Robert Johnson (johnsorl@COLORADO.EDU)
Sat, 29 Jul 1995 16:23:51 -0600

---------- Forwarded message ----------
Date: Thu, 27 Jul 1995 00:19:51 -0700
From: C Soren Ambrose <>

/* Written 12:03 PM Jun 20, 1995 by ax:foeamazonia in igc:rainfor.worldb */
/* ---------- "PLANAFLORO / INSP. PANEL" ---------- */





Sao Paulo, June 13, 1995

The World Bank Inspection Panel, a legal appeal mechanism
recently created to investigate omissions and mistakes of
the largest financial institution world-wide, will receive
tomorrow the first claim ever from Latin America,
regarding a US$ 167m loan to the State Government of
Rondonia, in the Western Brazilian Amazon. The project
which is being challenged, Planafloro, was aimed at
providing remedial action following the disastrous social
and environmental consequences of a previous loan,
Polonoroeste, in the early '80s. Twenty-five organisations
representing rural communities and forest dwellers,
environment and development NGOs, including those forming
the Rondonia NGO Forum and the Amazonia Program of Friends
of the Earth, sent today a claim to the Inspection Panel,
alleging serious violations of the World Bank's policies
and procedures.

According to the claimants, the World Bank neglected the
implementation of several provisions included in the loan
and project agreements signed with the Governments of
Brazil and Rondonia, as well as of its own sectoral
policies and directives on Forests, Wildlife, Indigenous
Peoples, Involvement of NGOs, Project Supervision, Project
Monitoring and Evaluation, Procurement and Suspension of

NGOs declared that it took over six months, analyzing
14,000 pages of documents, to draft the text of the claim,
which is over 80 pages long, with 200 pages of supporting
documents. According to Luis Rodrigues, secretary of the
Rondonia Forum, "local communities have tried, since the
very beginning of the negotiation, to alert Bank's staff
and management about the likely failure of the project",
which had a significant component aimed at environmental
recovery. In the claim, even a letter
signed by the rubber tappers' leader Chico Mendes, few weeks
before his assassination in 1988, is quoted, as evidence of the
early efforts made by the NGO community to prevent those problems
that would have risen later. In the letter, it was explained how
the lack of involvement of the local beneficiaries was likely to
generate the failure of Planafloro.

The claim does not only point at the environmental and
social damages caused by the lack of respect for the World
Bank's policies and procedures. A number of cases of
mismanagement and violations of administrative rules are
also described. Confidential Bank memoranda are quoted,
where Bank staff discuss how "to avoid embarassment" to
World Bank headquarters while allowing the former Governor
of Rondonia to "obtain political return before the
elections" out of the money from Planafloro. Another
internal document, signed by World Bank Vicepresident for
Latin America Shahid J. Burki and addressed to the Board
of the Executive Directors, clearly downplays serious
cases of mismanagement recorded in an evaluation report.

According to Roberto Smeraldi, coordinator of Friends of
the Earth's Amazonia Program, the claim is a "decisive
test for the effectiveness of the Bank's institutional
reforms". "The new President, who took over a few days
ago, put emphasis on the need of giving priority to the
reforms. The Inspection Panel is the main example of such
reforms so far, therefore we hope the Executive Directors
will not oppose the Panel investigation".
. The Inspection Panel was created in August 1994, as a
result of both pressure from citizen's groups and an
internal Bank report which showed declining Bank capacity
to ensure quality in project implementation. Three highly
respected individuals were appointed as members of the
Panel for a five-year mandate. They will have now to
obtain the authorization of the Bank's Board of Directors
before starting an investigation on Planafloro.



Phone/Fax: (55-69)223-1116 E-Mail:

Phones: (55-11)887-8228 and 887-9369 Fax: (55-11)884-2795 E-Mail:




The following summary is about the claim addressed to the
World Bank Inspection Panel by 25 organisations on June
13, 1995, asking to investigate the Rondonia Agricultural,
Livestock and Forestry Project (Planafloro).

1. The World Bank Inspection Panel

The Inspection Panel is an independent body established by
the Board of the Executive Directors of the World Bank in
1994. Three highly qualified individuals were appointed as
members of the Panel, which is chaired by the former
President of the European Investment Bank, Ernst Gunther

The Panel was created with the aim of offering an
independent legal mechanism to individuals and
organizations whose interests are adversely affected by
projects financed by the Bank. Through such mechanism,
they can ask that an investigation is conducted, so as to
correct mistakes and ensure that the Bank enforces its own
policies and operational directives. The Panel forwards
its recommendations to the Board of the Executive
Directors, which makes a final decision.

2. The Claim on Planafloro.

25 non-profit organisations representing small farmers,
rubber tappers, indigenous communities, local rural
unions, groups involved in the defense of the environment
and human rights submitted a request for investigation to
the Inspection Panel about the Planafloro project.
Previously, only one claim had been forwarded to the
Panel, about the projected Arun dam in Nepal. The claim on
Planafloro is therefore the first one from Latin America
and also about any project already under implementation
phase. The claim is over 80 pages long, with 200 pages of
supporting documents.

With an initial budget of US$ 228.9 million, including a
US$ 167 million loan from the World Bank (Loan # 3444-BR),
the Planafloro project intends to correct those serious
problems occurred during the implementation of its
predecessor, the Northwest Brazil Integrated Development
Program (Polonoroeste). The admission of the failure of
Polonoroeste by the former President of the World Bank
Barber Conable, in 1987, paved the way to the
environmental reforms within the Bank. The basic objective
of the Planafloro project is to promote a new model of
sustainable development in the State of Rondonia, through
a series of initiatives for the protection and management
of natual resources, such as socio-economic and ecological
zoning, promotion of agroforestry systems, recovery of
degraded lands, environmental protection, creation and
management of extractive reserves and other conservation
units, sustained forest management, environmental
education and support to indigenous communities.

Nothwithstanding the importance of Planafloro's general
objectives, the actual implementation of the project,
since the first disbursements by the Bank in June 1993,
has been hindered by a series of impediments, largely
caused by omissions of the World Bank and failures in
enforcing the contractual agreements and implementing its
own sectoral policies and operational directives,
including: Project Preparation, Project Supervision,
Forest Policy, Wildlands Policy, Directives on Indigenous
Peoples, Collaboration with NGOs, Project Monitoring and
Evaluation, Procurement, Suspension of Disbursement.

The main issues on which an investigation is requested
include public policies and institutional reforms, land
tenure policy, zoning and state conservation units,
environmental control and protection, investment and media
programs, support to indigenous communities and project
administration. Each of these issues was analyzed from the
following perspectives: (i) planned actions in Planafloro;
(ii) evidence of mistakes and malpractices; (iii)
attempts to alert the World Bank; (iv) omissions of the
World Bank; (v) adverse impact on local populations.

3. Main Failures and Omissions

3.1 Lack of enforcement of legally agreed reforms in
public policies and establishement of legal agreements
between the various executing agencies of Planafloro,
especially in relation to land tenure policies,
environmental control, socio-economic and ecological
zoning, state conservation units and fiscal incentives; in
particular, it was stressed how the Bank has violated its
own policies about Forestry and Wildlife. This is
confirmed by the lack of establishment, so far, of the
agreement between the State of Rondonia and INCRA (the
National Institute for Colonization and Agrarian Reform)
about land titling, which is the main cause for illegal
settling and depletion of natural resources in Rondonia.
Several cases of settlement of colonists in conservation
units by INCRA led local producers to lose hundreds of
thousands of hectares of land of legally established
extractive reserves. In addition, the use of irregular
land titles issued by INCRA for further illegal activities
is frequent, such as concessions for logging and burning
in protected areas.

3.2 Failure to adopt adequate provisions and corrective
measures, in accordance with the operational rules of the
Bank, in relation to the serious lack of technical
capacity of those bodies in charge of executing
Planafloro, including various state and federal agencies.

3. 3 In the activity of supervision, the lack of
enforcement by the World Bank in ensuring implementation
by government agencies of various actions outlined in the
staff appraisal report, loan agreements and Aide Memoires
from previous supervision missions. Such practices
contrast with the Bank's operational directives on project
supervision and, in some cases, suspension of
disbursement. Finally, crucial and substantial information
on several controversial components of the project was
deliberately omitted to the Executive Directors.

3.4 The lack of orientation and enforcement, on the part
of the World Bank, of activities in monitoring and
evaluation that were anticipated in the official documents
of Planafloro, also in contrast to the operational
directive on project monitoring and evaluation.

3.5 The failure in guaranteeing a flux of up-to-date and
accurate information on project progress in Planafloro
between operational staff and the Executive Directors of
the World Bank, in contrast to the operational directive
on project supervision and other internal procedures,
including the recommendations of the "Wapenhans Report"..

3.6 The particularly serious omissions of the World Bank
in the design and implementation of the component "Support
for Indigenous Communities" of Planafloro, in relation to
the extremely strict operational directive of the Bank
itself as well as to the contractua agreements of
Planafloro, focused on land demarcation and health. In
this area, it must be noted that severe adverse impacts
have been observed among the already depleted local ethnic

3.7 The continued, deliberate and alarming lack of
implementation of World Bank procedures in the activities
of procurement, with an immediate effect on the overall
project since it blocked any progress in the key project
component of zoning. Rules on the use of consultants, as
well as on the carrying out of an independent audit of
annual project expenses, as defined in the contractual
agreements, were also violated.

3.8 The omission of the World Bank with regard to the
implementation of measures to ensure the effective
participation of the public, as defined in the operational
directive on involvement of NGOs in Bank-supported

3.9 The failure in the implementation of the Investment
and Media programs defined in the contactual agreements of
Planafloro, also resulting in the opening of new roads in
conservation units, without respect for the
socio-ecological-economic zoning and in advertising
campaigns openly estimulating migration to Rondonia,
contrary to what established by the project. Eventually,
examples were mentioned of concessional loans through the
Bank of Amazonia and the Constitutional Fund for the North
for cattle-ranching projects in land irregularly titled by

The claim is concluded with a series of considerations
aimed at asking to the Panel and to the Executive
Directors to reognize the need to investigate the reasons
which led the Bank to these omissions with the resulting
damage to the local populations and environment, as well
as to the Brazilian citizens in general. The
investigation, it is stressed, would greatly contribute
to the solution of the ongoing problems in the execution
of Planafloro and, more importantly, to avoiding the
repetition of similar problems in other projects supported
by the Bank.