Document Type

Article

Publication Date

1999

Abstract

This Article presents a case study of lending by the International Finance Corporation (IFC), the private-sector lending arm of the World Bank Group, in the oil and gas sector in Guatemala. The case study emphasizes the need for additional environmental reform at IFC. With two separate loans in 1994 and 1996, IFC supported the activities of a small international oil company that was operating within a national park in the northern Guatemalan Petdn, an area of rich tropical forests and globally important wetlands. The company's operations had been "grandfathered"in to the park upon its creation in 1990. Funding from IFC was used to construct a pipeline from the oil field in the park to a refinery outside of the park. The crux of the authors' findings is that the pipeline should have been constructed to follow the path of an existing road, rather than along the chosen route that crosses significant stretches of primary tropical forest and that opened a new right-of-way into a park already facing continued pressure from colonization. The authors conclude that a stronger set of IFC lending policies, combined with a better environmental impact assessment and more extensive public consultation, would have led to a less environmentally damaging outcome. Although the authors acknowledge the complex questions about the role of governments, development agencies, the private sector, conservation organizations, and local communities raised by this issue, they focus on the narrow subject of IFC's role in this matter, stressing the need for a reform agenda at that institution.

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