Since 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."
But when talking to industry, IFC staff occasionally let slip the real purpose of IFC. "We are open for business," announced Tatiana Bogatyreva, a senior investment officer with IFC, at a packaging industry conference in Moscow earlier this month. The conference was organised by the Adam Smith Institute, a far right-wing pro-privatisation lobby group, and included sessions such as "Packaging as a marketing tool" and a "Champagne roundtable" with packaging industry executives. Bogatyreva told the conference that IFC is ready to finance more packaging sector projects.
Unlike the rest of the World Bank Group, IFC provides loans directly to companies, rather than to governments. The benefits to companies are clear. As well as providing long-term, cheap financing, IFC provides advice on emerging markets, industry sectors and financial structuring. And IFC can help arrange project funding from commercial banks, as well as providing equity finance for companies.
For several decades, IFC has been a major sponsor of pulp and paper projects around the world. In recent months IFC has approved loans for pulp and paper projects in Pakistan, China, Brazil, Jordan and Kyrgyz Republic. In China, IFC is playing an important role in financing the expansion of the industrial forestry sector.
In September 2001, IFC loaned a total of US$25 million to two subsidiaries of Sino-Forest Corporation for the construction of wood-related manufacturing plants and the purchase of plantations in China. Sino-Forest, a Canadian company, has a plantation area of about 240,000 hectares of plantations in southern China. The company is currently expanding its plantation area by 200,000 hectares in Guangdong Province.
In December 2004, IFC announced a financing package to Jiangxi Chenming Paper Company for a 350,000 tons a year paper mill and an associated pulp mill. Jiangxi Chenming is a joint venture between Sappi (South Africa), Shinmoorim (South Korea), Chenming Group (China) and Jiangxi Paper Industry Company Limited (China). IFC will provide US$72.9 million in equity and loans and will arrange a further US$205 million project financing.
In June 2005, Stora Enso signed a loan agreement with IFC for US$75 million to finance Stora Enso's activities in China. The money will go towards Stora Enso's eucalyptus plantations in Guangxi province in southern China and a planned expansion of the company's Suzhou Mill.
Companies which receive IFC loans often claim that the loan is some sort of independent approval of the firm's activities. After his company received an IFC loan, Allen Chan, Sino-Forest's Chairman and CEO, said, "IFC's contribution is an endorsement of Sino-Forest as one of the leaders in sustainable forestry management in China."
When IFC agreed a loan to Stora Enso, Markku Pentikäinen, head of Stora Enso Asia Pacific, said, "We are pleased to note that investors such as IFC appreciate our sustainability approach in both forestry operations and paper production. IFC sets a good example for other investors in the region through its emphasis on socially responsible investment."
Although the IFC has a series of policies which should mean that projects are screened against environmental and social standards, the reality is that the IFC prefers doing business to upholding standards.
In November 2004, IFC approved a US$50 million loan to Brazilian pulp giant Aracruz, to finance the expansion of the company's pulp and plantation operations. IFC gave the loan in spite of ongoing land disputes against the company.
In April 2005, representatives from 64 NGOs wrote to then-World Bank president James Wolfensohn to demand that the IFC cancel its loan to Aracruz. In his reply, Atul Mehta, Director of IFC's Latin America and Caribbean Department, dismissed the ongoing land claims against the company and stated that "land dispute issues were fully reviewed during IFC's appraisal."
One week after Mehta sent his letter, 500 Indigenous Tupinikim and Guarani people cut thousands of eucalyptus trees to demarcate 11,008 hectares of their land, land that Aracruz had planted with eucalyptus plantations. "With this act," the Tupinikim and Guarani wrote to Brazil's Minister of Justice, "we want to express to you and to the entire Brazilian nation that the land belongs to the Tupinikim and Guarani nations, and should be returned so that we may construct our own future, guaranteeing our liberty and autonomy, and the future of our children and grandchildren."
In its support of Aracruz and the pulp and paper sector generally, IFC makes clear what its business is: to provide public money for private profit.
By Chris Lang, e-mail; http://chrislang.org
