29. Oct. 2014
The recent constitution of a new Multilateral Development Bank (MDB) by the BRICS#1 countries, the New Development Bank (NBD), is widely recognized as a landmark event that has the potential to alter the landscape of development finance. The coming into life of another MDB founded by a group of emerging powers, and not by the “West”, has spurred a laudable debate on what exactly constitutes the “new” and the “old” in the realm of development finance.
This new arrival has prompted an array of questions, such as: With the NDB as a player, what changes will occur in the modus operandi of the pre-existing web of development finance institutions and their norms? Will the NDB serve as a catalyst for a more democratic world financial order? If so, was the NDB designed in such a way that will make this aspiration possible?
This article tries to address these and related issues: will the NDB be an impediment or a catalyst for a more inclusive, human-centered and democratic development process? What are the possibilities of adopting a “rights-based” approach by the NDB or, less ambitiously, the mainstreaming of human rights into its policies and practices?
To respond to those questions, this article presents concerns and expectations related to the risks and opportunities presented by the NDB in terms of advancing rights-promoting policies as well as standards and governance agendas into the dynamics of development cooperation. Without attempting to provide exhaustive coverage of these subjects, this article brings some key elements to the debate.
The World Bank Safeguards Review Process and Human Rights Dilemmas
World Bank’s environmental and social safeguards are in the final stage of a review process, which was launched in 2012. The WB is traditionally seen as a “standard-setter” in the establishment and enforcement of rules aimed at ensuring that financing development will not harm communities and the environment. This is despite the fact that it has still not adopted a full-fledged approach to human rights, as per the UN agenda on human rights and development#2 and that it no longer is at forefront in some fields, such as labor rights and human rights impact assessment.
In July 2014, the WB disclosed its proposed Environmental and Social Safeguards Framework for review and consultation. Immediately after the document was made public, numerous statements by civil society organisations (CSOs) argued that it contained multiple shortcomings and failed to achieve the objective of not “diluting existing standards,” which was promised by the Bank’s President, Jim Kim. This assertion is based not only on the perceived “overreliance” of the Bank on domestic institutions of borrowing countries, but also because of the diluted content of certain policies, and “opt-out” clauses in the Indigenous Peoples’ Policy.#3
The outcomes of the WB’s ongoing safeguards review process are to be understood in a context of shifts in the Bank’s investment patterns and strategies. These shifts are creating new challenges to the application of safeguards, which were devised with the original intent to “do no harm” in the context of stand-alone projects. Now, there are many programmatic operations, such as development policy loans, results-oriented investment strategies (the “Programme For Results”), and Public-Private Partnerships. These lending instruments can be fully or at least partially exempt from safeguards.#4
Where the WB sees the proposed safeguards as coherently distinguishing between the obligations of the Bank and its borrowers, and addressing previous contradictions,CSOs, on the other hand, see the Bank as shifting its responsibilities to borrowers without clear criteria about the division of labor and weakening mechanisms for accountability toward and protection for affected communities.
Overall, citizens’ groups and other stakeholders are engaging with the Bank to help ensure that there is no “dilution” of the current rules in ways that would reduce the capacity of the Bank to influence other institutions – notably the so-called bilateral and multilateral “new providers” – to adopt human rights criteria into their lending processes. These “new providers” include the BRICS’ NDB and the Asian Infrastructure Investment Bank.
The example of the Brazilian Development Bank
Brazil’s Bank for Economic and Social Development (BNDES) has attracted much attention in the past ten years, mainly due to the substantial increase in its disbursements, which soared from US$ 19.5 billion in 2005 to US$ 79 billion in 2013. A four-fold rise and an amount that is two and a half times the disbursements made by the WB (i.e. the IBRD and IDA) last year. Today, BNDES is second only to the Chinese Development Bank#5 in terms of disbursement capacity and outstanding loans. From the $79 billion disbursed by BNDES in 2013, approximately US$ 26 billion financed infrastructure projects.
The growth of the portfolio of BNDES has attracted unprecedented attention from a variety of actors.#6 This invigorated public oversight of the BNDES operations is intimately related to an increase in the number of denouncements and well-documented cases of human rights abuses associated with BNDES-financed projects.
Amongst the most prominent violations are the degrading conditions imposed on workers employed in energy infrastructure projects in the Amazon; an increase in the rates of sexual exploitation of children and adolescents in the proximity of the project construction sites; and the violation of the rights of indigenous and traditional peoples. The rights of these peoples include the right to be spared from any cultural, physical and territorial violence and the right to free, prior and informed consent (FPIC) prior to implementation of projects affecting them and their territories.
Despite improvements in the past five years#7 (primarily due to pressures from civil society and by exogenous institutional changes#8), the lack of transparency surrounding BNDES’s activities is still pervasive. And, despite the expected (and legally required) standards of democratic accountability, the Bank still fails to provide:
Last, but not least, BNDES lacks a grievance mechanism designed to receive complaints from victims of human rights abuses and affected communities in an impartial, credible and independent manner.
BNDES’s impact on the enjoyment of human rights is a complex issue. Every year, the Bank makes sizeable investments in “socially friendly” areas, such as microcredit and “social infrastructure” (e.g., access to sanitation, water, and educational facilities). BNDES also plays an important role in the governance of environmental impacts when it acts as manager of the Amazon Fund and the Climate Change Fund.
However, as the Bank has fallen short of mainstreaming human rights into its operations or adopting a human rights-based approach, a “double-standard” arises, which allows BNDES to contribute to human rights violations in Brazil and abroad#10 while simultaneously channeling resources to projects that undeniably carry positive social externalities.
The discussions around the NDB are multifaceted and diverse. This article sought to address prominent questions related to the potential impacts of the NDB in development cooperation and its role in enhancing the enjoyment (by individuals and communities affected by development projects and programmes) of all the rights enshrined in international human rights law. Our two-tiered analysis of the challenges to and opportunities of upholding human rights within the future normative framework and operations of the NDB allows us to make some forecasts.
Through the “global” example of the World Bank, we can conclude that the integration of human rights standards into the normative framework and the practical operations of the NDB will certainly be a steep and difficult undertaking. Firstly, because of the deep-rooted resistance on the part of the BRICS countries to confer MDBs with the powers to condition financial assistance on the compliance with a set of rules which, in their view, restrain their “policy space” and undermine their “democratic autonomy”. This is definitely not a new fact, but rather a historic cornerstone of the “South vs. North” polarization. However, on this very conflict, the winds have never blown so strongly towards the South as they do now. We see proof of this in the trend in the WB (and other MDBs) towards a more flexible approach to safeguards in which countries have more “ownership” over not only the assessment of potential adverse (or beneficial) impacts of projects, but also over compliance and enforcement of rules.
The national-level experience of the BNDES, in turn, provides evidence ofshortcomings in transparency practices, in stakeholders’ standards for participation and the relatively weak framework for social, environmental and human rights protection. The record of BNDES (which is similar to the record of national development banks of other BRICS countries) adds another layer of difficulty to the challenge of integrating human rights principles within the NDB. This is a source of concern because there are rumors that the NDB’s approach to human rights protection will emulate the national development banks of each of the BRICS countries.
As these two examples show, optimistic assumptions that the NDB will lay the foundations for a more democratic “world order” have little evidence to back them up. Still, means must be found to concretely improve the lives of those affected by development programmes. While many prioritize the role of the NDB in fixing current imbalances in the global governance regime, it is more important to address the plight of vulnerable citizens, not the injustices afflicting the State system. Peoples, and not states, are the most affected when there is an unfair system that – more often than not – imposes harsh conditionalities on development assistance in the Global South. People or citizens are also the ones bereft of remedies for violations and abuses within this emerging new model.
No global governance model can be truly called “alternative” or “sustainable” without having as its main pillar a rights-based, pro-poor development principle. The international development community cannot fully embrace “solutions” that put more emphasis on justice among states than on justice within states or that exact high costs in terms of social justice and peoples’ rights.
12 For the difference between “causing” and “contributing” to human rights abuses by corporations, see: OHCHR (2012). The Corporate Responsibility to Respect – An Interpretive Guide.
1. Acronym that refers to the grouping comprised of Brazil, Russia, India, China and South Africa.
2. On the UN’s perspective about the integration of human rights into development cooperation, see: United Nations “The Human Rights Based Approach to Development Cooperation – Towards a Common Understanding Among UN Agencies”.
3. For a thorough list of reactions, see: <http://www.bicusa.org/safeguards-reaction-roundup/>.
4. For a more detailed analysis on evolving trends of the WB’s investments, see: CURREY, Kevin (2014). Some Evolving Trends at the World Bank: Lending, Funding, Staffing; INTERNATIONAL RIVERS (2012). Will Safeguards Survive the Next Generation of Development Finance?
5. See Currey (2014) and table contained in page 8 therein.
6. Examples of this increased public scrutiny includes frequent pieces on traditional and non-traditional media, actions taken by the Federal Prosecution Service (Ministério Público Federal) against the Bank, and several FOIA requests from civil society organizations and from academics and media professionals (even though these requests met with very little success).
7. In 2009, BNDES created the “Portal BNDES Transparente”, allowing civil society to have more systematic access to information produced and held by the Bank.
8. In 2011, the Brazilian Freedom of Information Act (Lei N° 12.527/2011) came into force. The landmark piece of legislation has created a momentum in terms of public administration transparency and is undoubtedly a remarkable example of institutional change with positive effects in informal and deeply embedded cultural practices. Disputes over the public or confidential character of reports prepared by BNDES during the project cycle life are amongst the leading cases related to the application of the law.
9. Further information on BNDES’s transparency practices can be found in the study by Conectas: “Desenvolvimento para as pessoas? O financiamento do BNDES e os direitos humanos” (2014).
10. For the difference between “causing” and “contributing” to human rights abuses by corporations, see: OHCHR (2012). The Corporate Responsibility to Respect – An Interpretive Guide.
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