Yacyreta Dam Loan Violated World Bank Policies in Paraguay

In 1979, the World Bank and the Inter-American Development Bank began distributing funds to Entidad Binacional Yacyretá (EBY), a joint creation of the governments of Argentina and Paraguay, to construct the 67-kilometer Yacyreta Dam on the Rio Paraná flowing between their two countries. The dam, which was initially projected to cost $2.6 in total, has more recently been estimated to have cost closer to $12 billion, and is often called “a monument to corruption” due to well–documented allegations implicating engineering and construction companies and politicians in siphoning off public funds during the project’s completion.

The Yacyreta’s floodgates first closed in 1994, with harmful affects to local communities in the river basin. Claimants from the NGO Sobrevivencia filed a complaint with the World Bank Inspection Panel asserting that prior to funding the project, the Bank should have confirmed that citizens who live along the Rio Paraná were in favor of the dam’s construction and well-aware of the litany of impacts its construction would have on their environment. World Bank Executive Directors agreed to conduct an inspection of the project, reaffirming the World Bank commitment to humanitarian efforts worldwide. Due in large part to the assistance CIEL was able to offer Sobrevivencia, the Yacyreta Dam claim was the first claim in nearly two years to receive Board approval of an inspection by the Inspection Panel.

After officials from the World Bank Inspection Panel visited the Yacyreta site, they affirmed that the World Bank had in fact violated environmental and project-supervision policies. Unfortunately, the loans still processed and management elected to continue with the project, resulting in the displacement of much of the community due to flooding and significant damage to the ecosystem. In February of 1997, World Bank management asserted that the Bank “satisfied with the conclusions of the report [of the Inspection Panel] which affirm that its policies on resettlement, environment, community participation, and others were fully respected and applied in the case of Yacyreta.”

The International Rivers Network (IRN) responded with a sign-on letter endorsed by 83 NGOs demanding that the Bank take a number of steps toward greater transparency in their decision. The sign-on insisted the World Bank retract a previous and misleading letter published in the Paraguayan press, issue a Spanish-translation of the Inspection Panel report, and publicize its Action Plan. The Board issued statements promising compliance to the IRN demands, yet as construction continued on Yacyreta, peaceful protest demonstrations were plagued with violent policing. The World Bank closed the case in 1998 with a final pledge of $210 million.