Bolivia Mi Agua Water and Sanitation

In October 2023, the Complaints Mechanism (EIB-CM) of the European Investment Bank (the EIB or the Bank) received a complaint concerning the Drinking Water System Palacio Tambo sub-project (the Sub-project) that is part of the Bolivia Mi Agua Water and Sanitation investment project (the Project) in Bolivia. For this Sub-project, water is abstracted from the Japo community’s and delivered to the Palacio Tambo community. The promoter of the Project is the Bolivian Ministry of Environment and Water (MMAyA, or the Promoter) and the co-executor is the National Fund for Productive and Social investment (FPS, or the Co-executor), in coordination with the beneficiary municipal autonomous governments.

The complainant presents the Japo residents opposed to the Sub-project. The complaint alleges instances of non-compliance with the EIB Environmental and Social Standards (EIB E&S Standards) and, in particular, lack of prior and meaningful stakeholder engagement, lack of free, prior, and informed consent (FPIC) and resort to violence and retaliation as part of the Sub-project implementation.

Work performed

Following the initial assessment of the complaint, the EIB-CM decided to proceed with a compliance review regarding the reported allegations, with a view of investigating possible maladministration by the EIB. As part of its inquiry, the EIB-CM reviewed the Project documentation and the due diligence and monitoring of the Project by the Bank.

Conclusion

The Bank’s environmental and social (E&S) appraisal identified the presence of indigenous people, the fact that their rights were embodied in Bolivia’s national constitution and that the water schemes were community driven and supported by development plans. The EIB-CM finds that, given the nature of investment programme of the loan, it was relevant for the appraisal to focus on the Promoter’s E&S capacity and management systems and plans. Measures such as an increase in the E&S capacity of the Promoter, the development of a stakeholder engagement framework (SEF) including safeguards for indigenous people and a reporting mechanism were identified as necessary and requested through the loan agreement.

The Bank also verified that the required measures were indeed complied with at the start of the Project’s implementation. However, the Bank later did not act on the fact that the agreed SEF modules for indigenous peoples and involuntary resettlement were not used for monitoring and reporting purposes.

The information reviewed by the EIB-CM confirms that: i) the Sub-project’s design changed since the initial agreements between the Japo and Palacio Tambo communities, ii) the natural minimum waterflow may be lower than the flow initially communicated to the Japo community, and iii) that opposition to the Sub-project from the Japo community started mid-2022. Since then, there were multiple protest actions including road blockades, failed dialogue and decisions by the highest indigenous authorities against the opponents with the objective of restarting the construction. In May 2023, after a confrontation between the beneficiary community and the impacted community, the Co-executor took the decision of stopping the construction of the Sub-project and informed the Bank in August 2023.

The Bank informed the Promoter that it could not disburse further funds for the financing of the Sub-project until the conflict was resolved peacefully and in compliance with the EIB E&S Standards. It also contracted an external consultant, who confirmed that, despite FPIC seemingly having been initially secured, it had been lost and needed to be restored through mediation to comply with the EIB E&S Standards.

The highest indigenous authorities in the Sub-project area instructed the Co-executor to restart construction. In October 2023, the Co-executor, the contractor, and local authorities coordinated to enter the works’ site in the Japo’s community with the help of most of the population of the Palacio Tambo community. This happened without broad consent being secured in Japo community and reportedly led to more violence and injuries. The FPIC in Japo could not be secured to date for the Sub-project, resulting in a non-compliance with the EIB E&S Standards.

Three court cases confirm that the above mentioned highest indigenous authorities are entitled to take executive and judicial decisions and that both the beneficiary (Palacio Tambo) and impacted (Japo) communities under its authority must resolve their conflict internally. The EIB-CM is not a legal enforcement mechanism and will not substitute for the judgment of competent judicial authorities. The EIB-CM does not pass judgement on activities under the sole responsibility of third parties. In line with its Policy and Procedures, this does however not preclude the EIB-CM from reviewing the actions of the EIB as regards possible maladministration.

There was a coordinated restart of the works not complying with the Bank’s request for a peaceful Sub-project implementation in line with the EIB E&S Standards, and while there was no additional E&S information improving the compliance status of the Sub-project justifying a change in approach, the Bank eventually disbursed a part of the remaining funds for the Sub-project. The EIB-CM understands that this was to allow for the payment of the contractors who had completed the works.

Outcome

The Bank, however, decided that it would assess ex-post and confirm in writing to the Promoter whether the financing of the Sub-project is eventually eligible or not in terms of compliance with the EIB E&S Standards and decide accordingly to continue financing the Sub-project or deduce the Sub-project cost from the last disbursement. The Bank monitoring of projects’ E&S compliance and the monitoring of its formal requests to promoters is a continuous obligation which is of particular importance at disbursement when the Bank has more leverage. Therefore, the EIB-CM suggests that the decision to finance or not this Sub-project also considers the possibility to use the EIB’s leverage to agree with the Promoter on corrective actions supporting the Sub-project’s compliance with the EIB E&S Standards and facilitating access to remedy. The EIB-CM further suggests that this assessment is documented and its result communicated by the Bank to the Promoter and that it confirms the applicability and compliance of the Sub-project with the relevant EIB E&S Standards.

The EIB-CM also concludes that the Bank did not verify and notice that the monitoring and reporting modules in the SEF for indigenous people and involuntary resettlement identified as necessary at appraisal, and required under the loan agreement, were eventually not used for reporting. The Bank has agreed, during the process of handling of the complaint at hand, to  ensure that the initially agreed SEF (modules I, II and III) is fully implemented, supervised and reported on and to monitor that the Promoter and Co-executor use the SEF modules to report on sub-projects that are still to be completed under the Project. The EIB-CM suggests that the Bank duly verifies and cross-checks that it receives all the required information for each of the sub-projects that are yet to be financed under the Project. For future similar programs with the same Promoter, the EIB-CM advises the EIB to consider if upgrading the existing environmental and social management plan (ESMP) may support further these programmes’ compliance with the EIB E&S Standards (e.g. by requesting the elaboration of an Indigenous People Framework and Resettlement Policy Framework, adapting the SEF matrix & forms, and/or adapting/training the social resources about indigenous peoples and involuntary resettlement). In general, the EIB-CM advises that the EIB assesses the suitability of the selected financial instrument in relation to the characteristics of the investment and duly justifies the selection of a particular financial instrument.

Monitoring

The EIB’s implementation of the suggestions for improvement mentioned above is under EIB-CM monitoring.