When we think of roads in the Amazon Rainforest, of the destruction of forests and mistreatment of native peoples, our mind immediately and automatically associates these actions to the World Bank (IBRD) and, to a lesser extent, to the Inter-American Development Bank (IDB). It is true that for decades both multilateral banks were rightfully denounced for being major contributors towards the destruction of the Amazon Rainforest in the name of a dodgy form of development. However, today this relationship must be rethought, since the responsibility for what goes on both on the positive as on the negative side in this part of South America is shared with other financing entities that actually have a greater degree of influence than IBRD or IDB. Aside from that, the latter, however problem-ridden they might be have improved their social and environmental behavior, but the same cannot be said for these new financial actors or players.

Few are aware that the Andean Development Corporation – CAF and Brazil’s own National Bank of Social and Economical Development (BNDES) have been leaving behind traditional banks when it comes to financing in the region. Although created in 1970, CAF didn’t play a significant role in the region until the 90s, when its operations grew rapidly, which included the support of important transferences from IDB. Based on one of these operations in 1993, IDB imposed the condition of creating an environmental unit that would later become the Vice-Presidency of Sustainable Development. CAF came into being as a financial entity for Andean countries, brought together by the Cartagena Agreement but was soon added to by Argentina, Brazil, Paraguay and Uruguay turning it into a South American financing agency.

CAF approved loans of US$ 7.9 billion in 2008 and of US$ 9.2 billion last year or, in other words, much more than the World Bank did in the entire Latin America, limited at financings of US$ 4.6 and US$ 5.2 billion between 2005 and 2008. This represented more than IDB with its US$ 4.2 to US$ 7.1 billion in the same period. Just due to the economic crisis, loans from these banks were exceptionally high in 2009.

Another actor of increasing importance in the region is BNDES itself, created in 1952. Although fully Brazilian, as every year goes by, it becomes more resourceful in financing the international activities of the country’s public and private companies. In 2009, the bank forked out R$ 137 billion (some US$ 70 billion) for operations in Brazil and abroad. In other words, more than the World Bank loans throughout the world, which this year, totaled US$ 46.9 billion. In this manner, BNDES and CAF are today major financial players in the South American scenario and will be even more so in the near future.

Of course, there are other actors in the region. Aside from multilateral banks such as the World Bank, IDB and CAF and those of national development with international presence, whether regional such as BNDES or extra-regional as the well-known German bank, KFW, the Japanese JBIC, European EB, Nordic NIB or North American EXIMBANK, there are many other lesser known by the public that are private and support investments for mining, oil exploitation and any other operation that ensures clear profit, including the public-private ones. This group includes traditional banks and also financial entities from Asia, including from Korea and China.

Due to pressure from international North American and Latin NGOs and especially from public opinion of developed countries that supply the funding, the World Bank and IDB gradually changed their behavior to adopt a series of social and environmental policies that are applied with some degree of strictness and that are continually being improved upon and watched by civil society. In the last decade, both banks, especially the World Bank, avoided to take part in projects that could cause more deforesting or that could have other negative impacts on the environment.

Even so, they very carefully financed some projects in the Amazon Rainforest such as with the exploitation of gas in Camisea, in Peru (World Bank and IDB among others) and development projects in the states of Acre, in Brazil (IDB). The World Bank dedicated most of its investments towards forest conservation projects in the Amazon Rainforest. As a counterpoint, IDB, pressed by the increasing difficulty to make funds available from its abundant ‘Eighth Resources Increase’, was rash to promote the Initiative for Infrastructure Integration of South America (IIRSA) that actually was utilized mainly by CAF and BNDES. This initiative is the source of the currently more serious aggressions to the environment and Amazonian society, concentrated especially in the belt located between Brazil and neighboring Andean countries.

One of the advantages of CAF and BNDES is that they do not have so many social and environmental commitments as traditional multilateral and bilateral banks. Its precaution-free and complication-free operations appear to be cheaper and prone to be easily approved.

One of the advantages of CAF and BNDES is that they do not have so many social and environmental commitments as traditional multilateral and bilateral banks. They employ an impeccable discourse that contains all the words that foresee the proper treatment of the theme, however, in practice they do very little or always much less than they should. That being a fact, its precaution-free and complication-free operations appear to be cheaper and prone to be easily approved.

CAF governors represent the countries of the region and those of BNDES are, obviously, Brazilian. This means that differently from that which occurs with the World Bank and with IDB, there’s no one to champion the cause of the groups that are more sensitive to social and environmental issues. That is why these new financial actors do not impose any social and environmental and transparency parameters of their own, such as IDB and the World Bank do, preferring to “fully acknowledge” national sovereignty and the laws of each country, indifferent if these last are insufficient, inadequate or, even less so, if the government is institutionally incapable of complying with them.

A series of conflicts are the result of this policy, amply denounced by civil society organizations from the countries in the region, especially Ecuador and Peru. The most representative case comes from the Southern Inter-Ocean Highway, between Brazil and Peru, financed mainly by CAF with an accumulated cost of US$ 1.7 billion (the cost originally disclosed to society was of US$ 850 million), which began without any environment impact studies and without any investments to encourage the sustainable development throughout its length.

Less than US$ 20 million, most of which ill-spent, were destined to a phony social and environmental impact mitigation program. This is the same highway which will have more than 100km of its recently built length submerged by the waters of the artificial lake of the Inambari hydroelectric power plant, which will be mainly financed by BNDES. The result of this construction enterprise, as was foreseen, is causing an increase in deforesting, trespassing of native people’s territories and invasion of protected areas by lumberers and miners, encouraging illegal mining and river contamination, the explosive growth of prostitution and delinquency and so forth. The case of the Southern Inter-Ocean in Madre de Dios repeats, almost 40 years later, what the World Bank and IDB did in Rondonia and in Acre in Brazil on the other side of the border. CAF, with the exception of its discourse, seems to not have learned anything from the mistakes of its predecessors over such a long period of time. And it also doesn’t seem willing to learn anything else from now on.

Environmental NGOs, especially of the activist type, or of the lobbying variety, headquartered in Washington D.C. accompanied by their Latin American counterparts, intensely monitored the World Bank and IDB for decades. The active participation of NGOs in annual meetings and other events contributed towards successive policy and procedure revisions in both banks. NGOs for instance, had a lot to do with the creation of the famous “inspection panels” that authoritatively revise the behavior of banks with regard to the faithful application of their policies and social and environmental strategies during the implementation of projects. This constant monitoring of the main multilateral banks active in Latin America on the part of NGOs, unquestionably contributed towards the improvement of their environmental and social participation as well as with regard to the transparency of their operations. 

For this reason today, these same organizations are faced with the unusual situation of having to point out these banks, especially the World Bank, as examples to be followed by CAF and BNDES. It is true that, had IDB’s social/environmental and transparency parameters been applied, we would not be witnessing the consequences that are occurring in Madre de Dios’ stretch of that highway. BNDES used to devote much more care with social and environmental issues than it does today as it did once launch the good initiative known as the Green Protocol and anyway, is more careful with its national than with its international financings. Therefore, a first step is to demand that every time this bank finances a Brazilian company that conducts its business in countries in which prevails a weaker environmental legislation or that is devoid of an institutional capacity to meet the demands, to at least follow Brazilian standards.

Anyhow, the civil society of South America, especially of Amazonian countries, has a hard task ahead so that this infrastructure boom required by a globalised economy from this continent does not bring more damages than benefits. Concentrated attention must be paid to these new actors such as CAF and BNDES, which is no easy task to say the least. Aside from that, one must not allow surveillance over older players to grow slack, players who are permanently tempted to imitate their new competitors to maintain the volume of their operations.

The economic integration of South America is at once inevitable and a desirable need. To dedicate the necessary care towards its social and environmental implications represents a small additional cost now in order to avoid major costs to remedy the consequences in the near future. To build roads without regulating the ownership of land, without financing the agricultural and farming development, without avoiding unnecessary deforesting and without protecting the sanctuaries of biological diversity such as when building large hydroelectric power plants without caring for the basins that generate water, are all examples of collective suicide.

Marc Dourojeanni was a teacher and dean of the Forest College of the Agrarian National University of Lima, in Peru and General Forest Director for that country. Currently he is the President of the ProNaturaleza Foundation.