Politics of Poverty

Top development donor to Latin America failing on environmental sustainability

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Independent panel slams Inter-American Development Bank

As the largest source of development financing for countries in Latin America and the Caribbean, the Inter-American Development Bank (IDB) represents significant opportunity for the region’s poor. However, a recently released report by an independent panel of experts on environmental sustainability found that the IDB is missing critical opportunities to integrate environmental sustainability into its project planning. This represents a particularly worrisome oversight in countries like Peru, where uncoordinated and haphazard development already present a major threat to the environment and local communities.

The IDB’s mission is to eliminate poverty and inequality and promote sustainable economic growth, so the impact of its projects on environmental sustainability should be a central concern. Yet the Independent Advisory Group on Sustainability, the independent expert panel which authored the report mentioned above, found that the IDB’s integration of environmental issues into its Country Strategies has been “notably inconsistent” and that “there is a fundamental disconnect between the Country Strategies and the Country Environmental Assessments”. The report also notes that the IDB needs to incorporate a more consistent and deeper focus on environmental governance.

Peru, a country which receives loans from public international financial institutions (IFIs) like the IDB and World Bank, provides an illustration of what happens when development projects steamroll ahead without centralized planning that recognizes sustainability concerns. IFIs have given the Peruvian government loans to support public private sector investments in extractive industries, governance, decentralization, public expenditure reforms, infrastructure, and environmental management in Peru. However, despite these investments, Peru continues to face challenges in reconciling the prevailing development model with persistent poverty, inequality, and social conflict.

Two reports released last year – one an Oxfam America, Bank Information Center, and World Resources Institute report and the other a study by Peruvian forestry expert Marc Dourojeanni – highlighted major concerns regarding Peru’s approach to development investment. The studies revealed evidence of insufficient strategic planning and coordination of development projects both at the national and sub-national level, as well as inadequate participation of affected populations in decision-making around these projects.

According to Marc Dourojeanni, most worrisome is the lack of coordination of development projects at the national level. For example, he notes that 60% of the roads in Peru are built by local governments and not registered. In one case, the Peruvian government is building a massive inter-oceanic highway, but at the same time planning a major hydroelectric dam (Iñambari) which would result in flooding part of this highway. In a case Oxfam has worked on in Peru’s Piura region, although the Peruvian government and World Bank have invested more than $670 million in Piura’s agricultural development, a Chinese mining company is proposing a massive open pit copper mine. This would impact areas used to produce coffee and other products, as well as the headwaters used for irrigation and domestic use. Watch the video for more details on life in Piura.

Dourojeanni’s study, which reviewed projects proposed for the Peruvian Amazon between 2010 and 2021, found that the implementation of all of these planned projects could result in damage to 56% (or in the worst case scenario even up to 91%) of the Peruvian Amazon.

In the face of these startling projections, the IDB should waste no time in fully integrating environmental sustainability into its country planning and programming, setting a high standard for its developing country members. At the same time, it is critical that the IDB prioritize building capacity for strategic planning at the national and sub-national level in Peru and other member countries facing similar challenges.

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