MANAGEMENT'S COMMENTS ON THE REVIEW PANEL'S REPORT
YACYRETÁ HYDROELECTRIC PROJECT
I. COMMENTS RELATED TO THE REPORT'S PRINCIPAL CONCLUSIONS
1.01 This document contains Management's comments on the Report of the Review Panel for the Yacyretá Hydroelectric Project that was distributed with memorandum GN-1947-8 on September 25, 1997.
1.02 The Yacyretá Hydroelectric Project has been an ambitious and complicated undertaking from every aspect, spanning well over a decade. As a major power generation operation, the project is intended to benefit people throughout Argentina and Paraguay -- far beyond the immediate area of influence of the civil works undertaken, which is where the social and environmental impacts have occurred. With the support of the Bank, the Entidad Binacional Yacyretá (EBY) and the governments of Argentina and Paraguay have taken steps to try to mitigate or compensate for the social and environmental impacts in accordance with the relevant Bank policies as each of the successive loans was approved.
1.03 Loan 760/OC-RG from the IDB is the latest multi-lateral development bank (MDB) loan for the Yacyretá project. The majority of the loan resources are designated to help EBY address the expected negative social and environmental impacts associated with raising the water level in the reservoir from 76 meters above sea level (masl) to 83 masl. While many factors have contributed to delay completion of the Yacyretá project, Management continues to support the objectives of loan 760/OC-RG and considers that speedy implementation of the efforts set out in the loan contract remains the best course of action. Bank staff will continue to work with EBY and the governments of Argentina and Paraguay to this end.
1.04 In this context, the analysis and conclusions of the review panel represent an important input which Bank staff look forward to discussing with EBY and authorities from the two governments. Having considered the panel's report, Management finds no substantial areas of disagreement, either with the basic facts as reported by the panel or with the conclusions concerning the problems which still need to be resolved.
1.05 The panel drew two principal conclusions from its work:
"The program and actions that have been agreed to among the Governments of Argentina and Paraguay, the executing agency, EBY, and the Banks do not appear to satisfy all of the needs or resolve the diverse problems encountered in the Project;" and
"... the programs relating to the filling of the reservoir above 76 masl will be much more complex than all that has already taken place. So that these programs be implemented in an efficient fashion, special conditions are required, such as greater institutional capacity than at present; the establishment of systematic processes for participation oriented toward creation of authentic consensus; and more careful monitoring on the part of the financial organizations."
1.06 In addition, in various sections of its report, the review panel identified several areas that require specific attention in order to ensure the success of the project. These include:
a. Carrying out the Basic Program (i.e. the actions designed in February 1997
to mitigate
the social and environmental effects in the zone between 76 and 78 masl) in order
to dispel the
climate of uncertainty and restore credibility;
b. Placing the measures within the context of economic development plans of
the Parana
watershed as a whole, including by enhancing coordination with other
IDB-financed projects in
the region;
c. Strengthening coordination among the MDBs, the EBY and the
governments;
d. Improving public participation and access to information about the project;
and
e. Completing the pending studies.
1.07 As the panel pointed out, the programs related to filling the reservoir above 76 masl are more extensive and complicated than those already undertaken. Effective implementation of the Basic Programs currently underway, as well as the programs related to filling the reservoir to 83 masl, will require EBY to demonstrate much greater efficiency and effectiveness than it has in the past in this regard. Prompt completion of the missing base studies is a prerequisite for addressing the problems adequately. Concerted action to this end and timely decisions by both governments on a host of issues, as well as greater participation of the local community will be necessary. Timely decisions will also require increased coordination among all parties. Bank staff are prepared to assist EBY and the governments in this process.
1.08 Efforts to enhance the quality of public participation in the project have already begun. Last June, the Bank's annual evaluation of the project included for the first time participation by non-governmental organizations, local governments and citizens from the project area. To assist in this process, EBY engaged the services of a foundation that specializes in facilitating processes of conflict resolution and stakeholder involvement to assist in the evaluation meetings. With the assistance of the foundation, EBY is now taking additional steps to broaden civil society participation in the project.
1.09 Finally, some of what the panel has suggested cannot be handled solely within the context of IDB loan 760/OC-RG, but would require further actions by the governments of Argentina and Paraguay within the context of their own plans for development of the region. Management will work with EBY and the governments of Argentina and Paraguay to use loan 760/OC-RG to the greatest extent possible to address the negative impacts directly attributable to the Yacyretá project. With respect to potential actions outside the immediate influence of EBY and the Yacyretá project, Management is prepared to work with the governments of Argentina and Paraguay to decide how other IDB-financed operations in the region could address the needs, as well as to consider any additional requests from the governments for assistance in designing or implementing appropriate regional development activities in the Parana River basin.
1.10 Management would welcome the opportunity to discuss with the Board the findings and conclusions presented in the panel's report. The next section contains specific comments on each of the eight elements that the panel considered critical for implementing the socio-environmental programs.
II. SPECIFIC COMMENTS RELATED TO THE REPORT'S
"CRITICAL ELEMENTS FOR HANDLING THE SOCIO-ENVIRONMENTAL PROGRAMS"
2.01 Management's comments on specific considerations that "constitute, in the
opinion of the Panel, the critical elements for handling the socio-environmental
programs", and which more clearly define the nature of the conclusions expressed
in
the Report, are presented in the following paragraphs.
1. Guarantee of obligations for incurred social and environmental liabilities
a. Conclusion of the Panel
2.02 "a) Whatever the arrangements regarding management of the operations of the Project in the future may be, the social and environmental problems must be attended to. In this context it is of particular importance that the absolute responsibility of the governments be clearly established in such a way as to guarantee the repayment of all the social and environmental costs owed up to the present moment. It should be emphasized in this context that the IDB can play an essential role in assuring such conditions."
b. Management Comments
2.03 The Bank continues to be committed to addressing the social and environmental issues related to the Yacyretá Hydroelectric Project. The two governments and the EBY are contractually committed to fulfill their responsibilities regarding these issues. In this respect, the Bank will work with the EBY and the two governments so that the pertinent obligations of all parties are fulfilled.
2. Issue of symmetry
a. Conclusion of the Panel
2.04 "b) The Yacyretá Hydroelectric Project has been characterized up to now by a lack of symmetrical relationship between the countries. The importance of the decision of August 23, 1997 by the governments of Paraguay and Argentina modifying the Statute of EBY and establishing co-management should be highlighted. The Panel considers that this agreement contributed to the creation of more equitable relations in the bi-national management of the Project. Nevertheless, it must be emphasized that in order to create more equitable relationships, it will be necessary to create effective procedures which contribute to the creation of an appropriate institutional culture."
b. Management Comments
2.05 The Bank will inform both countries and the borrower of the Panel's opinion related to the issue of symmetry with regard to the Project. Effective solutions to the executing capacity are crucial and will involve prompt decisions and actions by the governments and continued monitoring by the Bank. The Bank would be available to provide technical support, if requested by the parties, to help improve administrative procedures.
3. Regional Development and Reformulation of Loan 760/OC-RG
a. Conclusion of the Panel
2.06 "c) In view of the fact that decisions and strategies for resolving the fundamental consequences caused by the filling of the reservoir up to 76 masl have been adopted, IDB loan 760/OC-RG acquires a special significance for reformulation of the focus, policies, and strategies involved in the future management of the Project. As a consequence, it is necessary to examine the appropriateness of reformulating loan 760/OC-RG. In this context, plans for future development of the basin of the Paraná River need to be taken into account, given the fact that the strategies of the Project will be closely related to decisions adopted with respect to construction of the Corpus dam.
2.07 'e) It must be noted that the social and environmental mitigation programs cannot resolve all the resulting development needs of a project as expansive as Yacyretá. For this reason, it would be advisable to reorient the activities of the Resettlement and Environmental Program to focus on regional development and possibly consider coordinating such activities with other IDB projects in the region."
b. Management Comments
2.08 The resources of Bank loan 760/OC-RG to EBY are designated to finance environmental mitigation and resettlement investments directly associated with the effects of the Project for which the borrower, EBY, has a legal responsibility and mandate. As the Panel indicates, there is uncertainty about the availability of sufficient resources to assure full financing of activities other than the Basic Plans now being executed. Any consideration of reallocation of loan resources for other purposes should await decisions regarding the future of the Project. Specific activities which form part of the Basic Plan can be reviewed and amended, as warranted, to take into account the plans of the governments for the development of the basin.
2.09 The problems caused by the Yacyretá Hydroelectric Project are aggravated by the general problems in the area beyond the scope of the Project, and, as expressed in the Report, their solution would be more viable as part of an overall regional, economic development scheme. Various programs being financed by the Bank in both countries have significant investments in the Project area. Together with the national authorities, Management will continue to support improvements in the planning of future programs and the utilization of those in execution to address the problems in the area of the Yacyretá Hydroelectric Project. Management is willing to consider requests from the respective governments for assistance (including financing) for further appropriate regional development activities in the Parana River basin.
4. Cooperation and coordination among both Banks and the two countries
a. Conclusion of the Panel
2.10 "d) It has been made clear that the joint action of the Banks improves the possibilities that commitments on the part of the governments actually can be accomplished. For this reason, it is necessary to strengthen the cooperation and coordination between both Banks and the two countries."
b. Management Comments
2.11 Management is constantly seeking ways to improve coordination with the World Bank. The project teams from both Banks continue to undertake joint actions to achieve common objectives. Management fully agrees that more cooperation and coordination is needed among the Banks, the two countries and the EBY.
5. Participation of the local population
a. Conclusion of the Panel
2.12 "f) The Yacyretá Hydroelectric Project has until now included the participation of the local populace in a sporadic and incidental fashion. In order to guarantee the genuine execution of the actions involved in this project in accordance with the Bank's rules and policies, it is necessary to strengthen the mechanisms for participation and coordination among the various public and private actors. In this context, the IDB could play an important role."
b. Management Comments
2.13 Management agrees on the importance of public participation in the Project. The active participation of civil society was indicated in the proposal for the most recent loan (760/OC-RG), as necessary for the success of the Project. The Bank is continuing to encourage and facilitate increased involvement of civil society in the Project. The annual program evaluation meeting in June, 1997 among EBY, the governmental authorities, and the Bank included participation of NGOs and GOs from Argentina and Paraguay and meetings with the local population, as established in the loan contracts. An experienced foundation was engaged by EBY to participate in the meetings and begin an orientation as to the scope of the problems associated with the Yacyretá Hydroelectric Project. The EBY is working with this NGO to establish an EBY/governmental/civil society forum to air the issues and work toward commonly acceptable solutions. The Bank is seeking to have a dialogue between the Borrower (EBY) and civil society strengthened and maintained as a means of involving all interested parties in the solutions to the problems of the Project. Management will continue to work with the borrower and the two governments to examine the various options for providing technical assistance and coordination to enhance the public and private participation with the Project and support necessary adjustments so that this becomes an ongoing process.
6. Basic socio-environmental evaluation studies
a. Conclusion of the Panel
2.14 "g) To meet the Project's objectives and to accelerate the execution of the complementary works, it is necessary to complete the basic socio-environmental evaluation studies. The Panel agrees with the Bank's technicians that the hydro-geologic study is a fundamental requisite for evaluation of alternatives in regard to the Brazo Aña Cuá and the Aguapey canal, as it is fundamental in order to analyze the effects of filling the reservoir on the humid terrain along both sides of the reservoir. The effects of this study could have important implications for decisions regarding the future of the project."
b. Management Comments
2.15 Management concurs that the basic studies should be completed as soon as possible and takes note that the Panel agrees with the Bank's technicians that the hydro-geological study should cover the areas mentioned. The Bank is exploring ways to ensure that the necessary studies are contracted and completed as soon as possible.
7. Quick and effective decisions
a. Conclusion of the Panel
2.16 " h) If decisions are not adopted quickly and effectively, problems will inevitably grow. It is necessary to adopt measures which will arrest negative impacts, so that restorative economic actions can then be implemented in the region. In this sense, it is urgent to reduce and finally resolve the existing uncertainty with regard to the future of the project."
b. Management Comments
2.17 Management agrees and continues to be committed to having the issues related to the Yacyretá Hydroelectric Project addressed in an efficient and rapid manner. To this effect, the Bank is working with the EBY and the two governments to have the Basic Plan executed in a timely and efficient manner, to clarify in the near future the prospects of the Project and to diminish the current uncertainty on issues such as resettlement, level of the reservoir and possible private sector involvement.