By Toby McIntosh
Recent critical investigations about the Central American Bank for Economic Integration (CABEI) have highlighted transparency weaknesses at the regional bank.
Three articles by the Organized Crime and Corruption Reporting Project (OCCRP), The Dictators’ Bank, concluded that the bank “has funded projects that led to environmental destruction, and others where funds were diverted for corrupt practices or used to fund the pet projects of dictators.”
The reporters relied mainly on leaked reports and court documents. They used some documents from the CABEI website but also were frustrated by the lack of official information.
More transparency is needed according to some closer observers of CABEI. And in the wake of the OCCRP articles, Taiwan, a CABEI donor, urged “enhanced transparency.”
The criticisms come as the bank is engaged in a process to modify its three-year-old access to information policy. The deadline for comment is Nov. 11.
Public interest in the CABEI exists because as a regional bank it lends and grants billions of dollars to projects in its five founding states: Nicaragua, El Salvador, Honduras, Guatemala and Costa Rica. It now has 25 member countries and assets of $13.8 billion.
“CABEI’s failures have enabled waste and corruption,” according to one of the OCCRP articles.
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New Access Policy Proposed
CABEI’s Access to Information Policy (in Spanish) was adopted in 2020 and is now under review, although the direction of the changes is unclear.
A consultation (English and Spanish) is now being held on the policy. The bank posted a “preliminary” new regulation (English and Spanish). The consultation was announced on Oct. 11.
The deadline for submission is Nov. 11, 2023.
The submissions may reveal the direction of the proposals. The bank did not describe the changes. Eye on Global Transparency has asked CABEI for an English version of its existing policy, which will facilitate comparison with the existing policy.
“At the end of the consultation term, CABEI will initiate an internal evaluation process on the inputs received in order for the Board of Directors to consider the final adjustments to be included in the updated and strengthened version of the Access to Information Policy,” according to the announcement. “As part of the process and in order to enhance transparency, the Bank will publish comments and observations submitted by the public.”
Experience With Existing Policy
Data from the CABEI provides some quantification about the use of the access policy, but aggregate figures are not usually a good measure of the quality of a policy and do not reveal what requests have been denied.
OCCRP used the access policy in its reporting, but found that audits and evaluations
of specific loans were largely unavailable when requested.
A CABEI web page on compliance indicators says that 727 documents have been disclosed so far in 2023. There is a list (in Spanish) of the titles of recently disclosed items.
But this total combines two categories of documents, those proactively disclosed and those disclosed after requests.
The 2022 annual report on the access policy (the latest) provides a breakdown. It says 865 documents were disclosed in 2021, “of which 701 were classified as public once approved and disclosed on CABEI’s website.” The entry continues, “In addition, 164 were classified as public upon request, which means that they are available to the public upon request.”
The same report says there were 151 requests for information in 2021. Of these, 32 were “rejected,” eight were totally denied and two were partially denied. For these 10, the report lists the reasons for denial (although not what was requested). No definition is given for the “rejected” category.
More recent data suggests a possible change in record-keeping, with many more partial denials.
The section under Compliance Indicators (Trends in Requests) describes “Status of Requests” and shows that there have been 143 requests (time period unclear but seems to be for 2023). Of these, 49 percent are called “complex” and 76 percent were related to “Operations.”
Of the 143, 82 requests were granted. three requests were denied, 21 were “partially denied” and 28 were “dismissed” (undefined). These numbers are quite different than those in the 2022 report, perhaps because of new definitions.
Critics Voice Many Concerns About CABEI Transparency
Broad transparency concerns have been identified by critics.
“Transparency is a major issue at CABEI,” wrote Ryan C. Berg, the Director of the Americas Program at the Center for Strategic and International Studies (CSIS), on May 8.
He continued:
Perusing CABEI’s website is like taking a time machine back to the earliest days of the internet. Minutes of the Board of Directors meetings are unavailable. The status of the loans granted by the institution and updates on those loans through their execution, monitoring, and evaluation periods are not readily available. When the Board of Directors recently moved to impose greater transparency by ordering an internal audit of expenses and demanding greater information, Mossi threatened to resign (putting at risk the privileges many at the bank enjoy under his leadership).
Another critic said that the meetings of the Board of Directors and the minutes should be made public.
Hugo Martínez, a former Minister of Foreign Affairs of El Salvador, in a May 1 article wrote, “Likewise, the status of loans granted must be reported across the program’s lifetime—from their approval and execution through monitoring and evaluation.”
More transparency was the first of several reform proposals Martinez made. He also suggested refining the bank’s criteria for allocation of resources and creating mechanisms that will allow it “to condition or suspend resources when countries violate democratic, environmental, and human rights standards.” Martinez wrote, “It is about consolidating the member countries’ political will and their commitment to transparency, democracy, and human rights.”
In March, the chairmen of the committees on foreign relations of the US House and Senate urging the presidents of Costa Rica, El Salvador, Guatemala and Honduras to leverage their position in the CABEI “to stop the bank’s development funding from propping up the Nicaraguan regime of Daniel Ortega and Rosario Murillo.” They also called on the leaders “to increase the transparency and scrutiny of the bank’s lending to the Government of Nicaragua.”
Since the publication of the OCCRP’s articles, Taiwan, one of the bank’s donors, issued a statement saying that it hopes a new leader “can encourage reforms within the bank, improve the loan approval process, and enhance the bank’s governance system.” It also said, “We also urge enhanced transparency of loan flows to ensure that the post-approval use of funds aligns with the bank’s mission.”
The bank’s president, Dante Mossi will be stepping down at the end of this month. The Board of Governors is scheduled on Nov. 17 to consider his successor from among three candidates.
Variety of Sources Used by OCCRP, Mostly Unofficial
OCCRP reporters used a variety of sources to report on the bank.
These included documents from court cases and governments, some leaked to the reporters. However, the reporters also used CABEI data about projects.
“Reporters spent more than a year investigating CABEI, combining open-source data with official investigations, leaked documents, and interviews with current and former bank employees,” the OCCRP report says.
Concerning one project, the reporters looked at records that were cited in an investigation by prosecutors from a United Nations-backed anti-corruption commission and at testimony given to Guatemalan prosecutors (which the witness said was a fake).
In another instance, involving a highway, the reporters relied on Guatemalan government audits “obtained by OCCRP” to document “construction problems and failures in supervision, leading to multiple suspensions of work.” Other Guatemalan documents showed that 15 years after CABEI started financing the project, the highway was incomplete.
OCCRP was able to find CABEI records showing that despite the corruption scandal CABEI extended the loan and how much was disbursed.
Similarly, OCCRP relied on Costa Rican court records to probe problems with highway construction in Costa Rica. In that case, the CABEI website showed that the bank has not disbursed any of the funds from the loan.
One constraining factor is a seven-year year secrecy clause for all former
employees.
Institutional Change Diminishes Transparency
The structure used to make loans can reduce transparency, the OCCRP story says,
In late 2018, CABEI started using “policy-based loans,” which OCCRP described as “ a type of financing meant to help countries achieve big-picture goals, such as reducing poverty, rather than a specific project.”
OCCRP reported, “Because the money goes straight into governments’ coffers, it’s difficult to know how it’s been spent. And because the funding isn’t for a specific project, it’s impossible to determine if it has been used effectively.”
Correspondence obtained by reporters, showed that several of CABEI’s directors opposed introducing policy-based loans, raising concerns including about transparency, particularly within the recipient countries. “Mossi compounded their worries by saying the loans wouldn’t need to be audited, they wrote,” according to the OCCRP article.
Again, the CABEI website was somewhat useful, providing data on the 13 development policy-based loans between 2020 and 2022, totaling more than $2.5 billion. However, details were scant. “Some give specific goals, such as support during the pandemic or to combat climate change, but almost half give only vague descriptions, such as ‘Support Public Policy Actions and Development Results,’ ” according to the OCCRP article.
OCCRP used budget documents from El Salvador’s government to show how funds had been diverted from their intended purpose.
CABEI records did help in some respects. OCCRP reporters were able to find out more about how the bank helped El Salvador with an effort to make Bitcoin a national currency. “The list of CABEI contractors shows the bank paid an IT company nearly $85,000 to conduct a study on the implementation,” OCCRP said.
Looking at the CABEI’s financial picture overall, the reporters used its June 2022 financial statement, in which a favorable accounting change was described, and then found a former CABEI official to comment, saying that the change was just made the bank look better on paper.
OCCRP collected historical data about CABEI’s lending available on its website, dating back to the 1960s, and constructed a database of 500 approved operations.
As a result, OCCRP was able to analyze what countries received support, particularly a shift benefitting El Salvador and Nicaragua. And the data revealed what kinds of projects got funded, such as at least 25 hydroelectric power plants, several of which were highly controversial.
Bank president Dante Mossi responded to OCCRP questions in interviews and written comments.
However, Bank officials at first did not reply to the OCCRP reporters’ inquiries, claiming they had not seen them and then saying according to the access to information rules, they were only obligated to provide responses within two months.
