CAO press release issued on June 10, 2022.
On May 9, 2023, CAO completed a monitoring exercise in relation to this case. The report recognizes that IFC has completed some actions outlined in the MAP and additional items approved by the Board. However, CAO notes that the client continues with the project in a manner not consistent with IFC’s advice or its obligation under its agreement with the institution and that additional measures should be taken to ensure compliance with IFC Performance Standards.
An omnibus monitoring report is available in the “Case Document” section below, detailing more information about the project-level actions taken by IFC.
CAO continues to monitor the effective implementation of the actions set out in IFC’s Management Action Plan, based on CAO Policy.
Status as of May 25, 2023.