[for public release] 

Inter-American Development Bank (IDB) 

Inspection of Cana Brava Hydropower Project (Brazil) 

United States Position 

Board Date: December 21, 2005 

The Inspection Panel is to be thanked for a useful and comprehensive report. Based on a 

thorough review of the full information provided in the Panel’s Report and Annexes, and the 

Management’s Response, we concur with the Panel findings regarding the Bank’s failure to 

comply with its policies on resettlement and project preparation. 

Specifically, we agree that the final resettlement plan did not incorporate the changes 

recommended by the Committee on Environmental and Social Issues (CESI), and that, for some 

of the affected people, the outcome of the IDB-sponsored resettlement did not meet the Bank’s 

policy requirement for living standards, access to land, natural resources, and services at least 

equivalent to pre-project levels. 

Among other things, the final plan lacked the identification of relocation sites, agricultural 

production models, and analysis of impoverishment and vulnerability. The budget was set 

without contingency even though there was little knowledge about which options would be 

chosen by the affected people. There was no schedule of the linkages between the pace of dam 

construction, filling of the reservoir, and resettlement activities. The assumption was that, 

following the final plan, affected people would learn more about the options and make their 

choices. However, as the Panel details, affected people received little concrete information about 

relocation sites or income restoration plans, and were given a short deadline to make decisions. 

It is also troubling that the resettlement plan assumed that cash compensation was potentially 

appropriate for all sub-groups of the affected population. This assumption was made despite the 

fact that the census had noted the extreme poverty and low education levels of the majority of the 

affected. It is directly in contradiction to the Bank’s policy which states that “Cash 

compensation will only be offered as an option if the social and economic conditions of the 

affected population, the institutional setting and housing market, or the complementary services 

included in the resettlement plan, are such as to ensure that it can be invested in a manner that 

will restore the affected population’s standard of living.” 

We believe there are significant “lessons learned” from this experience and trust that the 

management will take appropriate internal actions to ensure that it is not repeated. We are also 

encouraged by the news of an initiative recently taken by several local companies, with potential 

support by the Multilateral Investment Fund, to develop an economic and social development 

fund to help address the broader economic and social problems in the area. We understand that a 

local committee was recently established to resolve the potential cases of additional 

compensation identified in the social audit. 
With respect to disclosure of the inspection panel’s report, the IDB’s Disclosure of Information 

Policy recognizes that some restrictions on the release of information are necessary in order to 

protect business confidentiality and preclude material harm to the business and competitive 

interests of the Bank’s clients. The release of an abstract of the report written by the 

management of the bank, however well intended, represents a clear conflict of interest inasmuch 

as the management is the subject of the inspection panel’s report. We think that further work 

needs to be done on the Independent Inspection Mechanism and/or Disclosure of Information 

Policies to assure that the conclusions of the Inspection Panel can be made known more directly 

to the public in a manner that maintains the integrity of the process.