Lessons Learned: Pangue Hydroelectric
In the early 1990s, IFC commenced a decade-long involvement in the Pangue Hydroelectric project in Chile. The project sparked a multitude of controversies that have greatly influenced the Corporation's approach to addressing environmental and social issues. By IFC standards at the time, the Pangue project reflected precedent-setting efforts to promote environmental and social stewardship. Yet, no other project in the history of IFC has led to such ongoing controversy, and far-reaching institutional change.
The fallout from Pangue was a difficult but valuable learning experience for IFC management and staff. Two formal complaints were lodged with IFC's Compliance Advisor Ombudsman (CAO), an independent review was ordered by World Bank Group President, James Wolfensohn, and the project was subject to intense NGO scrutiny for over a decade. The resultant cost to IFC has been significant in terms of millions of dollars spent in staff time and public relations, legal and consultant fees.
Unknown to many, it was the Pangue project that catalyzed the strengthening of IFC's institutional capacity to address environmental and social issues, most notably the emergence of IFC's Environment and Social Development Department; the adoption of the Safeguard Policies; the formulation of robust environmental and social project review procedures; and the establishment of the CAO's Office. All these aspects have become a mainstay of IFC business. This case study has been written for an internal audience to relate key aspects of the Pangue story from the perspective of IFC. Its purpose is to ensure that 'lessons learned' by staff who worked on the project can benefit the wider institution as IFC moves forward with its focus on sustainability.