By Jason Lange
WASHINGTON Jan 10 An internal World Bank
watchdog criticized the lender on Friday for not doing enough
due diligence on a loan made to an Honduran company that is
purportedly 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 report by the IFC's Office of the Compliance Advisor
Ombudsman (CAO), said in a report that a standard news article
search required by World Bank rules would have turned up
accusations that Dinant's owner had masterminded the murder of
an environmental activist and that his properties were staging
posts for drug traffickers.
The CAO said it had not tried to verify the reports and
noted that the businessman had been acquitted of murder charges,
but it said the accusations 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, adding that its
investigators had conducted news searches using the same
parameters mandated by the World Bank's rules.
An Dinant official did not immediately respond to a request
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 left more than 100 people dead
since 2009, according to the Honduran National Commission
for Human Rights.
The CAO said on Friday that since the IFC approved the loan
program, there had been media reports that Dinant helped
forcibly evict farmers and that "inappropriate use" of its
security forces had resulted in multiple deaths.
The IFC said it took the report seriously but disagreed with
some of its conclusions. It said it was working with Dinant to
address the concerns raised in the report and that failure by
the company to meet its obligations could lead to termination of
"The lessons from this report can help us as we increase our
work in fragile and conflict-affected areas," IFC officials
Oscar Chemerinski and Morgan Landy said in a letter to the CAO.
The IFC said it was asking Dinant to retrain its security
personnel and more carefully screen them.
The CAO recommended that the IFC put more emphasis on its
loan programs' social and environmental impact, and said a lack
of adequate research could stem from a narrow focus on a
project's financial terms.