Dependent Variable 3: Accountability

In this section we will analyse the data obtained for the dependent variable “degree of accountability”. All three projects presented provisions relevant to this variable in their documents, although the IFI-financed projects contained a considerably higher number of quotes than the China-financed project. We will now analyse the results of the two indicators of accountability individually.

The first indicator of accountability is transparency, which refers to provisions which ensure that citizens are able to access information regarding the project’s planning and implementation. While both of the IFI-financed projects contained provisions related to transparency in their documents, the China-financed project had none.

The documents for the Agricultural Improvement project produced two provisions for transparency, both related to the procurement procedures. First of all, national public tendering procedures may be utilised only if these are able to guarantee transparency (Table 11, quote n.1). Secondly, all documents related to the procurement procedures must be made publicly available on the website of the Organismo Supervisor de Contrataciones del Estado (supervisory body for public contracting). These include the invitations to tender, the tender documents, the minutes of the bid opening, the calls for expression of interest and a summary of the evaluation reports of all the offers for goods and services (Table 11, quote n.2).

The documents for the Decentralized Rural Transport project contained one relevant provision, also related to the procurement procedure, which is that the selection procedure for the award of contracts must be based on publicly available objective criteria (Table 12, quote n.1).

As for the Coca Codo Sinclair project, its documents contained no quotes related to transparency. This is not surprising considering that not even the project’s loan agreement was made publicly available. The analysis of external reports further confirms these findings. In 2014 the Regional Coalition for Transparency and Participation published a report comparing the socio-environmental safeguards of projects in Latin America financed by China’s ExIm Bank, the IDB and two other regional development banks. The report selected the Coca Codo Sinclair project as its case study for ExIm Bank and concluded that the China-financed project fared the worst in terms of safeguards precisely due to its lack of transparency (Rivasplata Cabrera et al. 2014). Since the ExIm Bank lacks any form of Transparency and Access to Information policy, it is not compelled to disclose project documents nor to provide information on its activities abroad (Regional Coalition for Transparency and Participation n.d., par.3). Unlike other development banks, it does not have a web portal accessible to the public. It also lacks a public reporting mechanism and is “habitually unresponsive to requests for information in Ecuador and elsewhere” (Soutar 2014, par.18).

The second indicator of accountability is external oversight, which refers to provisions which ensure that the project’s implementation is monitored by external institutions or mechanisms. All three projects contained provisions related to external oversight in their

documents. However, while for both of the IFI-financed projects we were able to find an extensive amount of relevant quotes, for the China-financed project there seemed to be only one.

The Agricultural Improvement project contained in its documents twelve quotes concerning external oversight, which is to be provided by the Inter-American Development Bank. First of all, the project’s development is to be supervised by the IDB, who must implement any inspection procedures deemed necessary (Table 11, quotes n.6, 7 and 11). This includes the ex- ante or ex-post inspection of procurement processes (Table 11, quote n.10). Secondly, to this end the borrower must provide to the IDB a variety of project evaluation documents. These include: progress reports for each semester; midterm, final and impact evaluations (conducted by an external consultant); all documents necessary for an ex-post evaluation; and annual maintenance reports for five years after the project's completion (Table 11, quotes n.2, 4, 5 and 12). Thirdly, the project’s financial statements must be independently audited and presented to the IDB (Table 11, quotes n.8, 13 and 14). Finally, the IDB has the right to undertake punitive measures in case of corrupt, fraudulent, collusive or coercive practices (Table 11, quote n.9).

As for the Decentralized Rural Transport project, its documents contained sixteen relevant quotes, all stressing the role of the World Bank as the source of external oversight. First of all, the project is to be supervised by the World Bank, who to this end may inspect the project's goods and services, visit its facilities and request any relevant documentation (Table 12, quotes n.2, 3 and 16). Secondly, the borrower must provide to the Bank “all plans, schedules, specifications, reports and contract documents” concerning the project, including biannual and final performance reports, and implement any measures recommended by it (Table 12, quotes n.5, 9, 11, 14, and 15). Thirdly, the borrower must maintain and provide to the Bank records of all expenditures (Table 12, quotes n.12 and 13). Fourthly, all procurement records and financial statements must be independently audited and presented to the Bank (Table 12, quotes n.4, 6, 7, 8 and 10). Finally, in case of “corrupt, fraudulent, collusive or coercive practices” the Bank is to withdraw its financial support (Table 12, quote n.17).

Finally, the Coca Codo Sinclair project contained only one relevant quote in its documents, which is especially striking considering the high number of quotes found in the other

two project’s documents. The quote was found in the contract between Ecuador and Cocasinclair EP and states that the Ecuadorian government is entitled to request at any time external audits of the use of resources financed by the loan (Table 10, quote n.1).

While the China-financed project’s documents contained a lower number of relevant quotes than the other two projects’, it is nevertheless certain that in all three projects arrangements were in place to ensure external oversight. However, these positive results are somewhat weakened by the findings of external reports. First of all, in 2012 the non-profit Inter- American Dialogue published a comprehensive report on China’s lending practices in Latin America and the Caribbean. The report contains a comparative assessment of various development banks in terms of their lending practices’ compliance with a set of common social and environmental guidelines (Gallagher et al. 2012, pp.24-25). These guidelines include “independent monitoring and review”, which requires that “to ensure due diligence, an independent social or environmental expert not associated with the borrower will review the EIA, the project review, and consultation process” (Gallagher et al. 2012, p.23). Contradicting our findings, the authors conclude that while the World Bank requires the independent monitoring and review of its projects, China’s ExIm Bank does not. However, neither does the Inter- American Development Bank, which seems to contradict the high number of relevant quotes found in its project’s documents (Gallagher et al. 2012, pp.24-25).

Similarly, the non-profit Dialogo Chinoraises concerns over China ExIm Bank’s lack of appropriate oversight over the projects it finances, citing as evidence a fatal accident at the Coca Codo Sinclair project site in 2014 (Soutar, 2014). The accident resulted in the death of 13 workers after part of the stone wall of the main pressure well collapsed, and is apparently only one of the many which have plagued projects by Chinese companies in Ecuador (Soutar 2014, pars.4,7). Furthermore, according to Amazonian specialist Martha Torres Marcos-Ibáñez the accident was caused by structural failures and could have easily been avoided had there been appropriate risk monitoring measures in place (cited in Soutar 2014, pp.10-12).

Table 10. Coca Codo Sinclair Hydroelectric Project

Dependent Variable Quotes

2) Degree of accountability

a) Transparency Ecuador - Cocasinclair EP (CELEC EP, 2012)

Cocasinclair EP - Sinohydro Corporation (CELEC EP, 2009)

b) External oversight Ecuador - Cocasinclair EP (CELEC EP, 2012)

1) “El "ESTADO", queda facultado para solicitar cuando este estime necesario, la práctica de Auditorías Externas del uso de los recursos provenientes del Contrato de Préstamo respectivo.” (p.5)

Cocasinclair EP - Sinohydro Corporation (CELEC EP, 2009) Table 11. Agricultural Improvement Project (IDB, 2014)

Dependent Variable Quotes

2) Degree of accountability

a) Transparency 1) “Los procedimientos de licitación pública nacional

respectivos podrán ser utilizados siempre que, a juicio del Banco, dichos procedimientos garanticen economía, eficiencia, transparencia (...)” (p.5) 2) “Los llamados a licitación, los documentos de

licitación, las actas de apertura de las ofertas, las solicitudes para expresión de interés y el resumen pertinente de los informes de evaluación de las ofertas y propuestas correspondientes a todas obras, los bienes, servicios diferentes a consultoría y servicios de consultoría, según corresponda, serán publicados en la página Web del Organismo Supervisor de Contrataciones del Estado” (p.5) b) External oversight

3) “El Prestatario se compromete a (...) presentar al Banco, durante el plazo de cinco años luego de terminado el período de ejecución del Proyecto (...) un informe sobre el estado de dichas obras y equipos y el plan anual de mantenimiento para ese año. Si de las inspecciones que realice el Banco, o de los informes que reciba, se determina que el

mantenimiento se efectúa por debajo de los niveles convenidos, el Prestatario, a través del Organismo Ejecutor, deberá adoptar las medidas necesarias para

que se corrijan totalmente las deficiencias (p.6) 4) “El Prestatario (...) contratará servicios de

consultoría (...) a fin de realizar las siguientes evaluaciones del Proyecto: (a) Evaluación de medio término, la cual será presentada al Banco (...) (b) Evaluación final, la cual será presentada (...) (c) Una evaluación de impacto del Proyecto (...) deberá ser presentado junto con el informe a que se refiere el literal (b) anterior.” (p.7).

5) “El Prestatario (...) se compromete a recopilar, mantener y poner a disposición del Banco los informes indicados en las Cláusulas 4.08 y 5.01 así como la documentación e información estadística de soporte, para llevar a cabo una evaluación ex-post” (p.8)

6) “El Prestatario se compromete a que (...) se lleven los registros, se permitan las inspecciones, se suministren los informes, se mantenga un sistema de información financiera y una estructura de control interno aceptables al Banco, y se auditen y presenten al Banco los estados financieros y otros informes auditados (...)” (p.8)

7) “El Banco utilizará el PEP (...) como un instrumento para la supervisión de la ejecución del Proyecto” (PEP: “Plan de Ejecución del Proyecto”) (p.8-9) 8) “El Prestatario se compromete a presentar (...) los

estados financieros auditados del Proyecto, debidamente dictaminados por una firma de auditoría independiente aceptable al Banco" (p.9) 9) In case of "práctica corrupta"; "práctica

fraudulenta"; "práctica coercitiva"; "práctica colusoria"; "práctica obstructiva”, the Bank can undertake various measures, including “no financiar ninguna propuesta de adjudicación de un

contrato”, ”emitir una amonestación”, ‘remitir el tema a las autoridades pertinentes”, “imponer otras sanciones ” (p.28-29)

10) “El Banco realizará la revisión de los procesos de selección, contratación y adquisición, ex-ante o ex- post, según lo establecido en el Plan de

Adquisiciones” (p.32)

11) “El Banco podrá establecer los procedimientos de inspección que juzgue necesarios para asegurar el desarrollo satisfactorio del Proyecto” (p.34)

del Banco, los informes relativos a la ejecución del Proyecto, dentro de los sesenta (60) días siguientes a la finalización de cada Semestre” (p.35)

13) "El Prestatario se compromete a presentar al Banco (...) los estados financieros y otros informes, y la información financiera adicional que el Banco le solicitare (...)" (p.35)

14) "El Prestatario se compromete a que los estados financieros y otros informes (...) se auditen por auditores independientes" (p.35)

Table 12. Decentralized Rural Transport Project

Dependent Variable Quotes

2) Degree of accountability

a) Transparency Loan Agreement (Gonzalez Rodriguez, 2007)

1) “Award of contracts shall be based exclusively on price and, whenever appropriate, shall take into account factors that can be quantified objectively, and the procedure for such quantification shall be disclosed in the invitation to bid.” (p.14)

IBRD General Conditions for Loans (IBRD, 2005)

b) External oversight Loan Agreement (Gonzalez Rodriguez, 2007)

2) “The right of the Bank to inspect (...) the goods and services financed by the Loan under the Project, as well as the results achieved, the operations thereof and any relevant records and documents (p.9) 3) “The right of the Bank to obtain from the Borrower

all information as the Bank shall reasonably request regarding the administration, operations and financial conditions of the activities and results financed by the Project.” (p.9).

4) “The borrower (...) shall (...) (a) have all the procurement records and documentation for each fiscal year of the Project audited (...) by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available (...) the procurement audit report of such audit by said auditors (...) (c) furnish to the Bank such other information concerning said procurement records and documentation and the procurement audit” (p.10)

5) "The Borrower (...)shall (...) monitor and evaluate the progress of the Project and prepare Project Reports (...) on the basis of the performance indicators set forth below (...) Each Project Report shall cover the period of one calendar semester, and shall be furnished to the Bank (...)" (p.11)

6) “The Borrower (...) shall prepare and furnish to the Bank (...) interim un-audited financial reports for the Project covering the quarter” (p.12)

7) “The Borrower shall have its Financial Statements audited (...). The audited Financial Statements (...) shall be furnished to the Bank” (p.12)

8) “The Procurement Plan shall set forth those contracts which shall be subject to the Bank’s Prior Review. All other contracts shall be subject to Post Review by the Bank” (p.14)

9) "The Borrower shall (...) submit to the Bank for its review and comments":

a) "A plan describing the proposed

organization of Provias Descentralizado by 2011 and its action plan for 2007-2011" b) "A copy of the minutes of the Coordination

Group in which the output for the first nine Rural Infrastructure Plans will be

discussed"

c) "A report on the situation, efficiency and sustainability of routine road maintenance activities with micro-enterprises on the roads rehabilitated under the Rural Roads Project and the Second Rural Roads Project"

d) "A copy of the minutes of the Coordination Group in which the Rural Infrastructure Pilot under Component 3.b. of the Project is evaluated and options for scaling it up are discussed." (p.17)

IBRD General Conditions for Loans (IBRD, 2005) 10) “The Borrower shall maintain (...) a financial

management system and prepare financial

statements (...) both in a manner adequate to reflect the operations, resources and expenditures related to the Project”; “have the Financial Statements periodically audited (...) by independent auditors”, and “furnish (...) to the Bank the Financial Statements as so audited” (p.13-14)

11) "The Borrower and the Project Implementing Entity shall furnish to the Bank all plans, schedules,

specifications, reports and contract documents for their Respective Parts of the Project" (p.12)

12) "The Borrower and the Project Implementing Entity shall maintain records adequate to record the progress of their Respective Parts of the Project (...), to identify the goods, works and services financed out of the proceeds of the Loan and to disclose their use in the Project, and shall furnish such records to the Bank upon its request." (p.12)

13) "The Borrower and the Project Implementing Entity shall retain all records (...) evidencing expenditures under their Respective Parts of the Project (...).The Borrower and the Project Implementing Entity shall enable the Bank’s representatives to examine such records." (p.12-13)

14) "The Borrower shall prepare or cause to be prepared periodic reports (...) integrating the results of (...) monitoring and evaluation activities (...)" and shall "furnish or cause to be furnished each Project Report to the Bank promptly (...), afford the Bank a

reasonable opportunity to exchange views with the Borrower and the Project Implementing Entity on such report, and thereafter implement such recommended measures, taking into account the Bank’s views on the matter." (p.13)

15) “The Borrower shall prepare (...) and furnish to the Bank not later than six months after the Closing Date (...) a report (...) on the execution of the Project, the performance by the Loan Parties, the Project Implementing Entity and the Bank (...) and the accomplishment of the purposes of the Loan” (p.13)

16) “The Borrower (...) shall enable the Bank's representatives to: (i) visit any facilities and construction sites (...) and (ii) to examine the goods financed out of the proceeds of the Loan for their Respective Parts of the Project, and any plants, installations, sites, works, buildings, property, equipment, records and documents relevant to the performance of their obligations under the Legal Agreements.” (p.14)

17) “The Bank may (...) terminate the right of the Borrower to make withdrawals” if “corrupt, fraudulent, collusive or coercive practices were engaged in by representatives of the Borrower or the Project Implementing Entity” (p.19-20)