This paper, Lessons learned: Pangue Hydroelectric, summarizes the outcomes of a hydroelectricity case study in Chile, with particular regard to the effects on the International Finance Corporation (IFC).

Pangue was the first, major hydroelectric dam built on the Bío-Bío River. The fallout from Pangue was a difficult but valuable learning experience for International Finance Corporation (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.