Until the 1950s, countries were just that: countries. During the US presidency of Harry Truman, countries were classified into “developed” and “underdeveloped”, depending on how close or distant they were from the US model. Since then, the negative adjective “underdeveloped” has been replaced by the more positive “developing”. The fact that most of the so-called “developing” countries are now in a worse social, economic and environmental situation than they were when they were classified as such is not even a matter of much debate.
What’s important – for the “developed” countries – is to maintain the illusion that “developing” countries CAN become similar to Western countries. That is also one of the illusions International Financial Institutions (IFIs) seek to maintain.
Bulletin Issue 95 - June 2005
International Financial Institutions - IFIs
THE FOCUS OF THIS ISSUE: INTERNATIONAL FINANCIAL INSTITUTIONS
Forest destruction does not simply happen. A web of actors and policies can always be identified as responsible for initiating processes leading to deforestation and forest degradation. Prominent among those actors are International Financial Institutions which promote and make possible activities which result in massive forest loss and in the violation of the rights of forest and forest-dependent peoples. However, the negative role of these institutions is not easily perceived by the general public, as their loans and policies are presented under the disguise of “development assistance”. For that reason, the World Rainforest Movement and Friends of the Earth International decided to produce a joint bulletin on this issue, aimed at shedding some light over the obscure dealings of these institutions. We hope that the articles below will contribute to that aim.WRM Bulletin
95
June 2005
OUR VIEWPOINT
SHEDDING SOME LIGHT ON IFIS
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15 June 2005Development can provide --indeed, it does-- great opportunities for corporations eager to profit from business in so-called “developing” countries. International Financial Institutions (IFIs) have proved to be extremely good instruments for achieving that, and extremely bad for improving southern peoples’ livelihoods or protecting the environment. The World Bank Group –which includes the World Bank (WB) and the International Finance Corporation (IFC)- the Inter-American Development Bank (IDB), the Asian Development Bank (ADB), the African Development Bank (AfDB), the European Investment Bank (EIB), the International Monetary Fund (IMF), and Export-Credit Agencies are the major IFIs.
FINANCING GLOBAL DESTRUCTION:
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15 June 2005Let us make no mistake. When the IMF talks about a “favourable environment,” it is referring to business, to a favourable environment for direct foreign investment through operations on the stock exchange, or indirect foreign investment through the operation of transnational companies. The sporadic references made to the environment in their loans, grants, documents and strategies are functional to their classical recipes based on adjustment and stabilization programmes, which if properly applied, should lead us to sustained development, understood of course in terms of the continuous growth of the GDP.
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15 June 2005New policies, old problems. Ever since the 1970s, the World Bank has struggled to define an approach to forests, which reconciles its expressed commitment to poverty alleviation with its model of promoting ‘development’ through top-down growth and commercialisation. Free market models of development based on private property rights do not fit well with conventional forestry approaches. Since the 1700s, the dominant model of ‘scientific forestry’, developed in Europe, has opposed the free play of market forces by reserving forests for State-chosen strategic interests. This has entailed State control of forest reserves, as ‘public goods’, to the exclusion of both local communities and (at least in theory) destructive industries.
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15 June 2005Since it was founded in 1956, the International Finance Corporation (IFC) has committed more than US$44 billion of its own funds and arranged a further US$23 billion in loans for 3,143 companies in 140 countries. According to its mission statement, IFC exists to "promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives."
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15 June 2005Globalisation, a corporate-led process across the world, has had immense negative social and environmental impacts, particularly in the Third World. Though the huge commercial forces behind globalization have tried to make people think that it is some kind of an uncontrollable force of nature, and that the famous free market rules the world by its own right, there is increasing awareness that a large part of such devastation is financed and backed by tax-payers' money using national export credit agencies, commonly known as ECAs.
THE REGIONAL ACTORS
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15 June 2005Founded in 1966, the Asian Development Bank (ADB) claims to be "dedicated to reducing poverty in Asia and the Pacific". The Bank's lending to the forestry sector indicates that in fact the Bank's focus is on promoting industry and corporations rather than addressing the needs of the region's poor. The ADB's first loan to the forestry sector was in 1977, since when the Bank has lent over US$1 billion for forestry projects. More than 80 per cent of this total was spent on establishing more than one million hectares of tree plantations, three-quarters of which are commercial plantations. These plantations provide few, if any, benefits to the poor.
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15 June 2005The Inter-American Development Bank (IDB) does not have a specific forest policy or sector strategy, as they claim they have covered forests in other policy and strategy documents, including those on rural poverty reduction, rural finance, agriculture, water resources, coastal resources and energy. The IDB’s current draft of its Environment and Safeguards Compliance Policy also touches on protection of natural habitats.
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15 June 2005Financial deliberations generally take place between dubious actors in obscure corners of the political arena. This is definitely the case with the European Investment Bank, which has only recently been put in the public spotlight. It is now time to uncover the dirty secrets of the European Union’s house bank.
IMPACTS ON THE GROUND
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15 June 2005When the World Bank approved US$270 million in grants and guarantees for the controversial one thousand megawatt Nam Theun 2 (NT2) hydroelectric dam in Laos on 31 March of this year, most of its Directors were convinced that the project’s economic benefits outweighed its environmental and social downsides. The reservoir behind the Nam Theun 2 dam would flood an area of 450 square kilometres, home to 5,700 Indigenous People and habitat to endangered species such as the Asian elephant and white-winged duck. Water would be transferred from the Theun River to the Xe Bang Fai, severely changing water flow regimes in the Xe Bang Fai upon which over 120,000 depend for their livelihoods.
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15 June 2005Camisea is the greatest energy project in the history of Peru. This project involves the extraction of natural gas in an area known as Lot 88, located on both sides of the Camisea River, one of the richest biodiversity areas in the world. The cost of building the whole project amounts to 1,600 million dollars, including the exploitation and processing of gas and the construction of gas pipelines that will pass by the Andes Cordillera before reaching the coast for distribution.
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15 June 2005Uruguay is in the sights of the pulp industry. The Finnish multinational company, Metsa Botnia and the Spanish company Ence are proposing to install two pulp mills to produce bleached eucalyptus pulp (using ECF process with chlorine dioxide) for export, with Botnia producing a maximum volume of 1 million tons per year and Ence 500,000 tons. The pulp mills would be installed on the banks of the Uruguay River, which Uruguay shares with Argentina, in the locality of Fray Bentos. The projects have given rise to increasing citizen opposition both in Uruguay and Argentina, with a multitudinous meeting of both peoples on the General San Martin Bridge that joins the two territories (see WRM Bulletin No. 94) as the high point of the campaign.
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13 June 2005“The worst immorality is a studied ignorance, a purposeful refusal to see or know” (Andrea Dworkin) ‘Development’ and International Financial Institutions (IFIs) together with the main decision makers within them, often attempt to justify destructive projects and policies on the proposition that neo-liberal economic policy incarnates the one-way high street to poverty alleviation and environmental protection. As the collection of articles presented here demonstrates, continuing to uphold this proposition amounts to “a purposeful refusal to see or know”.
