María Cecilia Ramirez Inter-American Development Bank Infrastructure and Energy Department

Transcription

1 María Cecilia Ramirez Inter-American Development Bank Infrastructure and Energy Department Green Growth Knowledge Platform Annual Conference 2017

2 Research Scope and Activities Objectives for the study Understand the extent to which infrastructure projects in Latin America and the Caribbean are affected by conflicts, and the response of infrastructure firms to such conflicts. Activities Evaluate the nature and implications of conflict in infrastructure projects I. Create a database on 200 conflicted infrastructure projects in LAC II. Undertake interviews with officers of major firms, NGOs, and research institutes in LAC. III. Use the information to understand the nature, geographical and industry prevalence, and consequences of conflict. Analyze how infrastructure firms are approaching conflict. Green Growth Knowledge Platform Annual Conference

3 Research Scope and Data 200 different infrastructure projects with conflicts, from the 1980s to today Breakdown of sub-sectors: Energy, Resources and Transportation Green Growth Knowledge Platform Annual Conference

4 The Nature of Conflict is Multi-Dimensional Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC Environmental Drivers Social drivers Governance drivers Economic drivers Green Growth Knowledge Platform Annual Conference

5 Conflicts Affect Each Infrastructure Sector Differently Although all six sectors have seen conflicts, resource, transportation, and energy projects have been more conflictive. Conflict Consequences Conflict Escalation Resource Waste Energy Transportation Water Urban Development Resource Energy Transportation Waste Urban Water Average Conflict Consequence Points 0% 25% 50% 75% 100% Low Moderate High Extreme Green Growth Knowledge Platform Annual Conference

6 Average Conflict Escalation Points Average Conflict Consequence Points Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC Low Institutional Capacity is Linked to More Serious Conflicts y = 0.531x R² = Chile Peru Panama Costa Rica Brazil Argentina Colombia El Salvador Dominican Republic Mexico Guatemala Ecuador Honduras Bolivia Venezuela y = x R² = El Salvador Guatemala Chile Brazil Argentina Peru Ecuador Colombia Mexico Panama Uruguay Costa Rica Dominican Republic Honduras Bolivia Venezuela 5 Uruguay Rule of Law Indicator Rank Rule of Law Indicator Rank Green Growth Knowledge Platform Annual Conference

7 Projects are Vulnerable to Conflicts Early On Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC 100% Most projects in the database faced conflicts in 75% the early project stages, before operations. 50% 22% 24% 30% 25% 17% 7% 1% 0% In hydroelectric projects, conflicts occur during pre-feasibility because of community concerns and expectations. Then during construction. In a few cases conflicts also occurred during operations. [...] In mining projects, conflicts usually occur during operations, as communities begin to perceive negative effects. Division head at infrastructure operating company Green Growth Knowledge Platform Annual Conference

8 The Point of Time at Which Conflicts Emerge Has Shifted 80% 60% Projects developed in the 1980s faced most conflicts during operations. Since then, the project phase that conflicts occur has been constantly shifting, towards earlier and earlier phases in the project cycle. 100% % 20% 0% Green Growth Knowledge Platform Annual Conference

9 Conflicts Cause Projects to Fail and Harm National Economies CONSEQUENCES AT THE PROJECT LEVEL Project delays 81% Cost overruns 58% Independent Average project expert delay: 5 years 57% Project redesign 42% Project Publicly cancellation reported cost overrun: 18% 1% - 600% - Average JV cost change overrun: 70% 13% above original - US$1.1 billion Project relocation 7% - Median cost overrun: 25% above original - US$192 million 0% 25% 50% 75% 100% CONSEQUENCES FOR PROJECT SPONSORS Reputational damage Redress payments Concession amendment 30% 27% 95% Fines 20% Imprisonment 5% 0% 25% 50% 75% 100% Green Growth Knowledge Platform Annual Conference

10 Conflicts Cause Projects to Fail and Harm National Economies NATIONAL CONSEQUENCES Productivity losses Missed development opportunities Loss of confidence / foreign investment Political instability / government change The consequences of conflicts are diverse. The most important are lack of confidence for investment, lack of confidence in institutions, unaccountable governments, and instability during the development process... For domestic and international investors, this is a bad message. Division head at infrastructure operating company Green Growth Knowledge Platform Annual Conference

11 Conflicts Are Not Addressed Systematically General Company Actions As Conflict Response Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC Press statements Consultation Regulatory compliance Independent expert participation Exit from project Regulatory innovation No action Force Bankruptcy 3% 19% 16% 14% 12% 39% 46% 69% 91% 0% 25% 50% 75% 100% In our country, there is the notion that it is cheaper to go ahead without defining comprehensive measures and pay the price afterwards in terms of compensation and dealing with conflicts. Just making the business run and then dealing with the consequences is considered to be the most efficient way to do things. Executive at environmental NGO Green Growth Knowledge Platform Annual Conference

12 but sometimes Sponsors do Respond with Added Benefits Community Benefit Provisions Community infrastructure Community capacity building Community jobs Community cash payments Community project participation Government equity stake Community equity stake 1% 5% 11% 27% 42% 39% 47% 0% 25% 50% 75% 100% Environmental Benefit Provisions Environmental improvements 32% Environmental restoration Reforestation 14% 11% 0% 25% 50% 75% 100% Green Growth Knowledge Platform Annual Conference

13 % of projects providing benefit Sponsor Action Can Mitigate Conflicts Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC ENVIRONMENTAL BENEFIT PROVISION AS CONFLICT RESPONSE VS FINAL PROJECT STATUS 100% 75% 50% 37% 43% 25% 0% 9% Cancelled 15% Postponed In progress Operational Green Growth Knowledge Platform Annual Conference

14 % of projects providing benefit Sponsor Action Can Mitigate Conflicts Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC COMMUNITY INFRASTRUCTURE BENEFIT PROVISION AS CONFLICT RESPONSE VS FINAL PROJECT STATUS 100% 75% 50% 38% 53% 56% 25% 21% 0% Cancelled Postponed In progress Operational Green Growth Knowledge Platform Annual Conference

15 % of projects providing benefit Sponsor Action Can Mitigate Conflicts Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC COMMUNITY CAPACITY-BUILDING BENEFIT PROVISION AS CONFLICT RESPONSE VS FINAL PROJECT STATUS 100% 75% 50% 38% 37% 58% 25% 0% 12% Cancelled Postponed In progress Operational Green Growth Knowledge Platform Annual Conference

16 Average Company Response Points Lessons from Four Decades of Infrastructure Project-Related Conflicts in LAC IFI-Funded Projects Address Conflicts More Effectively IFI-funded projects are generally better prepared and come with more stringent environmental and social management protocols and monitoring initiatives exceeding local regulations Non-IFI-funded IFI-funded Green Growth Knowledge Platform Annual Conference

17 Recommendations States and Governments 1. Ensure that national laws are comprehensive and universal. 2. Strategically develop institutional capacities to contain conflicts. 3. Start planning at the regional level. 4. Implement rigorous environmental and social regulations. 5. Design fair systems for distribution of project benefits. 6. Ensure that local communities can voice their concerns. Green Growth Knowledge Platform Annual Conference

18 Recommendations Developers and Contractors 1. Develop sustainable projects to avoid conflicts: environmental, social, institutional economic/financial 2. Establish conflict management frameworks to effectively adapt to changing situations. 3. Allocate time and resources to the consultation process. 4. Focus on transparency to build an effective relationship with local communities. Green Growth Knowledge Platform Annual Conference

19 Recommendations Lenders and Investors 1. Encourage governments to reinforce upstream planning capacities. 2. Encourage governments to deliver pipelines of infrastructure projects that are attractive to investors 3. Provide incentives for conflict management by tying funding to good practices. 4. Establish monitoring over the whole project cycle. Green Growth Knowledge Platform Annual Conference

20 Conclusion Conflicts continue to happen, with detrimental consequences for firms, investors, and national governments. Comprehensive and functional legal and regulatory systems are key to contain conflicts. Enhancing upstream planning ensures projects don t end up unprepared and in conflictive locations. Sustainable projects mitigate risks that lead to conflicts. Firms addressing conflicts proactively are less likely to see their projects cancelled. Yet, need for a continuous effort: there is no silver bullet solution Green Growth Knowledge Platform Annual Conference

21 THANK YOU María Cecilia Ramirez Inter-American Development Bank Infrastructure and Energy Department Green Growth Knowledge Platform Annual Conference 2017 Report authors Ioannis Blatsos Cristina Contreras Julia Fernandez Andreas Georgoulias Nikos Georgoulias Sven-Uwe Mueller Hendrik Meller Rahissa Melo Maria Cecilia Ramirez Judith Rodriguez Graham Watkins