WASHINGTON Jan 10 An internal World Bank
watchdog blasted the lender on Friday for not doing enough due
diligence on a loan made to a Honduran company that is allegedly
linked to multiple killings and drug trafficking.
The watchdog said the bank's International Finance
Corporation (IFC), which aims to spur private investment in poor
countries, should have more carefully researched
Tegucigalpa-based Corporacion Dinant before approving the $30
million loan program.
A standard news article search required by World Bank rules
would have turned up accusations that Dinant's owner
masterminded the murder of an environmental activist and that
his properties were staging posts for drug traffickers, the
IFC's Office of the Compliance Advisor Ombudsman (CAO) said in a
The CAO said it did not try to verify the authenticity of
the reports and noted that the businessman was acquitted on
murder charges. But their existence should have raised red flags
because they could damage the reputation of the World Bank.
"IFC staff either knew about these allegations and
perceptions and failed to deal with them" or did not conduct
required news searches, the CAO said, noting its investigators
had conducted news searches using the same parameters mandated
by the World Bank's rules.
The IFC approved the loan program in 2009 to help Dinant
develop its palm oil and food business. The CAO launched an
audit of the project in 2012.
Through the loan, IFC indirectly got involved in one of the
thorniest land disputes in Central America. Dinant operates in a
fertile region near Honduras' Caribbean coast that has been the
site of violent clashes that have killed more than 100 people
since 2009, according to the Honduran National Commission
for Human Rights.
Since the IFC approved the loan program, there have been
reports in the media that Dinant helped forcibly evict farmers
and that "inappropriate use" of its security forces had resulted
in multiple deaths, the CAO said on Friday.
The IFC said it disagreed with some of the report's
conclusions, but it was asking Dinant to retrain its security
personnel and vet them more carefully.
"The lessons from this report can help us as we increase out
work in fragile and conflict-affected areas," IFC officials
Oscar Chemerinski and Morgan Landy said in a letter to the CAO.
The report offers a cautionary tale for the World Bank as it
plans to work more closely with the private sector in order to
fight poverty in less developed nations.
The CAO recommended the World Bank put more emphasis on its
loan programs' social and environmental impact, saying a lack of
adequate research could stem from a narrow focus on a project's
An official at Dinant did not immediately respond to a
request for comment.
(Reporting by Jason Lange in Washington; Additional reportin by
Anna Yukhananov in Washington and Gustavo Palencia in
Tegucigalpa; Editing by Amanda Kwan)