|Update on Dinant - October 2017|
This is an update to the previously posted information regarding the implementation of the Enhanced Action Plan (EAP) relevant to IFC’s 2009 investment in Dinant Corporation. As of April 2017, Dinant has fully repaid the balance of IFC’s outstanding loan and IFC has no further contractual relationship with the company.
As of the date of repayment of the loan, Dinant had achieved material compliance with IFC’s Performance Standards. Additional steps enabled by IFC have been undertaken to help address more systemic issues in the Bajo Aguan. These have received support from many stakeholders, including civil society representatives, local communities, the Government of Honduras, and Dinant.
Notwithstanding the progress of Dinant--particularly in implementing the Voluntary Principles for Security and Human Rights (VPSHR) security force protocols--the Bajo Aguan context in which the company operates continues to be plagued by criminal acts and tragic loss of life. This is reflected in the 2016 killing of MUCA leader Jose Angel Flores and the August 2017 murder of two unarmed Dinant security guards. The ongoing violence underscores the need for all stakeholders in the Bajo Aguan to demonstrate an equal commitment to reducing conflict and participating in a dialogue process to address the structural issues of land rights, respect for the rule of law and inclusive development.
Dinant Implementation of Key Environmental and Social Improvements
Dinant has successfully implemented the actions required of it as identified in the April 2014 EAP and their original Environmental and Social Action Plan (ESAP). The status of each action plan item and progress in this regard are documented in the update of the EAP table. Some of the more significant action plan items are discussed in greater detail below.
Paramount among these action items has been Dinant’s progress in modernizing and professionalizing its approach to security activities. It adheres to the Voluntary Principles for Security and Human Rights (the first company in Honduras to do so) and now meets the requirements of IFC Performance Standard 4 (PS4). Notably, Dinant has expanded the VPSHR Implementation Program beyond its agribusiness operations to include all its operations in Honduras.
Dinant has also undertaken and concluded Risk Assessments and associated management plans for all its facilities. The Risk Assessments analyzed a range of issues and challenges each site faces and were adopted into the management plans to address security, environmental and social risks.
All Dinant security personnel (both in-house and contracted guards) have been trained in techniques aligned with PS4 and the VPSHR, which includes risk assessment, conflict avoidance and rules around the use of force to be proportionate to the nature and extent of the risk when facing potentially violent situations. Dinant also unilaterally took the decision to disarm its security guards in all plantations, extraction mills and factories which, as verified by Foley Hoag, has helped dramatically improve relations and reduce tensions with local communities.
With assistance from the Consensus Building Institute (CBI) and other consultants engaged by IFC under the EAP, Dinant implemented its Community Engagement and Grievance Mechanisms (GM) Program throughout its operations. The GM in the Bajo Aguan, where the company’s plantations are located, is now interacting with over 20 communities. CBI also coached and provided capacity building and other training to the social engagement teams in all of Dinant’s operational sites in Honduras. This professional capacity now consists of five community liaison officers, a corporate social responsibility manager, and an overall Social Manager at the corporate level reporting to senior management.
A major milestone for Dinant and the Panama community were two meetings held in early February/late March 2016 to discuss the community engagement program and community concerns and grievances. While some representatives of local civil society organizations continue to voice concerns around operational and security issues, Dinant has committed to address these concerns on an ongoing basis, consistent with its grievance mechanism procedures.
Inquiry into Past Security Incidents
The only remaining (but significant EAP action item) is the inquiry into previous alleged incidents involving Dinant security guards.
The law firm of Foley Hoag has been reviewing the company’s approach to reporting and addressing past incidents involving Dinant’s security forces. While this review remains a work in progress as discussed further below, it indicates that the procedures followed previously (in the 2010-2012 period) were not aligned with PS4 requirements nor with the new VPSHR protocols to which Dinant now adheres and that are embedded in Dinant’s new Security Management System.
This work has been delayed due to several factors, including: respecting the integrity of the Government’s own ongoing investigation into past crimes in the Aguan Valley (embodied in the specialized investigative work of the Unidad de Muertes Violentas del Bajo Aguan - UMVIBA); the practical difficulties in identifying sources of information given the length of time that has passed since the alleged events occurred; the 100% turnover in Dinant’s security personnel; and the challenges associated with narco-trafficking links to past crimes.
The inquiry is being conducted by a qualified third party under the supervision of Foley Hoag. It is expected that Foley Hoag will report to IFC on the key findings and conclusions of the third party.
Conflict Mapping and Dialogue to Resolve Structural Issues
As part of its commitment under the EAP, IFC engaged CBI to undertake conflict mapping to help identify relevant stakeholder views on the underlying causes of conflict in the Bajo Aguan. The goal of this exercise was to identify a potential dialogue process for resolving those disputes.
Following an extensive two-year dialogue process with stakeholders, CBI prepared the “Road Map: Moving Forward in the Bajo Aguan: Key Issues Analysis & Process Design Recommendations (for Regional Dispute Resolution),” which was posted in August 2015. The Road Map captures stakeholders’ views. They see the following issues as interrelated: the need for inclusive socio-economic development of the Aguan Valley, land ownership/titling, lack of adherence to the rule of law, and flawed criminal investigation processes into past killings and other human rights crimes.
Throughout the Road Map process, and up until the end of March 2017, IFC and CBI continued their engagement with various stakeholders - including local communities, campesino-led organizations, local and international NGOs, donors, Dinant, and the Government of Honduras – as part of a sustained effort to create and sustain a dialogue on the issues identified in the Road Map.
Unfortunately, progress in terms of actually initiating the dialogue process has been slow. This is due to a number of factors beyond IFC’s or CBI’s control and influence - including the unwillingness of a number of influential external stakeholders to move from longstanding political and ideologically rooted positions into a problem-solving mindset.
The pathways for dialogue identified in the Road Map remain relevant, however, and the Government of Honduras has indicated it still intends to move forward with a participatory process – which can provide an avenue for reducing structural tensions in the Bajo Aguan, and potentially elsewhere in Honduras.
|Update on Dinant - April 2016|
Building on the previous posted information, we would like to provide a further update on the implementation status of the Enhanced Action Plan relevant to IFC’s investment in Dinant.
Progress on the Road Map:
Most notably, we welcome the strong expression of support from the Government of Honduras to move forward with the dialogue process aimed at addressing the key sources of conflict in the Bajo Aguan. This dialogue process is framed by the draft “Road Map: Moving Forward in the Bajo Aguan: Key Issues Analysis & Process Design Recommendations (for Regional Dispute Resolution),” (initially posted in August 2015 and referred to throughout as the Road Map), as articulated by the Consensus Building Institute (CBI) following extensive stakeholder dialogue over many months during the course of 2014-2016.
Since then CBI has continued in-depth engagement with various stakeholders, including local communities, campesino-led organizations, Dinant, the Government, local and international NGOs (Oxfam, Plataforma, Troicaire, Diakonia, etc.) to develop a shared understanding and commitment to the Road Map’s participatory process. Stakeholders have made clear that they see inclusive socio-economic development of the Aguan, land ownership/titling and associated conflict, impunity and the lack of rule of law, and a flawed criminal investigation processes as all inter-related. Addressing these challenges will require recognition of these linkages in order to realize enduring solutions.
A clear demonstration of the Road Map’s progress were recent meetings held between the World Bank Group and several Honduran Ministers to organize their approach to the dialogue process to come. In addition, a workshop for Government officials facilitated by CBI, in association with the Harvard – MIT Program on Negotiation, titled “Negotiating for Mutual Gain in Situation of High Conflict with Application to the Bajo Aguan Context” was held in March 2016. A similar tailored workshop has been offered to Bajo Aguan civil society stakeholders, inclusive of CSOs, NGOs, members of campesino organizations, and local communities in the coming months to provide capacity building prior to specific issue engagement.
The Road Map will continue to be refined jointly with all stakeholders support and contributions to the process. An updated version of the Road Map reflecting the most recent steps forward will be posted here soon.
Dinant has successfully completed the majority of the actions in the April 2014 draft EAP. The status of each action plan item and progress in this regard are documented in the update of the EAP table.
Dinant has also continued to make significant progress in modernizing and professionalizing its approach to security activities. It has demonstrated its commitment to implementing the Voluntary Principles for Security and Human Rights (VPSHR) and meeting the requirements of IFC Performance Standard 4 (PS4), both of which have been the guiding strategy during a year of transitions in the corporate security function. Among other notable achievements in 2015, Dinant expanded the VPSHR Implementation Program beyond its agribusiness operations, to include all remaining components of Dinant Honduras, including the Sales and Distribution Division.
Dinant conducted Risk Assessments for all facilities and functions by the end of 2015. These Risk Assessments analyzed the full range of issues and challenges each site faces and developed effective management plans to address all security, environmental and social risks. All Dinant security personnel, (100% of in-house and contracted) have been trained in the Voluntary Principles for Security and Human Rights, Threat Assessment, Conflict Avoidance, Rules for the Use of Force and techniques to minimize the amount of force required to repel a violent assault. Dinant has continued the unprecedented initiative in Honduras of unilaterally withdrawing firearms from its security guards in all plantations, extraction mills and factories in the country.
Dinant continues to work with its Security Consultant, as well as Foley Hoag (IFC’s Security and Human Rights Consultants), to further enhance and improve its Security Management System.
Dinant worked closely with CBI to launch its Community Engagement and Grievance Mechanisms (GM) Program in the Bajo Aguan in the four communities closest to their plant facility. CBI also coached and provided capacity building and other training to the social team from all Dinant’s operational sites in Honduras. A major milestone for Dinant and the Panama community were two meetings held in early February/late March to discuss the community engagement program and community concerns or grievances.
The perspective of participants attending these meetings has been positive so far and represents a new and more formalized line of communication with a community central to past conflicts. It is also important to note that the campesino movement continues to voice strong concerns around operational and security issues, and that Dinant is proactively committed to addressing any and all concerns through its operational grievance mechanism.
In parallel, IFC’s security consultant Foley Hoag has been reviewing the company’s approach to reporting and addressing past incidents involving Dinant’s security forces. While this review remains a work in progress, it is acknowledged that the procedures followed previously (2010-12 period) were not aligned with IFC Performance Standard 4 requirements nor with the new protocols to which Dinant now adheres. Revamped procedures and protocols are already embedded in Dinant’s new Security Management System.
Lastly, work continues on defining an approach to an additional inquiry into Dinant security guards’ past actions that would be both externally credible and serve the intended purpose of the PS4 requirement and EAP commitment. Based on inputs received from experts and other stakeholders, some of the most significant challenges to defining an approach include: protecting the integrity and sovereignty of the Government’s own ongoing investigation into past crimes in the Bajo Aguan; the practical difficulties in identifying witnesses given the length of time that has passed since the events; the virtually 100% turnover in Dinant’s security personnel; and, the attribution complications associated with narco-trafficking links to past crimes.
We will continue to provide updates on any of the outstanding tasks in the EAP that are ongoing, as well as on the implementation of the Road Map process, as it moves forward.
|Moving Forward in the Bajo Aguan: CBI Analysis & DRAFT Process - April 2016|
The Consensus Building Institute, an independent non-profit consultancy retained by IFC, has been working with GoH and other stakeholders to further refine the draft Road Map in connection with its work on envisioning stakeholder engagement approaches and dispute resolution potential in the Aguan region of Honduras. The views and suggestions reflected within are based on CBI’s broad and inclusive stakeholder engagement efforts to date. As one of the stakeholders associated with the process, the World Bank Group believes the Road Map provides a series of credible, integrated and constructive options for making progress in helping address sources of conflict in the Aguan Valley of Honduras.
The Government of Honduras has committed to implementation of the Road Map, contingent on help from donors on capacity building, and support with some budget and resource implications going forward. The World Bank Group thanks CBI, and the stakeholders involved in the process to date, for their continued contributions and collaboration. The WBG will stay involved to ensure the implementation of the Road Map will move forward over the coming months.
|Update on Dinant (Consultation Draft) Enhanced Action Plan – October 2015|
Building on previous updates, we would like to provide a current assessment of the progress related to the Dinant Enhanced Action Plan.
The Consensus Building Institute (CBI) continues its engagement on the draft Road Map posted in August 2015. CBI has consulted with various stakeholders over the last few months, including local communities, campesino-led organizations, Dinant, the Government, and local and international NGOs (Oxfam, Plataforma, Troicaire, Diakonia, etc.), in developing the Road Map and believes it represents a credible set of options for making progress on key issues that have contributed to past conflict in the Bajo Aguan.
As part of the Road Map process, the World Bank Group has provided support to the Government of Honduras (GoH) in identifying possible socio-economic areas of focus in the Bajo Aguan, as well as providing technical guidance on a review of the land tenure baseline there. The GoH has expressed support to the Road Map and is evaluating how best to move forward in its implementation – considering needs for institutional capacity building and budget and resources implications. The international donor community has also endorsed the Road Map and can play an instrumental role in supporting the implementation of certain programs in the Bajo Aguan needed to address urgent and complex structural issues.
Dinant continues to make major progress on its implementation of the Enhanced Action Plan (EAP) of April 2014. The status of each action plan item and progress in this regard are documented in the update of the Draft for Consultation EAP table attached. Overall, Dinant continues to make informed decisions regarding risk issues and to address the use and capacity of security personnel through policies, procedures and training. Dinant continues to work with its Security Consultant, as well as Foley Hoag (IFC’s Security and Human Rights Consultants), to further improve their Security Management Plan.
From July-September 2015, Dinant worked with CBI to launch its Community Engagement and Grievance Mechanisms (GM) Program in the Bajo Aguan in the four communities closest to their plant facility. The process will be rolled out to other directly impacted communities over the coming few months. So far, these efforts have been welcomed by the communities.
Foley Hoag continues to work on preparations for the inquiry into allegations of past unlawful or abusive acts by Dinant security personnel – another Enhanced Action Plan commitment. They have developed a draft terms of reference for assessment and evaluation of the company’s past actions (inquiry process) and identified potential qualified and credible parties to conduct the inquiry. Foley Hoag will oversee the inquiry process and summarize the key findings and recommendations for subsequent public disclosure.
We will continue to provide updates on the process as it moves forward.
|Moving Forward in the Bajo Aguan: CBI Analysis & DRAFT Process - August 2015|
The Consensus Building Institute, an independent non-profit consultancy retained by IFC, has further revised its “draft roadmap” (originally posted in May 2015) in connection with its work on envisioning stakeholder engagement approaches and dispute resolution potential in the Aguan region of Honduras. The views and suggestions reflected within are based on CBI’s broad and inclusive stakeholder engagement efforts to date. As one of the stakeholders associated with the process, the World Bank Group believes the Roadmap provides a series of credible, integrated and constructive options for making progress in helping address sources of conflict in the Aguan Valley of Honduras. The World Bank Group thanks CBI, and the stakeholders involved in the process to date, for their contributions and collaboration.
|Moving Forward in the Bajo Aguan: CBI Analysis & DRAFT Process - May 2015|
The Consensus Building Institute, an independent non-profit consultancy retained by IFC, has produced this “draft roadmap” in connection with its work on envisioning stakeholder engagement approaches and dispute resolution potential in the Aguan region of Honduras. The views and suggestions reflected within are entirely CBI’s and are based on broad and inclusive stakeholder engagement efforts to date. They do not necessarily reflect an official position of the World Bank Group.
|Update on Dinant (Consultation Draft) Enhanced Action Plan – April 2015|
IFC appreciates the feedback received so far on the Draft EAP and related stakeholder engagements underway.
IFC continues to work closely with Dinant and supervise its efforts to ensure continued progress regarding implementation of all of its commitments reflected in the April 2, 2014 Draft Enhanced Action Plan (EAP).
Following previous updates on the implementation of those commitments, we would like to provide an update on the current status of the EAP below.
Dinant has made substantial progress in recent months in implementing the requirements in the original Environmental and Social Action Plan (ESAP) agreed between the company and IFC, which remains an integral component of the Draft EAP. Specifically, Dinant has:
Since July 2014, the Consensus Building Institute (CBI) has been helping all stakeholders to envision whether and how key issues, concerns, and opportunities can be addressed and resolved through constructive engagement and dispute resolution efforts. CBI has undertaken ten trips to Honduras so far, meeting with various stakeholders -- including Dinant, campesinos, government officials, communities, local and international NGOs, and other interested parties.
Based on stakeholder input, CBI has drafted a potential “roadmap” which identifies a possible basis for dialogue to address key issues in the Aguan Valley. In brief, CBI is working on the following:
While the CBI-led process can help facilitate and catalyze dialogue, continued progress on these issues will depend on the leadership and ownership of many actors -- including the Government of Honduras, Dinant, campesinos, civil society organizations, and donors. The draft roadmap identifies prospective opportunities by stakeholder grouping and is currently being shared with them for review and comment prior to disclosure.
In addition to CBI’s support, IFC hired law firm Foley Hoag, LLP as an external advisor on security and human rights. Foley Hoag serves as the Secretariat for the VPSHR. Dinant is the first Honduran company to commit to incorporating practices in the VPSHR into its management systems. The Foley Hoag team has made five trips to Honduras so far, meeting with Dinant, local and international NGOs, campesino movements, and Government of Honduras officials, including public security forces and the Special Investigative Unit in the Bajo Aguan.
Progress regarding Dinant’s implementation of the VPSHR continues. Dinant has hired a new security manager and is in the process of hiring new private security contractors for all operational sites in Honduras. In the Aguan Valley, Dinant plans for all plantation guards to be directly hired by the company in order to more effectively vet and supervise them, and is close to meeting this goal. All new and existing security personnel have been or are being vetted and trained on the VPSHR. Security manuals and protocols are being updated with support from an external security consultant with feedback/verification provided by Foley Hoag.
Dinant has shared its commitment to human rights and international standards on the use of force with public security officials in the Bajo Aguan, and will continue to engage with them to develop a mutual understanding of how both parties will ensure respect for human rights in the Aguan region.
Dinant has conducted a security forum with 11 communities from the Comayagua area, near their operations, in order to produce a Community Risk Assessment. Dinant also recently launched its Grievance Mechanism there. The Grievance Mechanism was disclosed in March and is already operating in Comayagua, as verified by a recent IFC visit to communities in the area. Regional versions will soon be launched in the Leán Valley, San Pedro Sula and the Aguán Valley after further stakeholder consultation and engagement.
Foley Hoag has conducted an initial assessment of Dinant’s procedures of inquiry into past incidents in which its security guards were alleged to have used excessive force. Foley Hoag is now developing terms of reference for a third-party inquiry into these incidents to identify whether the security guards followed international standards on human rights and use of force as well as Dinant’s internal requirements. Foley Hoag has also met with the Government of Honduras’ Special Investigative Unit, regarding the government-led criminal investigation into violent killings in the Aguan Valley, which is examining, among others, past incidents in which Dinant’s guards were allegedly involved.
We have received input from many stakeholders and, in consultation with CBI, Foley Hoag, Dinant and other stakeholders, may revise some elements of the EAP. Any such revisions will be disclosed on IFC’s website. A more comprehensive update on the status of all actions is available here. IFC will continue to provide regular updates on our website.
|Update on Dinant (Consultation Draft) Enhanced Action Plan – October 2014|
Following IFC’s most recent update of July 3, 2014 on implementation of Dinant’s Enhanced Action Plan, we are providing an update below.
IFC continues to work closely with Dinant to ensure continued progress regarding implementation of its commitments reflected in the April 2, 2014 Draft Enhanced Action Plan. In July 2014, IFC retained the Consensus Building Institute (CBI) to provide support for a conflict mapping and consultation process that will help inform and finalize the Enhanced Action Plan.
CBI is now facilitating an ambitious multi-stakeholder engagement effort to build a constructive dialogue. So far, CBI has traveled to Honduras on three separate occasions in pursuit of these objectives. Trips to conduct further meetings for the second stage of this process are expected from October 2014 through February 2015.
In September 2014, IFC also hired law firm Foley Hoag, LLP as an external advisor on security and human rights. Experts from Foley Hoag will help IFC with the monitoring of Dinant’s new security management plan and procedures to ensure compliance with IFC’s Performance Standards and alignment with the Voluntary Principles on Security and Human Rights. They will also help to guide the audit process, which will look into past incidents involving Dinant's security personnel. A summary of the terms of reference for this work are available here.
In addition, since the last update, Dinant has completed and initiated a formal vetting process for the use of internal and third-party security guards. Training by the International Committee of the Red Cross on the proportionate use of force for all Dinant security staff has also been completed. Dinant guards in the Aguan Valley, Comayuga, San Pedro Sula and Lean facilities and plantations have been disarmed. Dinant’s grievance mechanism has been completed and a pilot version is being refined through discussions with community focus groups in Comayagua. It will soon be finalized and implemented throughout the Corporation.
A more comprehensive update on the status of other actions in the Draft Enhanced Action Plan is available here.
Based on feedback from CBI, Foley Hoag and other stakeholders, the timing and sequence of some elements of the Enhanced Action Plan may be revised. IFC will continue to provide regular updates on our website on any such revisions and progress related to the implementation of Dinant’s Enhanced Action Plan.
|Update on Dinant (Consultation Draft) Enhanced Action Plan – July 3, 2014|
July 3, 2014
Following the April 8 release of the Consultation Draft Enhanced Action Plan, IFC continues to engage regularly with Dinant regarding implementation of its commitments. IFC is currently putting in place our own external advisors to provide support and monitor actions related to the action plan as well as a broadened consultation with stakeholders.
IFC has retained the Consensus Building Institute to provide support for a more robust conflict mapping and consultation process associated with building out and finalizing the Enhanced Action Plan. The first step will be to gauge stakeholder interest in undertaking a participatory assessment process to develop a shared understanding of root causes, issues, challenges and opportunities. The terms of reference for this work are available here.
IFC is also in the process of retaining an external advisor on security and human rights to help IFC with the monitoring of the client’s new security management plan and procedures to ensure compliance with the Performance Standards and alignment with the Voluntary Principles. This advisor will also help to guide the audit and inquiry process into past incidents involving Dinant's security personnel. We will also post the terms of reference for this work once available.
We will continue to provide regular updates on our website on progress related to the implementation of Dinant’s Enhanced Action Plan.
|Dinant Consultation Draft Enhanced Action Plan|
April 02, 2014
Following IFC Management’s Response to the CAO Audit of IFC’s Investment in Corporación Dinant (January 3, 2014), IFC received substantial feedback from stakeholders, including civil society and its Board of Directors, with respect to the Action Plan presented in the response.
After taking this feedback into account, and with additional engagement with Dinant, the CAO, Board members, and other stakeholders, the Action Plan has been further enhanced as elaborated here.
Posted on April 08, 2014
|IFC Statement on Next Steps Related to CAO Audit of IFC’s Investment in Corporación Dinant|
January 21, 2014
IFC is deeply saddened by the loss of life as a result of the conflict in the Aguan Valley, and the violence that has affected all sides. The World Bank Group continues to urge the government of Honduras, and to press Dinant, to ensure that crimes highlighted in the CAO Audit are investigated and that remedies are available where wrongdoing is found.
IFC takes the CAO Audit and its findings very seriously. IFC will continue to work with Dinant to refine and flesh out the Action Plan in IFC Management’s response, in consultation with the CAO. IFC will report Dinant’s progress in meeting these actions to our Board. CAO will monitor and report on IFC’s actions in response to the audit.
IFC has not disbursed funds to Dinant since 2009, and will not disburse further funding until Dinant fulfills its commitments in the Action Plan, including strengthening its community engagement and environmental and social standards, and reviewing its security practices. Should Dinant fail to meet these commitments, IFC stands prepared to exercise all remedies available, including canceling the loan.
Environmental and social sustainability is core to IFC’s business. IFC has strong policies. Implementation must be equally strong. We understand that implementation in fragile and conflict-affected countries is particularly challenging, requires keen attention from management, and adequate tools for staff to deliver strong development impact in an environment of high risk.
IFC acknowledges that there were shortcomings in how we implemented our environmental and social policies and procedures in the Dinant investment, and accepts the recommendations made in the CAO Audit. As noted in the audit, IFC must take a broad view of the country and sector risks when considering projects. Additionally, we need to pay more attention to a client's security practices and preparedness in fragile country situations. As we continue to analyze the audit and its findings, IFC will reflect on what we could have done differently and how this should inform our work going forward. We will ensure that these lessons are shared with staff and other stakeholders.
|IFC FACT SHEET—January 10, 2014|
IFC and Corporación Dinant (Dinant) signed a loan agreement for $30 million in April 2009 to fund expansion of Dinant’s snacks and edible oils processing facilities, in order to generate employment opportunities for the local community and promote economic growth in Honduras. IFC disbursed $15 million in November 2009, but additional disbursements were put on hold following an increase in violence in the Aguan Valley, where Dinant operates. IFC’s Compliance Advisor Ombudsman (CAO) launched an audit of IFC’s investment after becoming aware of potential environmental and social issues around the Dinant investment in November 2010, when the then-President of the World Bank Group received a letter of complaint. That CAO audit has now been released.
Where we stand now
|We are deeply saddened by the loss of life that has taken place as a result of the Aguan Valley conflict. It has affected campesino associations, security guards, police, military, staff of Dinant, journalists, and civilians. It is very difficult to get to the bottom of allegations, as official investigations have not been completed. The CAO makes no findings as to whether the allegations are true. In its 2012 annual report, the Honduran National Commission of Human Rights noted the complexity of the situation in Aguan, as violence has touched all sides of the conflict.|
IFC has worked with Dinant on a robust Action Plan to further address the CAO report’s findings. This Action Plan includes the following steps:
In addition, the following measures are underway:
|IFC Management has committed to monitor the implementation of Dinant’s Environmental and Social Action Plan, as well as the Action Plan noted in Management’s response to the CAO audit. Should Dinant not meet its obligations under these plans, Management reserves the right to exercise all remedies available, including cancellation of this investment and accelerated repayment.|
| Statement from IFC Executive Vice President and CEO, Jin-Yong Cai
Re: CAO’s compliance audit report dated December 20, 2013 regarding IFC’s investment in Corporacion Dinant S.A. de C.V.
January 3, 2014
IFC is committed to ensuring that the projects we finance are implemented in an environmentally and socially responsible and sustainable manner. We have carefully reviewed the CAO’s compliance audit report regarding IFC’s investment in Corporación Dinant S.A. de C.V. This document, as well as other CAO reports, can help improve our ability to manage environmental and social risks, particularly in countries dealing with conflict and fragility.
We have worked with Dinant to enhance the company’s policies and practices. Moving forward, we will continue to monitor the implementation of Dinant’s Environmental and Social Action Plan, and look to bolster our procedures in relation to environmental and social risks in fragile and conflict-affected areas. Additional steps, to be carried out by Dinant under IFC guidance, have been identified and, moving forward, we will also monitor their implementation.
Working in fragile and conflict-affected states is challenging, due to the multiplicity of constraints and scarcity of resources and capacity. However, IFC can help advance sustainable development and have an impact by virtue of continued engagement in these areas. IFC remains committed to helping create the conditions for economic growth and job creation in these regions in a way that will benefit the poor.
|IFC Management Response to CAO Audit|
January 3, 2014
Ms. Meg Taylor
Compliance Advisor Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington DC 20433
Dear Ms. Taylor,
Thank you for sharing the CAO’s compliance audit report dated December 20, 2013 regarding IFC’s investment in Corporación Dinant S.A. de C.V. (hereafter “Dinant”) in Honduras. IFC is committed to ensuring that the projects it finances are implemented in an environmentally and socially responsible and sustainable manner. Although we do not agree with some of the findings in the report, we acknowledge that CAO audits help strengthen our policies and procedures and lead to improvements in managing environmental and social risks, including in the context of fragile and conflict-affected states. The lessons from this report can help us as we increase our work in fragile and conflict-affected areas, where we can play an important role in helping companies create the conditions for economic growth and job creation.
We believe the key CAO Dinant report findings pertain to how IFC assesses broader contextual risks early in the appraisal process, as well as risks related to the interaction between company security forces and communities. We believe some of these findings have been addressed through the 2012 update to IFC’s Sustainability Framework. For example, in accordance with the 2012 Sustainability Policy, we will consider inherent environmental and social risks of a given sector as well as the project’s location in determining the risk category. We do believe that if a similar project were presented for financing today, it would most likely be categorized as high-risk.
We also review and update our operational procedures and practices on an ongoing basis to capture the continuous learning from our projects, including Dinant. For example, we have developed new screening tools that flag—earlier in the project appraisal process—potential environmental and social risks associated with agro-commodity production.
Moreover, IFC is committed to the Principles for Responsible Agricultural Investment (developed by FAO, IFAD, UNCTAD, and the World Bank Group), which ensure that agricultural investments support practices that protect the environment and local communities, respect local laws and land rights, and contribute to food security. We will continue to learn from our projects in the agribusiness sector to strengthen our standards and implementation processes.
Project Context and Risk
At the time of project appraisal in 2008, IFC believed that the project risks associated with the expansion of Dinant’s existing processing facilities were limited and manageable through an appropriate Environmental and Social Action Plan, consistent with IFC’s policies and practices at the time. Local counsel confirmed that Dinant held clear title to all its plantations. There was no evidence of land claims in the legal system or otherwise. Other international financial institutions also conducted their own due diligence prior to IFC and subsequently obtained approvals from their respective Boards of Directors on that same basis.
In June 2009, nearly a year after IFC’s appraisal, the military overthrow of President Zelaya—an event IFC could not have foreseen—ignited social unrest across the country and reawakened a push for land redistribution in the Aguan Valley. The resulting political turmoil undermined law and order, exacerbating the trafficking of drugs and arms in the area. Nevertheless, IFC chose to remain engaged and work with Dinant to deal with the significantly changed circumstances on the ground and to improve its policies and practices, particularly in security and community engagement, in an effort to address the more volatile security environment.
IFC and Client Actions
IFC has worked with Dinant to identify and undertake measures to prevent armed clashes, and has communicated several times with President Lobo to support a peaceful resolution to the Aguan Valley land conflict. The new government of Honduras called for negotiations between campesino organizations and landowners to quell social tensions and find a solution to land disputes. In late 2012, Dinant voluntarily sold nearly 4,000 hectares of its occupied plantations to the Honduran government to facilitate a resolution of the claims of campesino organizations. Dinant transferred its legal land titles to the government and received compensation.
In December 2010, in response to the rapidly changing circumstances IFC requested that Dinant hire an international security and human-rights consultant, who traveled to Honduras to assess its security program and thereafter defined an action plan, consistent with the Voluntary Principles on Security and Human Rights. IFC management conducted several visits to Honduras beginning in January 2011. In addition, our environmental and social specialists intensified supervision as soon as practicable with visits in 2011, 2012, and twice in 2013. IFC also recommended a consultant to oversee the Environmental and Social Action Plan implementation process locally and help the company build and manage a team of internal staff and specialized consultants. Working with the support of consultants and IFC, Dinant has taken significant strides forward. The following is a summary of actions taken with IFC’s support, active guidance and monitoring, aimed to improve Dinant’s Environmental and Social Action Plan performance. Several actions also address some of the CAO report findings:
Stakeholder Engagement, Social Assessment and Community Development
Environmental and Social Management
We will continue to monitor and supervise the implementation of Dinant's Environmental and Social Action Plan through bi-monthly discussions and, in this connection, consider additional support from external experts. In addition, we will seek Dinant’s agreement to undertake that the following actions are undertaken over the next 12 months, with IFC’s support and guidance, to further address the CAO report findings. We will adjust these actions and timeline according to developments on the ground.
|In accordance with its commitment and ongoing efforts to strengthen community engagement, Dinant will continue to collaborate with proper authorities to investigate any credible allegations of unlawful or abusive acts of its security personnel against communities/stakeholders in the Aguan and take action to prevent recurrence if allegations are found to be true. As appropriate, Dinant will also refer such allegations to the relevant authorities, and, based on its findings, assess the feasibility of remediation to affected parties||Dinant to implement with IFC guidance||Targeting 12 months with estimated completion no later than the next 24 months|
|Dinant will develop a more comprehensive vetting process for security personnel.||Dinant to implement. IFC to supervise and monitor.||Targeting 3 months with estimated completion no later than the next 12 months, with quarterly updates to management + CAO|
Dinant will train in-house and third-party guards on the new security protocols that define and clarify appropriate use of force, and to ensure a common understanding of its procedures.
|Dinant to implement. IFC to supervise and monitor.||Targeting 3 months with estimated completion no later than the next 12 months, with quarterly updates to management + CAO|
Dinant will implement a grievance mechanism to address communities’ concerns and complaints, and provide feedback in a consistent and timely manner, while remaining attentive to the unique needs of each community in which it operates.
|Dinant to implement. IFC to supervise and monitor.||Targeting 3 months with estimated completion within the next 12 months, with quarterly updates to management + CAO and pending positive political developments and adequate security on the ground.|
|IFC will review, and if necessary strengthen, its approach to the management of environmental and social risks in fragile and conflict-affected areas. In particular, IFC will review its experience, and that of other DFIs, related to clients’ use of security forces in very high-risk environments.||IFC to review and amend as needed. IFC to report back semi-annually to the World Bank and IFC President, the IFC Executive Vice-President and CAO on progress related to these actions.||Estimated completion within the next 12 months|
Manufacturing, Agribusiness & Services Department
Sub-Saharan Africa, Latin America & the Caribbean
Environment, Social and Governance Department