While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
PS 5 – Land Acquisition and Involuntary Resettlement
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

This is a Category-A project according to IFC’s Policy on Social and Environmental Sustainability because it is an equity investment in a corporate client with greenfield ports and terminals under construction in a high-risk environment, including the risk of induced land-use change leading to potential loss of natural or critical habitats, which are main concerns in both the Amazon and Chaco biomes.

PS7 Indigenous Peoples (IP) does not apply since no IP groups have been identified in the areas of influence of the projects. According to the client, there has been no interaction with indigenous peoples or quilombolas (traditional Afro-Brazilian communities enjoying certain legal protections in Brazil). Based on the results of IFC’s review, PS8 Cultural Heritage is not considered applicable to HDB’s current business activities as well. However, taking into account that this is an investment in a corporate entity with subsidiary projects and operations, the company will develop specific procedures to analyze and manage eventual risks and impacts related to cultural heritage that might be identified in the future.

The company has presented extensive information on its current EHS practices and procedures to address E&S risks and impacts as well as to ensure that the its current and prospective construction projects and ongoing operations currently comply with national laws and regulations in its countries of operation and will meet IFC Performance Standards and applicable WBG EHS Guidelines, provided that specific additional agreed-to measures spelled out in the attached Environmental and Social Action Plan (ESAP) are implemented.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

At the corporate level Hidrovias has had a certified Integrated Management System since August 2013 in order to manage quality, environmental, health and safety aspects of its activities, based on internationally recognized standards including ISO 9001 (Quality), ISO 14001 (Environment), OHSAS 18001 (Occupational Health and Safety), and SA 8000 (Social Responsibility). Hidrovias is also seeking certification of its operations at the corporate and operational levels under the International Safety Management (ISM) Code of the International Maritime Organization (or IMO, which is a United Nations specialized agency). As noted in greater detailed under PS3, Hidrovias also seeks to abide by the IMO''s International Convention for the Prevention of Pollution from Ships (MARPOL), the main international convention covering the prevention of pollution of the marine environment by ships from operational or accidental causes.



Environmental and Social Assessment and Management System (ESMS) – E&S management systems for the North and South operations are based on the corporate parent''s guidelines as well as specific risks and impacts of each operation and applicable IMO/MARPOL requirements (adapted for river transportation).



Policy – The company policy and manual that lay out Hidrovias'' Integrated Management System (IMS, or Sistema de Gestão Integrada in Portuguese) emphasize environmental responsibility, pollution prevention, OHS, compliance with legal requirements, social responsibility, professional improvement of employees and contractors, and continuous improvement of the IMS itself. This overarching policy guides the company on how to achieve sound environmental and social performance, provides a framework for the environmental and social assessment and management process, and specifies that the company''s activities and operations will comply with the applicable laws and regulations of the jurisdictions in which they are being undertaken, including those laws implementing host-country obligations under international law. This policy is consistent with the principles of the Performance Standards and with internationally recognized standards related to ISO, OSHAS, and SA. The policy and manual also indicate who, within the organization, must ensure conformity with the policy and be responsible for its execution, and these include the requirement that they be communicated to all levels of the organization.



Identification of Risks and Impacts – River transport is a safe and environment-friendly means of transport, and it is generally supported by the authorities. It helps to promote sustainable development by generating comparatively fewer emissions than other more conventional methods of freight transport such as roads. Building terminals and ports in Brazil and Uruguay and running barge operations throughout the region involves other types of risks and impacts. For large-scale development projects such as port construction Brazil’s and Uruguay’s
regulatory agencies have required an environmental impact assessment (EIA) or equivalent aimed at identifying, analyzing, and managing risks and impacts in order for necessary environmental licenses to be issued. At the operational level, the company is also obliged to comply with Brazilian, Paraguayan, Argentine, and Uruguayan procedures and requirements and to obtain necessary permits and authorizations at local and/or regional levels for its current and proposed operations.



The South operations are inspected by the coast guard (Prefectura Naval) of the three countries involved (Paraguay, Argentina, and Uruguay); these are active agencies with sufficient resources to monitor river navigation and conduct onboard inspections frequently and rigorously, based on local and international practices and codes. For example, to comply with the request of the Paraguayan authority, which is a signatory of the International Convention for the Safety of Life at Sea (SOLAS), Hidrovias is developing its own navigation manual, based on the above-mentioned ISM Code, adapted for river navigation and to be revised on a yearly basis. This manual (which will have two slightly different versions for transporting grains and iron ore) will include sections on ship design and equipment, safety of cargo transportation, flag state implementation, fire protection, safety of navigation, radio communications, and standards of training and watch-keeping. In the medium term HDB will begin the certification process under ISM for both the company and its vessels.



In Brazil, the environmental and social risks and impacts arising from the company’s operations in Pará state have been identified in the context of the projects’ direct impacts but not in terms of the risks of induced impacts, principally the illegal conversion of natural habitats that could occur with improved transport logistics and increased agricultural activity. While induced impacts cannot be fully quantified, including the specific contribution that one infrastructure company is making within a far broader context, there is nonetheless the risk that improved transport logistics in western Pará could lead to expansion of the agricultural frontier at the expense of natural habitats in the Amazon. At the time of appraisal, two of the three planned greenfield projects (a transshipment port in Vila do Conde, Barcarena and an inland terminal in Miritituba, Itaituba, both currently under construction) had undergone the process of conducting a comprehensive Environmental and Social Impact Assessment (ESIA), holding public hearings, and developing an Environmental Management Plans (EMP). As discussed further below under PS6 (Biodiversity Conservation), these studies did not consider induced impacts from unplanned but potential consequences caused by these investment projects, namely that the construction of the Miritituba port, close to still-intact areas of the Amazon forest, is likely to lower transport costs fo
r farmers and thereby accelerate conversion of natural habitats into agricultural areas, particularly for soy production.



Nonetheless, the Miritituba port is being purpose-built to handle soy traded only by responsible traders who are sensitive to the preservation of natural habitats and abide by the Amazon Soy Moratorium. Beyond that, the port''s incremental contribution to the overall reduction of transport costs is judged to be marginal, given the myriad other factors (paving of BR-163, installation of other ports in Miritituba district, etc.) that are contributing to development in the region.



As part of the ESAP, Hidrovias will establish and keep internal procedures to assure the compliance of all Legal Requirements related to the matter of Amazon Soy Moratorium and/or soy produced in illegally deforested areas.



Management Programs – Hidrovias has developed E&S management programs consistent with its policy and addressing the identified environmental and social risks and impacts of its projects. These programs have largely targeted the mitigation of negative risks and impacts and the improvement of E&S performance. For the most part they consist of a combination of operational procedures, practices, plans, and related supporting documents (including legal agreements) that are managed in a systematic way and that are applied comprehensively. These systems and practices also encompass the contractors and primary suppliers over which the company has control or influence, such as third-parties responsible for vessel manufacturing, construction companies, and other contractors involved in implementing or monitoring E&S performance. Also, some of these programs take into account the outcomes of the company''s engagement process with affected communities. . As the company is undertaking a number of construction projects, HDB will, as per the ESAP, develop and implement a chance-find procedure to handle unforeseen archeological finds in its lands.



Organizational Capacity and Competency – HDB''s E&S team is led and staffed at both corporate and operational levels by experienced, competent, and diligent professionals, and the overall structure, internal reporting lines, communications, and working methods – including access to the senior-most decision-makers in the company – indicate strong organizational capacity. In addition, the company is augmenting its E&S management team at the operational level and strengthening, as necessary, its organizational structure by further defining roles, responsibilities, and authority to implement the ESMS, under the leadership of its Corporate Director for Quality, Environment, Health, and Safety (QEHS). Sufficient management sponsorship and human and financial resources are being provided on an ongoing basis to achieve effective and continuous environmental and social performance. The North and South projects are led by a General Director, a HR Manager, and an EHS Manager supported by an internal and/
or external team to coordinate the implementation of the EMP. These teams will be responsible for ensuring the implementation of the agreed ESAP as well.



Training – HDB believes that training programs for its push boat crews are the basis for the induction, retention and development of its key operational personnel, and the company is investing in their training as well as the development of all staff with any responsibility for E&S performance. The company has a crew training center in Paraguay, the Naval Academy, equipped with simulator and boat school. The scope of the training programs covers all the stages of the crew’s career. The trainings are conducted by specialized employees from Brazil, Argentina, and Paraguay. Also, the company provides training and information for employees regarding environmental protection, legal requirements, and good practices under its formalized corporate program and each employee''s career development plan. Specific campaigns are conducted on a regular basis to raise awareness of EHS issues.



Monitoring and Reporting – The company conducts formal internal and external inspections and audits on a regular basis (daily and weekly) and uses the results to improve its management system through a preventive approach, besides planning and implementing corrective actions. The results of these inspections and audits are then reported to the QEHS Director on a weekly basis; any critical issues are raised at bimonthly executive committee meetings and if necessary at full shareholder meetings, held every quarter.



Emergency Preparedness and Response – The company will review, update and/or amend its emergency preparedness and response plans for all its operations, in collaboration with relevant third parties, such as local fire departments and waterway administration authorities, to respond to accidental and emergency situations associated with its projects. The company will maintain its program of emergency drills, and its emergency preparedness and response activities will be periodically reviewed to reflect any changed circumstances. Contractors involved in building new infrastructure are required to develop and implement the same plans and procedures until the projects are handed over to HDB to operate.

Working Conditions and Management of Worker Relationship – As a relatively new company, Hidrovias has sought to establish itself as a sector leader in human resources practices and to build a highly positive workplace atmosphere. At the corporate level Hidrovias has a comprehensive and well-articulated Ethics Code (Código de Ética or code of conduct) that outlines the company''s commitment to socially and environmentally responsible business practices in all respects. It states the company''s values, principles, and expectations of its employees clearly, and the code of conduct underpins and guides the functioning of a group-wide business ethics committee (Comitê de Ética), which meets on a monthly basis or if any special need arises. In addition, Hidrovias has developed a company-wide human resources policy, and it is implementing a comprehensive set of human resources practices and procedures that align with its overall vision. These practices and procedures concern all aspects of recruitment, selection, contracting, feedback and performance reviews, professional development, reassignments, promotions, and end-of-employment formalities. This overarching approach is then translated into country-specific procedures and practices at the operational levels in Brazil, Paraguay, and Uruguay. Brazilian operations are the most advanced in defining and implementing their internal procedures and practices, whereas Paraguayan and Uruguayan operations are still finalizing the full complement of such measures.



Hidrovias supports labor rights, including the freedom of workers to organize, associate with a union of their choosing, and engage in collective bargaining. In Brazil, where local labor laws and practices are highly structured and regulated, virtually the entire workforce is unionized. The Brazilian affiliate, HDB, is currently switching the registration of unionized workers from a maritime union to one more appropriate for a logistics operator with a significant number of office staff. In the case of Uruguay, although the existing workforce in the river barge operation is relatively small (about 25 employees in total), Hidrovias'' local operator, Limday, seeks to respect fully its workers'' right to organize and to associate with a union of their choosing. Currently two of the 14 push boat crew members and one of five mechanics are affiliated with a union, and Limday seeks to be responsive to worker needs in general and specifically with regard to union requirements and requests. Some quality-of-life upgrades have been introduced for the Limday push boat crews, for example, and a new collective bargaining agreement with one of the unions is presently being negotiated. At the Obrinel maritime port in Montevideo, which is currently under construction, the company expects to employ 70 people during operations, all of whom will be free to associate with a union of their choosing. In Paraguay, which historically has had a tradition of weaker and less rep
resentative unions, no staff is unionized, but a number of navigational staff is affiliated with professional societies for captains, first mates, and sailors. Nevertheless, the company has unequivocally stated that it sees no impediment against unionization or collective bargaining agreements, should employees choose to pursue such options.



In both Brazil and Paraguay, Hidrovias is developing partnerships for purposes of training its prospective workforces. In the case of Pará, Brazil, the environmental licensing process for the ports in Miritituba and Vila do Conde included requirements to identify training needs both for the construction phase and for longer-term workforce development, and HDB is working with SINE (Sistema Nacional de Emprego), Instituto Federal do Pará (IFPA), and SENAI (Serviço Nacional de Aprendizagem Industrial) to roll out training courses for specific skills it requires. The company has established targets for "local" hiring (defined as workers recruited within the state of Pará), and in the case of the Vila do Conde port, where HDB has the majority of its Brazilian operational staff, the local labor target of 65% has so far been exceeded. In a similar vein, Hidrovias del Paraguay is creating a partnership with SINAFOCAL (Sistema Nacional de Formação e Capacitação) and the Directorate-General for Employment to train entry-level sailors. In its Paraguayan operations, the company is also seeking ways to ensure that navigational staff, particularly in its officer corps, are able to gain appropriately varied onboard experience and study and sit for necessary exams to advance in the professional credentialing system in that country. This is seen as highly innovative, valuable, and motivational by crew members.



As a new company with only a few years of operations, HDB has not reported any significant cases of investigations or lawsuits by the Public Prosecutor for labor issues in Brazil, and the Hidrovias subsidiary in Paraguay and joint-venture partners in Uruguay report similarly minimal levels of labor-related grievances. Based on IFC interviews with select Hidrovias staff, including crew members on their push boats, employees appear to be very satisfied with the terms and conditions of employment. In general terms, Hidrovias has a reputation of paying its employees well and providing attractive benefits, and it is seen as a market leader as result of its highly modern fleet and its clear commitment to workplace health and safety (see below). Staff also appreciates the company''s relatively horizontal and solutions-focused workplace environment. In Paraguay, for example, the telephone numbers of senior managers are listed on board Hidrovias'' push boats, and it is not unusual for operational staff to call them directly to resolve problems. Personnel at all levels appear genuinely to value and identify with this strong internal workplace culture.



Hidrovias'' internal worker grievance mechanisms are based first on th
e ability of staff to raise concerns or complaints with their supervisors, then taking any unresolved issues to the HR department, or if necessary, lodging complaints directly with the company''s ethics committee (Comitê de Ética). In Paraguay there are plans for installing onboard suggestion/complaint boxes, should crew wish to raise issues or register grievances through such means. In addition, Hidrovias is also developing an anonymous online channel for making complaints or suggestions, which will also be available to workers at third-party contractors. Under the ESAP, Hidrovias will formally constitute and publicize the existence of this anonymous workers’ grievance mechanism and ensure that all personnel, including third-party workers, have access to it.



Non-Discrimination and Equal Opportunity - As noted above, Hidrovias has a company-wide set of principles and policies for managing human resources, and these are being translated into operational-level procedures and practices at the country or operator level. Among these principles Hidrovias has made a clear commitment to non-discrimination and equal opportunity in hiring and advancing staff, which traditionally has been male-dominated for push boat crews. The company is highly cognizant of this historical legacy, and particularly for its officer corps it is looking for ways to seek out and promote greater opportunities for women to participate in the workforce.



Protecting the Workforce - Hidrovias has strict prohibitions, as articulated in its code of conduct (Código de Ética), against employing underage workers or engaging in any forced labor practices, both through its own operations and those of its suppliers or contractors. Recruitment and contracting procedures, including of workers employed by third-parties, guard against such practices. Only where permitted and regulated by law – as in the case of Brazil''s Menor Aprendiz program – will Hidrovias allow young workers to participate in formal apprenticeships but not engage in any hazardous activities.



Occupational Health and Safety - As stated in its corporate code of conduct, Hidrovias places a high degree of emphasis on occupational health and safety (OHS). By incorporating best industry practices from logistics operations around the region, the company seeks to become a sector leader in this respect. IFC observed that the company has a comprehensive and well-developed OHS system functioning throughout its operations. At the corporate level, OHS policies and approaches follow the International Safety Management (ISM) Code of the International Maritime Organization, and Hidrovias is aiming for ISM certifications at both the company and operational levels. In each country, the company scrupulously follows national legislation and regulation regarding workplace safety (such as the normas regulamentadoras, or NRs, in Brazil), and these are reflected in operational procedures and practices. In its approach to OHS at its Vila do
Conde worksite, for example, HDB has implemented a full panoply of OHS measures: onsite induction and weekly trainings on OHS, monthly awareness campaigns, workplace safety committees, daily safety briefings, obligatory use of personal protective equipment, prior analysis of any hazardous work activities, the issuance of specific permits for such work, and investigations of any workplace accidents or injuries. This focus even extends to the analysis and rectification of potential sources of ergonomic problems for office workers. Beyond Brazilian legal requirements the company has sought to implement further innovations and good practices, for example by requiring any vehicle used by a third-party contractor at its Vila do Conde site to pass HDB''s own safety inspection every six months and by assembling all of its contractors'' health and safety staff on a weekly basis to focus exclusively on OHS issues. The Vila do Conde site has also instituted a system – which Hidrovias hopes to expand throughout its operations – of encouraging staff to flag OHS issues proactively that require further training and attention through a system of anonymous suggestion cards. Moreover, senior managers are held to the same standards and inspected regularly on OHS issues as well.



This rigor extends throughout the company''s operations. For example, IFC observed at the Montevideo port worksite that the local Hidrovias affiliate, Obrinel, has hired dedicated OHS staff to guide and monitor both company and contractor staff regarding health and safety through the application of a well-structured and thorough approach. In its Paraguayan operations, the company has introduced the safe use of hand winches and plans to introduce special lightweight ropes to minimize potential injuries while barges are being lashed up. So far there have been very few and relatively minor workplace accidents within Hidrovias'' own operations or among the contractors involved in building its ports. However, as noted below, the subcontractor of a Chinese company hired to build barges for Hidrovias suffered two fatalities and two additional injuries in a late-December 2013 accident, after which Hidrovias mounted both an investigation and a number of corrective measures, including the assignment of its own OHS staff to monitor such issues at its manufacturers directly.



Workers Engaged by Third Parties - Hidrovias seeks to extend its responsible practices on labor and OHS issues to its principal suppliers, contractors, and service providers. The principal employers of third-party workers in HDB’s supply chain include first-tier suppliers, namely the following: Robert Allan, a Canadian naval architectural consulting firm established in 1930, and a leader in creating cost-efficient vessels for service in the marine transportation industry; Uzmar, a Turkish shipyard, founded in 1984, which builds tugs and workboats using compact tug designs from Robert Allan; ZPMC, a state-owned Chinese company bas
ed in Shanghai, which engages in the design, building, installation, sale, and leasing of heavy port handling systems and machinery, heavy ocean equipment, and large metal structures and components; CIE, a Paraguayan company founded in 1978, that manufactures and installs capital goods for both domestic and international clients in the energy, transportation, and industrial sectors; Roll-Lift, a subsidiary of Roll-Dock formed in 2011, which provides door-to-door solutions for the transport of heavy loads; and Erin and Estaleiro Rio Maguari, Brazilian shipbuilders engaged in the design, construction and refurbishment of some of HDB’s barges and pushboats. As part of its contracting process, HDB screens its third-party contractors and requires them to submit valid documentation regarding EHS issues in conformity with local and national environmental regulations. Likewise, HDB’s control procedures will require proof of appropriate training or certification for third-parties hired for specialized skills or to carry out hazardous activities.



After a serious accident in December 30, 2013 in the block fabrication area of HRDD (Huarun Dadong Shipyard), a subcontractor of ZPMC in China, that resulted in the death of two workers of HRDD and injuries to two others, Hidrovias immediately sent a senior manager to China to interact with ZPMC and HRDD to make sure that the investigation and analysis of the accident was carried out at the appropriate level. The preliminary action plan presented by ZPMC was found to be adequate, and Hidrovias is following up on its implementation. The company has subsequently stepped up enforcement of its system under which it guides and oversees supplier performance on OHS through onsite monitors who work for Hidrovias. Weekly calls are carried out between South American-based OHS managers and these site monitors to ensure that problems are identified early and corrective actions are taken expeditiously.



The second major category of third-party workers comprises employees of the construction and specialized service companies contracted to build Hidrovias'' terminals. These currently include the Vila do Conde site in Pará, northern Brazil, and the Obrinel terminal within the Montevideo port. Construction is also likely to commence on two additional inland terminals (Miritituba and Marabá) within the next 1-2 years. In the case of Vila do Conde, some 1,000 construction workers will be hired in the course of the project, and HDB has sought to manage labor and OHS issues of these contractors through strict performance clauses and ongoing monitoring by the company''s own staff. In the case of Obrinel, construction work is divided among seven different contractor packages, with a total estimated workforce of 400 over the course of the project. Obrinel has hired a full-time consultant exclusively to guide contractors and monitor their performance on OHS issues. In the case of Miritituba, which is due to begin construction in July,
2014. HDB is hiring contractors for different packages of work. They will be managed and overseen by a project team from Promon (a strategic partner of Pátria''s in the P2 private equity fund that owns Hidrovias). Under Hidrovias'' supervision, Promon is already hiring a health, safety, and environmental manager and team for overseeing contractor performance.

The company follows the IMO''s International Convention for the Prevention of Pollution from Ships (MARPOL), the main international convention covering the prevention of pollution of the marine environment by ships from operational or accidental causes. Where appropriate, adaptations of these rules for a river environment are made, and these are (or will be) reflected within the ESMS for each operation as site-specific manuals and procedures are developed.



Resource Efficiency – At the corporate level, the company monitors its electrical energy consumption on a monthly basis and compares this with the individual consumption target of 20 kWh per staff person. This indicator must be carried over to the operational level so that resource efficiency efforts can be managed and monitored successfully. Additionally, the corporate headquarters and operational offices have developed measures to reduce energy consumption, such as replacing light bulbs with more efficient ones.



Air Emissions – The most significant sources of air pollutants from port operations include combustion-related emissions from the ships’ propulsion systems and auxiliary engines and boilers, mainly consisting of sulfur dioxide (SO2), nitrogen oxides (NOX), greenhouse gases such as carbon dioxide (CO2) and carbon monoxide (CO), fine particulate matter (PM), and volatile organic compounds (VOC). These emissions also arise from the company''s limited onshore vehicle use. Onshore construction activities and vehicle traffic on unpaved roads may also contribute to particulate matter emissions. At the operational level the main source of emissions is dust emanating from the grains and fertilizers handled during loading and unloading from trucks to barges and then from barges to storage areas. To minimize the generation of dust from these sources, these activities will be done through closed systems (closed conveyors and loading/unloading areas). If applicable, storage areas will have exhaust systems with dust collection via bag filters; collected materials will be reused. The company will develop and implement management strategies for reducing air emissions at all its operations, including procedures for combustion sources, VOCs and dust, aligned with international guidelines and applicable World Bank Group EHS Guidelines.



Greenhouse Gases – Although HDB''s operations contribute to reducing greenhouse gas (GHG) emissions by developing a low-GHG alternative to road transport, the company has considered feasible and cost-effective options to lower its own project-related GHG emissions, such as using low-carbon fuel sources (e.g. liquefied natural gas for the grain dryers). HDB will quantify its direct annual GHG emissions for its operations (in CO2-equivalent terms) using internationally recognized methodologies and good practice, and the company will present these results during the investment period. In the event that these GHG emissions 25,000 tons of CO2-equivalent per year, the cli
ent will annually quantify direct emissions from the facilities owned or controlled within its physical project boundaries, as well as indirect emissions associated with the off-site production of energy used by the project.



Wastewater – Water effluents associated with port activities may include stormwater and sewage from port operations, as well as sewage, bilge water, and vessel-cleaning wastewater from ships. Ship sewage and wastewater contains high levels of organic material with biological oxygen demand (BOD) and coliform bacteria, trace concentrations of constituents such as pharmaceuticals, and typically low pH levels. Wash water may contain residues such as oil. Pollutants in bilge water contain elevated levels of organic substances with high BOD and chemical oxygen demand, dissolved solids, oil, and other chemicals that accumulate as the result of routine operations. Storage areas for hazardous products generated by Hidrovias'' operations are planned in such a way as to avoid soil and water contamination, primarily through the use of segregated drainage systems. Effluents will be directed to a wastewater treatment plant (WWTP). Sanitary wastewater will be collected and directed to a compact WWTP for treatment before being discharged into the public network (where available) or into the environment, under a specific permit. When applicable, domestic effluents (generated in company cantinas, for instance) will be directed to grease boxes before going to the WWTP. Similarly, the effluents generated at maintenance workshops will be conducted to an oil-water separator box before collection for reuse and/or discharge.



Solid Wastes – The company follows legal requirements in all of the jurisdictions where it operates, both at its offices and on its vessels. For its vessels HDB complies with IMO/MARPOL guidance. In addition, HDB''s activities – both during construction and from its operations – generate various solid wastes ranging from dredging materials to scrap metal from decommissioned barges and routine office and operational wastes.



Dredging activities are being planned as part of the construction of the Obrinel terminal in Montevideo. Prior to the start of dredging, materials will be evaluated for their physical, chemical, biological, and engineering properties to inform the decision as to how they can be reused or disposed of, including the possibility that some of the dredged silt will be used for backfill in a 2-ha area of waterfront that is being converted into solid land. Otherwise, the dredged materials will be disposed of in an area of the river designated by Uruguayan environmental authorities under the construction and environmental licenses for the terminal.



HDB also produces solid wastes in its routine operations, including wood and general solid wastes. Hidrovias currently keeps registers of the types and quantities of wastes it generates and documentation related to third-party services for transporting and dis
posing of such, including chain-of-custody documentation to its final destination. These contractors are constituted by reputable and legitimate enterprises licensed by relevant government regulatory agencies. It should be noted that under the joint development plan required by Pará state environmental authorities and managed through the association of Miritituba-area port operators, HDB is already assisting local authorities to develop a proper municipal solid waste disposal site for Itaituba. As noted in the ESAP, Hidrovias will ascertain whether licensed disposal sites are being operated to acceptable standards and where they are, it will use these sites. Where this is not the case, the company will reduce waste sent to such sites and consider alternative disposal options, including the possibility of developing their own recovery or disposal facilities at the project site.

Infrastructure and Equipment Design and Safety - Hidrovias has proactively improved infrastructure and equipment designs in order to increase safety and environmental performance and to minimize risks and impacts for workers and communities. In the case of the Obrinel port terminal in Montevideo, such design improvements constitute an estimated $10 million of the $90 million total project budget. To avoid having workers operate in confined spaces and to eliminate any accumulation of potentially explosive dust, these improvements include an enclosed underground conveyor belt system, the installation of ventilation systems under the grain silos, and the inclusion of fully-mechanized and enclosed equipment for offloading trucks and fully-automated systems for rolling, drying, aerating, and managing temperatures for grain storage. To minimize traffic impacts on neighbors in the surrounding community, the terminal is being constructed with a dedicated entrance and an enclosed 200-truck external parking lot (in addition to a 50-truck internal parking lot). Similarly, the design of a terminal in Pará, Brazil, includes a separate access road and truck waiting area that HDB and other port operators – who have formed a local association known as ATAP (Associação dos Terminais Privados do Rio Tapajós) – will construct to reroute traffic from the road passing through built-up or residential areas of Miritituba.



Through ATAP, the company is seeking to lead a series of private-sector initiatives under a common agenda aimed at addressing some of the negative impacts that the developments in Itaituba could bring to the region, which already suffers from poor infrastructure (sanitation and transport) and inadequate housing and health facilities. These measures are discussed in greater detail below, under "Stakeholder Engagement."



Security of Navigation - The company must comply with the standards for registration and issuance of navigation certificates with the waterway safety administration for each country where it operates. These processes include inspection by an approved company. The vessels are monitored and maintained in good condition by HDB in order to meet environmental and safety standards for their respective basins.



Road Traffic - HDB’s clients are responsible for road or rail transport of their cargo to the inland terminals from which HDB runs its barging operations. Ocean-bound cargo will arrive at ports like Vila do Conde (Barcarena, Pará) and Obrinel (Montevideo, Uruguay) mainly by barge, but in the case of Obrinel in particular there will be some incoming cargo delivered by road (and eventually by rail, once a spur is extended into the port). In the second phase of the Miritituba terminal, an average movement of 440 trucks/day is projected. Once operational, the Marabá terminal will transport minerals for Alpa (a Vale subsidiary) from a nearby depot, but it has not yet been decided how the mineral will be transferred to the Marabá term
inal.



The design of the Obrinel terminal includes an internal area for 50 trucks and an external waiting area for up to 200 trucks. A similar external waiting area is being developed for the Miritituba operations, to be shared with other port operators. The exact set-up for these waiting areas will vary, but in principle they are used to better control traffic flow and minimize disruptions for nearby residents and businesses. Waiting areas will include a wide range of services such as gas stations, workshops for minor repairs, food services, sanitation, and rest areas so as to avoid disruptions to the surrounding community from large numbers of waiting trucks.



Drainage Systems – As noted above under "Wastewater" in PS3, whenever there is a risk of environmental contamination, the company will install drainage systems to collect, direct, and treat stormwater, particularly in grain storage areas, workshops, parking lots for mechanical equipment, etc. Some of these systems will include oil-water separation boxes.



Spill Prevention and Control – HDB will establish specific procedures within its ESMS for preventing, responding to, and containing spills, including a countermeasure plan consistent with the IMO Manual on Oil Pollution Section II - Contingency Planning.



Air Quality – Besides the mitigation measures described above under "Air Emissions" (PS3), the location of storage areas in Vila do Conde Port was chosen in light of the direction of prevailing winds in order to minimize potential dust-related impacts in a nearby neighborhood



Security Personnel - HDB employs private security guards from different companies for its facilities in Brazil, Paraguay, and Uruguay, and depending on local circumstances these guards are armed at some locations. In Brazil, for example, HDB has hired a properly credentialed private security firm whose staff have undergone necessary background checks, training, and licensing for use of firearms in Pará, namely at future HDB ports in Barcarena, Marabá, and Miritituba. In Uruguay, by contrast, HDB''s operating partners run their port operations as privately-managed terminals within larger port facilities; perimeter security, access control, and surveillance are therefore maintained by service providers hired by the ports. HDB''s operating partners have unarmed guards for controlling access to the company''s private terminals. In Paraguay Hidrovias rents office space in a building that uses armed guards to patrol the floors. Hidrovias'' office building in Belém and São Paulo, Brazil, and in Montevideo, Uruguay, otherwise have unarmed guards. As part of the ESAP, HDB will carry out a security risk assessment for its facilities and vessels and develop appropriate policies and procedures for managing the project’s use of armed guards and its relationship with public security personnel in light of IFC Performance Standard 4.

Protection and Conservation of Habitats – Many recent public and private investments taking place or being planned in Brazil’s North are aimed at increasing economic development in the region, such as paving roads (e.g. the BR-163 highway from Cuiabá, Mato Grosso state, to Santarém, Pará state, which serves as the principal northbound conduit for road-based transport from Mato Grosso), expanding energy generation, transmission and distribution, and increasing economic activity, mainly in the mining and agribusiness sectors. Specifically, the paving of BR-163 will facilitate the export of grains and other commodities from Mato Grosso, Brazil''s bread basket, by connecting road and river transportation systems and reducing transport distances and costs significantly. Currently, the vast majority of Mato Grosso''s agricultural production is being shipped 1,500-2,500 km southward by road to the highly congested ports of Santos and Paranaguá in southeastern and southern Brazil, respectively. In addition, the same northern logistics system comprising river barging and highway transport can be used for importing or moving products within the region. Improved transport linkages will therefore accelerate integration of this region into domestic and global markets, increase production, and improve employment.



In general, the installation of Hidrovias’ facilities takes place on already converted land in consolidated areas. On the other hand, part of the products transported by Hidrovias, such as soy, comes from regions with have seen significant conversion of natural and critical habitats, such as the Amazon forest in Brazil and the Chaco biome in both Argentina and Paraguay. Most of this production is handled by large traders, Hidrovias'' principal clients, who participate in schemes like the Round Table for Responsible Soy (RTRS) and seek to observe Brazil''s Amazon Soy Moratorium. However, part of the region''s soy production originates from spot-market players who buy from smaller traders or farmers without long-term purchase contracts and without basic information on the product''s origin, such as the name, region, and tax registry of the farms where it was grown. In the case of HDB, 100% of the company''s transport capacity in the North System is contracted to large trading companies, which observe high levels of governance and abide by the Amazon Soy Moratorium. The Moratorium, which prohibits purchasing soy produced on illegally deforested lands, was originally negotiated in 2006 between the big traders, Greenpeace, and Brazilian authorities. It has been renewed on a yearly basis since then.



The municipality of Itaituba, where Miritituba is located, encompasses various conservation areas including the following: the Amazon National Park, with an area of 994,000 ha, Itaituba National Forests I and II, with 220,034 ha and 440,500 ha, respectively, the Environmental Preservation Areas of Bom Jardim/Passa Tudo and Praia do Sapo and the Altamira National
Forest, with a total area of 689,012 ha (in both Itaituba and Altamira municipalities). The Miritituba inland port (11.5 ha) is being planned for a low-density area within a designated Port and Industrial Zone (under Municipal Law No. 2308/2012), and this port area (which includes current and prospective terminals operated by other companies) has been included as part of Itaituba''s official urban plan (Municipal Law No. 1807/2006). Nonetheless, there are concerns about the indirect impacts on biodiversity that such port operations might have, particularly as they lower transportation costs and potentially spur the expansion of nearby areas for agricultural production. (By contrast, the proposed ports in Vila do Conde, Barcarena municipality, northern Pará, and in Marabá, southeastern Pará, are located in areas already heavily altered from their original habitats, and in the case of the prospective Marabá terminal, its operations will be aimed at transporting iron ore from an existing Vale mine further to the south.)



While no significant conversion of natural habitats or significant loss of biodiversity are expected as direct impacts from this project, indirect impacts related to the expansion of the agricultural frontier and concomitant conversion of natural areas could arise as a result of the overall improvement of logistics in the region and the corresponding reduction of transport costs. The western region of the state of Pará, where the proposed Miritituba terminal is located, has been the subject of studies and research, stimulated especially by environmental, ecological and social concerns regarding the exploitation of the Amazon through timber extraction, the expansion of the agricultural frontier, increased mining activity and, more recently, the development of infrastructure such as dams, waterways, and highways. Nonetheless, as stated before, the Miritituba port is being purpose-built to handle soy traded only by responsible traders who are sensitive to the preservation of natural habitats / abide by the Amazon Soy Moratorium. Beyond that, the port''s incremental contribution to the overall reduction of transport costs is judged to be marginal, given the myriad other factors (paving of BR-163, installation of other ports in Miritituba district, etc.) that are contributing to development in the region.



HDB will establish and maintain internal procedures to review clients'' compliance with all provisions of Amazon Soy Moratorium or any other relevant legal requirements aimed at preventing trade in soy produced in illegally deforested areas. If the purpose of the port or the mix of HDB''s clients changes, the company will advise IFC of such changes and may be required to undertake further due diligence to ensure that these do not lead to undesirable indirect impacts.



In contrast with the situation in the Brazilian Amazon, Hidrovias is not currently establishing new transportation routes in Paraguay that could dramatically reduce s
hipping costs and therefore accelerate conversion of natural habitats into soy-producing regions. Rather, it is using existing transportation routes; its effect on shipping costs and therefore the potential conversion of still-intact habitats is considered to be more limited. In the event that Hidrovias seeks to install new ports close to the Chaco that could reduce shipping costs and thus make agricultural expansion into intact habitats more likely, the company will conduct specific risk assessments to (a) analyze any indirect impacts that could result from the possible expansion of soy or other grains and (b) identify opportunities to mitigate those risks, commensurate with the client’s control and influence over farmers. In this connection, the company will consider how the certification scheme of the Round Table on Responsible Soy could play a role in minimizing the negative impacts of expanded soy production in natural habitats.

As part of the environmental licensing process for its greenfield projects in Uruguay (Obrinel terminal) and Brazil (Vila do Conde and Miritituba), Hidrovias has undertaken formal stakeholder engagement processes mandated by regulatory authorities, including public notifications, community hearings, and making the relevant ESIA available widely. In the case of Obrinel, which was considered a project of moderate, manageable risks and impacts by Uruguayan authorities, no public hearings were required, but the company nonetheless organized a community engagement event, which was attended by the local mayor for that district of Montevideo and neighborhood residents, and its project notification and ESIA were posted online and received some 10,000 visits in total. No opposition or complaints against the project has been registered to date. The ESIA process in Brazil required public hearings, which were well attended and where the main community concerns related to prospects for local employment. No opposition or significant community grievances have been noted with regard to the Vila do Conde and the Miritituba ports. The Marabá site, once its design is finalized, will undergo a similar process. In the meantime, HDB has initiated contacts with the local residents of Quilômetro 9, adjacent to its proposed port on the Tocantins River, through a community meeting organized immediately after the purchase of the property. It has maintained ongoing contacts ever since, including the continuation of modest philanthropic activities started by the property''s previous owner.

Beyond these efforts related to the environmental licensing and construction process, the company has sought to engage broadly and proactively with relevant stakeholders and initiate appropriate community development activities. In the case of Miritituba, HDB has joined with other private port operators at the suggestion of the state environmental secretary, and together these companies have established ATAP (Associação dos Terminais Portuários e Estações de Transbordo de Cargas da Hidrovia Tapajós) as a means for harmonizing their approach to stakeholder engagement, strategic community investment, and community outreach. ATAP has hired a local social and environmental consulting firm to coordinate activities aimed at engaging with local authorities and other stakeholders, receiving and handling complaints from the community, and managing local development projects either mandated by the port operators'' environmental licenses or offered by the companies on a voluntary basis. A common, overarching community development action plan mandated by state environmental authorities envisions a series of investments in traffic safety, sanitation, and development of a local supply chain to service the river ports. ATAP maintains a local office, holds monthly public forums on the projects in both Itaituba and Miritituba, manages a toll-free telephone number for information requests, suggestions, and grievances, and produces a monthly newsletter distributed widely within the community.

In Barcarena the same social and environmental consulting firm carries out very similar activities, but exclusively on HDB''s behalf, as the ATAP structure is not existent there. Recent outreach and development activities have included regular public meetings on the project itself (known as the Social Dialogue Forum), income-generation training courses for local women, and festival-like events to help local residents, who live in an area remote from many public services, get free medical and dental check-ups and secure necessary government identification cards.

HDB seeks to be a responsible corporate citizen in the communities where it operates. In the case of Barcarena, the excavation of drainage canals along both sides of the HDB property as part of the civil works has contributed enormously to reducing flooding in neighboring houses, which were previously often inundated during the rainy season as a result of their location in low-lying, poorly drained areas. As noted above under PS-5, HDB has also built a new primary and secondary school complex in Barcarena. This school has seen strong growth in enrollments, as the facilities are far superior to the previous school, and the building itself has become a focal point for community development, including through evening classes on adult literacy and other skills. In Paraguay and Uruguay, where HDB''s operations and facilities or those of its partners have more limited direct interaction with communities, the company nonetheless seeks to engage proactively with stakeholders and to act as a responsible corporate citizen. At one of its Uruguay locations, HDB''s partner Limday donates yearly scholarships and make other philanthropic contributions to the town of Fray Bentos. In Paraguay, HDB is commissioning an independent social impact assessment to identify hitherto unknown stakeholders and begin dialogue to communities along the route of its barging operations on the Paraguay River.

External Communications and Grievance Mechanisms – As noted immediately above, HDB has in place a well-developed system for communicating externally with key stakeholders and for receiving and processing complaints. HDB has contracted a specialized social and environmental consulting firm to organize public forums, to engage with stakeholders, to produce and distribute regular newsletters, and to manage a grievance mechanism (through a toll-free telephone number, the placement of suggestion/complaint boxes at key locations, and direct community interaction). Comparable systems have not yet been fully developed in Paraguay and Uruguay, where the interaction between the project and communities is far more limited and where impacts are also more attenuated. Nonetheless, the conduct of an independent social impact assessment in Paraguay along the course of HDB''s barge operations will indicate ways in which an appropriate approach to external communications and grievance management can be designed in that country. Operations in Uruguay, where the company''s private terminals are managed within larger ports with restricted public access, also have clearly defined means for external grievances to be submitted via a toll-free number or contact directly with HDB''s operating partners. In addition, HDB at the corporate level is developing a means for fully anonymous complaints to be registered via the company''s website from anywhere in the world. As part of its effort to develop a comprehensive grievance management system, Hidrovias will examine its policies, procedures, and practices in light of PS1 requirements and good-practice guidance from the IFC, particularly for where the company''s operations have the greatest proximity to and interaction with local communities.

On-going Reporting to Affected Communities - In the last six months HDB''s operations in Brazil have launched various mechanisms for ongoing reporting to affected communities, including regular public meetings, the publication and distribution of monthly newsletters, and the availability of local offices staffed by HDB and environmental and social contractor personnel to interact with stakeholders, such as through regular office hours and a toll-free telephone number for responding to information requests. Hidrovias is seeking to formalize and extend such practices throughout its operations.

Fabio A. Schettino
E-mail: mailto:fabio.schettino@hbsa.com.br
Tel: +55 11 3905-6000
Fax: +55 11 3905-6005

Broad Community Support is not applicable for this project

Title	Anticipated completion Date	Status	Comments	Completion Date
Chance Archeological Finds: HDB will develop a procedure to handle chance archeological finds for its construction projects.	09/29/2014 11:00:00 PM	Completed	Completed	01/25/2015 09:00:00 PM
Worker Grievance Mechanism: HDB will formalize and publicize an anonymous grievance mechanism and ensure access to all personnel including third-party workers.	11/29/2014 09:00:00 PM	Completed	Completed	03/22/2015 11:00:00 PM
Hidrovias will formalize energy consumption targets at the operational level and incorporate them into its EHS management system. Where benchmarking data are available, HDB will make a comparison to establish the relative level of efficiency.	07/30/2016 11:00:00 PM	In Progress	Due date revised as agreed with IFC client
Hidrovias will confirm acceptable conditions and standards of the disposal sites it uses. Where there are no licensed sites, the company will reduce waste sent to such sites and consider alternative disposal options, including the possibility of developing their own recovery or disposal facilities at the project site.	07/30/2015 11:00:00 PM	Completed	Completed	07/29/2015 11:00:00 PM
HDB will carry out a security risk assessment for its facilities and vessels.	08/30/2015 11:00:00 PM	Completed	Completed	10/26/2015 10:00:00 PM
Develop appropriate policies and procedures for managing the project’s use of armed guards and its relationship with public security personnel in light of IFC Performance Standard 4.	10/30/2015 10:00:00 PM	Completed	Completed	02/25/2016 10:00:00 PM
Biodiversity Conservation (Brazil): HDB will establish and keep internal procedures to assure the compliance of every and all Legal Requirements related to the matter of Amazon Soy Moratorium and/or soy produced in illegally deforested areas.	11/29/2014 09:00:00 PM	Completed	Completed	03/17/2015 11:00:00 PM