Traditionally known for lending money to governments, in recent years
the World Bank has increasingly loaned to and invested directly in corporations
doing business in developing countries. The International Finance Corporation
(IFC) the private sector lending arm of the bank is now
the fastest growing component of the World Bank Group.
The IFC says its mission is to promote private sector investment
in developing countries, which will reduce poverty and improve peoples
lives. The idea is that strategic investments and interventions
by the IFC can create jobs and spur sustained growth.
Sustained economic growth is essential for poverty reduction, and
the private sector is the main engine of growth, says Ludwina Joseph,
a press officer with the IFC.
But critics charge that, as a profit-making concern, the IFC prioritizes
the pursuit of profit over economic justice, social or environmental concerns.
Rather than promote development and alleviate poverty, they say, the IFC
uses taxpayer dollars to subsidize multinational corporations and businesses
connected to local elites. Recently, the IFC has attempted to respond
to claims of favoritism to big companies with new initiatives; but these
new programs themselves raise a host of new questions about institutional
These charges are particularly serious since the IFCs role will
continue to grow in importance so long as the Bank and International Monetary
Fund continue to push privatization policies and market-based solutions
to alleviating poverty.
The Profit Mentality
The IFC supports the private sector by making loans directly to corporations,
investing directly in private projects, and by syndicating loans through
By investing its own money or making loans without government guarantees,
the IFC seeks to assure private investors both national and international
that investments in developing nation markets are a worthy risk.
In this manner, the IFC says it is catalyzing much greater private sector
investment in frontier areas developing countries and
sectors that might otherwise be overlooked were it not involved. Risks
and management responsibilities are left principally to the companies
carrying out projects receiving IFC funding.
Critics say the IFCs investments and loans are driven by a profit-making
mandate, while little attention is paid to measuring the impacts its activities
have on rates of poverty. The bulk of IFC money goes to lucrative infrastructure
projects that have significant social and environmental costs, as well
as financial intermediaries who allow the IFC to remove itself from any
The IFCs portfolio is oriented toward the interest of corporations
rather than environmentally sustainable development, says Carol
Welch of Friends of the Earth USA, which last year published Dubious
Development, a critique of the IFC. Many of the projects they
are involved in such as oil, mining and gas, coal-fired power plants
and luxury hotel chains fail to deliver on their own mission of
alleviating poverty and often contribute to environmental crises such
as global warming.
The IFCs harshest critics say that it should be closed: private
investment flows to developing nations have exploded in the last decade,
reducing the need for the World Banks private-sector arm, which
was created in 1956. They contend that borrowing companies, particularly
multinationals with access to deep pockets, should be able to stand on
their own legs without the support of the IFC.
Our criteria for working with multinational clients is that they
offer modern technology and management techniques in their fields, are
interested in transferring those skills and knowledge to local partners
in developing countries, and are committed to working with the Banks
guidelines for social and environmental responsibility, counters
the IFCs Joseph.
Perhaps the most unwelcome criticism of the IFC came in March of 2000,
when the U.S. Congressional Advisory Commission on International Financial
Institutions (dubbed the Meltzer commission after the commissions
chair, Allan Meltzer) spelled out its assessment of the IFC in just two
short paragraphs out of a 124-page report. The commission concluded that
private-sector involvement by the development institutions should
be limited to the provision of technical assistance and the dissemination
of best practice standards. The IFCs core functions, along
with those of the Multilateral Investment Guarantee Agency (MIGA), a World
Bank arm that provides investment guarantees to private investors, should
be left to the private sector, the Meltzer report urged. Investment,
guarantees and lending to the private sector [by the World Bank] should
The cause of private sector development would be ill-served without
IFC and MIGAs support for frontier investments and breakthrough
demonstration projects, responds the IFCs Joseph.
IFC officials say the IFC remains the single largest source of investment
in poorer developing nations, and that its involvement is critical to
creating private sector-driven growth in both low-income countries and
rural regions of middle-income countries. Between 1993 and 1999, the IFC
expanded its reach from 55 to 78 countries and expects this number to
expand further. IFC officials add that a new strategy involving smaller-sized
businesses will also expand its mission.
But the IFCs new strategy is still slow in coming, with its investments
and loans still concentrated in a handful of middle-income countries.
According to the IFCs 2000 annual portfolio review, the IFC continues
to face a significant concentration of exposures in a few countries, notably
Argentina and Brazil. In addition, the largest 10 country exposures account
for 57 percent of IFCs portfolio.
Meanwhile, the profit imperative may be the biggest obstacle to operating
in the poorest parts of the world. The IFC reports that non-performing
loans in frontier markets averaged 14 percent between 1996 and 2000, compared
to an average of 8.2 percent for the corporation as a whole. While
a few specific equity investments in frontier markets have done well,
these are concentrated in two or three countries while the remainder of
IFCs equity investments in frontier countries had significantly
lower financial returns compared to the rest of the portfolio, the
IFCs latest portfolio review admits. If the corporation were
to increase significantly its relative investments in frontier sectors,
it could potentially face lower net income.
A Poor Report Card
It is not just external critics who have challenged the IFCs performance.
The IFCs internal watchdog the Operations Evaluation Group
(OEG) issued its year 2000 internal evaluation report this February.
A copy of the confidential report was leaked to Multinational Monitor.
OEG says there is little strategic coherence to the IFCs approach
to private-sector lending: IFC does not systematically form expectations
for, nor monitor, projects diverse development impacts, distribution
effects or poverty impacts, the OEG says. This gap between
IFCs recently adopted mission statement and its operational procedures
limits accountability, affects staff incentives and poses risks to IFCs
The OEG attributes the IFCs problems to a variety of factors, including:
a lack of objectivity and depth of due diligence in appraising
sponsors and managers;
a failure to specify project development objectives with
monitorable indicators, coupled with a near-exclusive supervision focus
on IFCs loan performance as distinct from both development impacts
and the quality of equity outcomes; and
inadequate environmental structuring, reporting and supervision.
OEG officials add that even the IFCs own economists believe the
IFC suffers from an approvals culture, which provides a disincentive
for rigorous analysis [that] still persists today. This approvals
culture is fueled by the fact that investment officers job
performance is assessed on the amount of money they can move out the door,
not on the success of projects or the social, environmental or development
impacts of the projects.
The basis for the OEGs critique is revealed in the IFCs project
record. IFC investment officers continue to develop projects like luxury
resort hotels and shopping malls, which may generate modest foreign exchange
and create employment but few other benefits, especially when the investors
and occupants are foreigners.
The IFC is also pushing the use of technologies which have already demonstrated
adverse environmental impacts and have been criticized as being dirty
or obsolete, including chemicals, aluminum and waste disposal technologies.
In India, for instance, the IFC is considering loaning $20 million to
Chemplast, for the transfer of a partially erected but unused PVC
and VCM (vinyl chloride monomer) plant from Bulgaria. The production
of PVC involves the creation of dioxin and other cancer-causing chemicals.
There is no clear need to demonstrate the viability of this industry in
India, which already has a significant number of PVC and other plastics
Similarly, the IFC is proposing to build a medical waste incinerator as
part of the Alexandria Cleanliness Project in Egypt. The project
would be the IFCs first investment in the waste business. We
believe that the benefits of introducing modern technology and management
techniques, and the multiplier effect that this has on similar operations
elsewhere, outweigh the losses from dividend repatriations and should
result in a very positive economic return for the country, says
William Bulmer, Manager of the IFCs Infrastructure Department.
But critics in the Global Anti-Incineration Alliance say the project
has the potential to create higher unemployment and lower recycling rates
because it threatens to displace an informal network of tens of thousands
of waste collectors who currently divert a high percentage of waste for
recycling and composting.
There are also safer, more economically viable alternatives to
incineration (which emits dioxins and other toxic pollutants now subject
to elimination under the POPs Convention), including autoclaving and microwaving,
says Neil Tangri of the Global Anti-Incineration Alliance and Essential
Action, a project of Multinational Monitors publisher, Essential
Bulmer says no final decisions have been made on the selection of technologies
and other issues.
IFC executive vice president Peter Woicke says that the IFC continues
to develop infrastructure services such as power plants, water supply
and telecommunications because they are fundamental to the quality
of life in the developing world. Without reliable and reasonably priced
access to these services, people suffer and companies have difficulty
surviving. Yet internal documents suggest the IFC gravitates towards
large infrastructure projects involving telecommunications, mining and
electricity generation mostly because they are among the most profitable.
Extractive industries oil, mining and gas represent about
11 percent of the IFCs portfolio and, according the IFC, have by
far the highest equity return. Just two joint ventures accounted
for nearly 40 percent of the IFCs total dividends in FY2000.
At the same time that it is pursuing large infrastructure projects, according
to Peter Woicke, the IFC is also regearing its approach towards increasing
support for small and medium enterprises (SMEs). This effort is particularly
important as state-owned enterprises downsize and continue to be privatized.
Yet IFCs experience in direct SME investments has not been
positive from a financial standpoint, the IFCs Annual Portfolio
Performance Review for 2000 states.
These small, low-return projects receive less IFC staff attention. IFC
is neglecting its supervisory and administrative responsibilities towards
small-sized projects, the OEG says.
The IFCs solution: farm out direct oversight to financial intermediaries
which, in turn, make smaller loans to downstream companies and retain
responsibility for overseeing the social and environmental impacts of
the subprojects they lend to.
Although direct investments in SMEs actually make up only a tiny volume
of IFC approvals under 2 percent throughout the 1990s the
IFC is increasing its use of financial intermediaries and wholesale lenders.
While it is difficult to measure the extent of IFCs support for
SMEs through intermediaries, by 2000, financial services (including intermediaries)
grew to represent almost half of IFCs approvals.
IFC officials contend they will actually improve their oversight of SMEs
through the use of financial intermediaries. Since 1998, IFC has
had special requirements for financial projects. These requirements may
range from the provision of training for financial intermediary staff
to IFC review and monitoring of all subprojects, says Ludwina Joseph
of the IFCs press office.
But the use of private intermediaries raises basic questions about accountability.
Do these intermediaries share the IFCs purported commitment to social,
environmental and development goals, as well as profit? How effectively
does the IFC monitor projects funded by intermediaries for compliance
with the IFCs environmental and social safeguards? How does the
IFC remedy instances where intermediaries fail to comply with these safeguards
and force future compliance?
Privately, IFC officials agree there are no good answers to these questions.
An IFC Roadmap for Sustainability a Powerpoint presentation
made to employees at a recent IFC retreat suggests that when it
comes to financial services, we just dont know the impact
and have little leverage this is where the next stakeholder issue
Those stakeholders might be environmentalists, who point
out that financial intermediaries are not required to disclose the environmental
impacts of a subproject unless they are classed as Category A,
meaning they may result [in] diverse and significant environmental
impacts. Judging a project as Category A triggers a
requirement to conduct a detailed (and costly) environmental assessment.
Project sponsors who want to keep their costs down thus have an incentive
to avoid increased environmental oversight.
Its also not clear how much the poor will be able to benefit from
some of the new financial instruments created by the IFC and its financial
intermediaries to service poorer countries. In June, for instance, the
IFC announced a plan to establish a market for weather derivatives in
Morocco. Everyone would be delighted to do this, Diego Wauters,
the executive director of Societe Generale, the project sponsor, gushed
to Derivatives Week magazine. But everyone may not include
Jerome Levinson, a member of the Meltzer Commission and professor at American
University Law School, says that, even if more effectively undertaken,
the IFCs programs on small and medium enterprises would be meaningless
in the context of other Bank and IMF activities.
I dont see how the IFC can itself create an adequate source
of credit for small and medium enterprises, Levinson says.
With the policy of the indiscriminate opening of capital markets,
which has been the leitmotif of our Treasury [Department] as well as the
World Bank and IMF, you simply open the door to the concentration of economic
power, Levinson contends. In a country like Argentina, for
example, the domestic banking system has been taken over by foreign banks.
One of the first things the foreign banks have done is curtail lending
to the small and medium enterprise segment. There is a gap or vacuum of
the availability of credit for small and medium enterprises, which is
leading to a concentration of economic power and of course a growing income
inequality. Its not clear to me that an IFC or any foreign entity
can really compensate for that, so it seems to me that the IFC is a feel-good
dabble-around-the-edges throwaway to American rhetoric for private enterprise.
If there is any coherence to the IFCs work with the IMF and other
parts of the World Bank, it may be to prey upon economic weaknesses induced,
at least in part, by Bank and IMF policies.
For example, in July 1999, a year after the Asian financial crisis (widely
acknowledged to have been caused, at least in part, by IMF policies),
the IFC proposed to take a $48.8 million equity stake in Kookmin Life
Insurance Co., Ltd. (KL), which became insolvent during the crisis. The
IFC proposes to restructure the company in partnership with New York Life
International, Inc. The new company, the IFC said, will
further expand its business by taking over the books of a number of other
failed life insurance companies when they are auctioned by the Government
at a later time. This would enable the new KL to quickly reach a critical
mass and become one of the largest life insurers in Korea.
A Key Role in Privatization
The Bank openly acknowledges that its pro-privatization policies are creating
an increasingly important role for the IFC.
The Bank and IFC now collaborate in the formulation of country
assistance strategies (CAS) that guide our collective work, says
Peter Woicke, who was hired in 1999 to both lead the IFC and serve as
a managing director of the Bank itself, a joint appointment that signaled
World Bank President James Wolfensohns intent to more closely integrate
IFC and World Bank operations.
The Banks CASs often recommend privatizing services formerly
operated by governments, including transportation, telecommunications,
education and water sectors that the IFC is increasingly investing
in and lending to, a situation which has left the IFC open to charges
that its public interest mission conflicts with its drive for profits.
In the Banks draft private sector development strategy, issued
in June, the Bank proposes to unbundle projects so that the
profit-making parts are carved out for corporations to bid on while other
groups (e.g., non-governmental organizations) administer subsidies through
the loss-making parts of the project. The IFCs role would be to
pick up all good deals left on the table by the private sector.
Critics say the move to unbundled projects appears to create opportunities
for the private sector to move into risky situations by absolving corporations
of significant social, environmental and financial responsibilities. Instead
of having to plow profits back into the loss-making part of a project
(such as environmental clean-ups or subsidies for the poor), corporations
would walk away with their profits, leaving the rest to the public.
But while the IFC and Bank are working to build synergies in their approach
to investment policies, they have done little to build meaningful synergies
when it comes to environmental and social policies. A new World Bank environmental
strategy developed for two years and approved by the Banks executive
board in July (and intended to provide stronger incentives for Bank staff
to pay attention to environmental issues) does not apply to the IFC or
Big Oil And The Bank: Clear And Present Danger
It was early June, in the sweltering heat of Nigerias oil
capital, Port Harcourt, and the phone was ringing. The man on the
other end said he was in town for only a few hours, that he was
here representing the International Finance Corporation (IFC), and
that hed like to talk. It wasnt hard for the staff of
Environmental Right Action in Port Harcourt, Nigeria to figure out
why he was calling.
Just two weeks before, Washington, D.C.-based nonprofits had revealed
that the IFC, the World Banks private sector lending arm,
was about to approve a $15 million loan which would ultimately benefit
Royal Dutch Shells operations in Nigeria. Communities, and
local environmental and human rights groups, were outraged. Shell
is widely blamed in the Niger Delta for the death by hanging of
writer/activist Ken Saro-Wiwa in 1995, as well as a host of other
human rights and environmental problems associated with oil development.
Even the IFCs own internal documents recognized that association
with Shell in Nigeria represented a reputational risk
to the World Bank Group.
The IFC had a problem on its hands. Although it had been working
on the loan for almost two years, it had never formally consulted
with the communities who might be affected by the loan an
oversight which represents a serious breach of Bank guidelines,
and could have derailed the project. So a small team was quickly
dispatched to Port Harcourt to talk to some of the locals. According
to Isaac Osuoka, of Environmental Rights Action (ERA), the
man arrived here on a half hours notice, talked to me for
about twenty minutes, during which I told him we opposed the project,
and that was it.
Back in Washington, though, the loan was speedily approved, now
that management had been satisfied that proper consultation
had indeed taken place. IFC staff claimed to have conducted six
consultations with other groups on the ground in Nigeria, and said
that only ERA opposed the project. ERA was quick to point out that
four of the other five groups that IFC consulted were
actually funded by the oil industry and that the fifth was
a U.S. academic who had been traveling in Nigeria. It was, according
to Nnimmo Bassey of ERA, a mark of the hypocrisy often termed
transparency in the boardrooms of these neocolonial concerns.
But there is little unique about the Nigeria loan; the World Bank
and Big Oil often work together. The World Bank Group currently
devotes approximately 20 percent of its lending to energy-related
projects, of which the overwhelming majority is devoted to projects
that extract or burn fossil fuels. Financing for fossil fuel related
projects alone topped $1.3 billion in 2000. Overall, between 1992
and the present, the Bank Group approved funding for more than $18.5
billion in oil, gas, and coal projects in developing countries
about 25 times more than the Bank spent on renewable energy sources
such as solar and wind.
Beginning in 1998, rising awareness of the Bank Groups role
in fueling climate change has led to some retrenchment of some World
Bank branches fossil fuel portfolios. At the IFC, however,
little has changed: since 1998, the agency has backed corporate
oil, coal, and gas developments to the tune of $2.5 billion.
At base, say critics, the issue is that Bank lending for fossil
fuel projects runs counter to the Banks stated mission of
helping the poor. Lending for fossil fuels actually harms both the
poor and the environment, they argue.
A recent internal paper from the IFC offered support for this claim,
noting that: The notion that governments invest incremental
rents/returns from extractive industries profitably and for the
benefit of poor people is all too often more of an aspiration than
a reality. Cross national data from 113 countries between 1971-1997
has shown that oil exports are strongly associated with governance
weaknesses some resource rich governments use royalty proceeds
to keep tax rates low, cultivate patronage and increase military
Michael Ross, recently a visiting scholar at the World Bank, conducted
the study Does Resource Wealth Cause Authoritarian Rule?
Ross concluded the problems with lending in this sector can be traced
to a rentier effect, which suggests that resource-rich governments
use low tax rates and patronage to dampen democratic pressures;
and a repression effect, which holds that resource wealth retards
democratization by enabling the government to better fund the apparatus
Environmentalists have long been concerned about the local and
global impacts of fossil fuel extraction, including oil spills,
tailing ponds, toxic emissions and other local impacts. While best
practices can mitigate some of these impacts, the issue of carbon
emissions from fossil fuel projects is not so quickly dealt with.
Research by the Institute for Policy Studies, Friends of the Earth,
and other groups critiquing the pattern of international financial
institution investments in oil, gas and coal projects concludes
the planned projects will vastly accelerate global warming, while
also choking off investment in renewable energy and recklessly endangering
and displacing local people and environments.
In response to such criticism, the World Bank recently began a
"strategic review" of its investments in the oil, gas
and mining sectors. According to the Banks own reports, lending
in these areas represents a clear and present danger
because of global concern over inherent sustainability of
extractive industries and compelling evidence of accelerating
global warming. Environmentalists and human rights advocates
remain skeptical of the efficacy of reviews unless the critical
question of whether to lend at all to these industries is on the
"There is no reason why the richest corporations on the planet
deserve any form of public subsidy from the World Bank or any other
public institution to continue to pump out more oil, gas and coal,
says Daphne Wysham, coordinator of the Sustainable Energy &
Economy Network. We need to invest our public money in the
public good. For the poorest who will be most dramatically and directly
harmed by climate change, the greatest public good is to invest
every spare dollar in renewables and energy efficiency now."
For the World Bank, it is still business as usual while the studies
move forward. After approving the loan for Shells contractors
in Nigeria, the IFC immediately moved to the next critical piece
of funding for the poor. In mid-June, the Board approved a $1.75
million loan for a 4-star hotel in Port Harcourt because these
companies will continue to demand clean reasonably priced hotel
Stephen Kretzmann is campaigns coordinator for the Sustainable
Energy and Economy Network of the Institute for Policy Studies.
Shrimp For Brains
In the past two decades, shrimp consumption has spread far beyond
exclusive country club buffets and World Bank annual meetings. The
culinary delicacy has become a middle-class staple in the industrialized
world and, to service the growing demand, a huge and some
say destructive land-based shrimp aquaculture industry has
expanded rapidly in the coastal regions of Asia and Latin America,
often with the help of the International Finance Corporation.
The IFC says it is supporting such enterprises because they are
environmentally benign or beneficial and tangibly contribute to
the well-being of the people in the host country and, in particular,
the relevant local community. But fishing activists in the
Honduran Gulf of Fonseca region say the IFC ignored a long history
of environmental damage and violations of law by industrial shrimp
farms when it loaned $6 million to Granjas Marinas San Bernardo
(GMSB, a subsidiary of the Sea Farms Group) to expand its operations,
making it one of the biggest shrimp farms in the world. IFC officials
say that in the course of due diligence investigations conducted
before the loan was offered, they found an industry devastated by
Hurricane Mitch. Water had overtopped all of GMSBs lagoons
and most of the shrimp were washed out to sea, says Mark Eckstein,
an IFC environmental specialist. But local fishers say GMSB did
not suffer much damage from Mitch as many of its shrimp lagoons
had already been harvested before the hurricane hit.
Its painful to see how, in the name of poverty relief,
the IFC promotes the destruction of natural resources vital for
the survival and progress of the inhabitants of local communities,
says Jorge Varela Marquez, executive director of the Committee for
the Defense and Development of the Flora and Fauna of the Gulf of
Fonseca (CODDEFFAGOLF), a grassroots network of thousands of fishers.
Varela says area fishers have long complained of harassment by company
security guards who have, until recently, closed off access to the
surrounding mangrove areas and estuary where coastal inhabitants
have traditionally lived off the bounty of the wetlands, harvesting
shrimp, fish, iguanas, mussels, clams, crabs, conchs, timber and
In late 2000, after the Central American rainy season ended and
the flat salty marsh areas had dried up enough for earthmoving equipment
to be brought in, the company began to meet stiffened resistance
to its attempts to build new ponds. Local fishers led a 3,000-person
march against the expansion in December and, on February 6, hundreds
escalated their opposition to the expansion by blocking the access
road going into the farm. National police were brought in to forcefully
break up the blockade.
Prompted by the protests, the IFC sent a commission to investigate
Weve worked collaboratively with CODDEFFAGOLF and the
company to address the specific concerns that were raised,
says Eckstein, who explains that at the IFCs behest GMSB has
since hired an environmental director to cover all of its operations
in Honduras, along with an assistant whose job it is to specifically
engage the concerns of local community groups.
But Varela says the IFCs investigators were accompanied by
company executives the entire time they were in the country and
that, while the company has begun to respond to community concerns,
they are doing so in a way intended to divide CODDEFFAGOLF and weaken
the fishing community movement. In May, while Varela and other group
leaders were in Washington, D.C. meeting with a representative of
the IFCs ombudsmans office, he says the company and
members of the federal Ministry of the Environment ran a smear campaign
against him in the papers, and attempted to buy off leading fishers
by offering them farm jobs as wild larvae collectors.
While GMSB may be attempting to mitigate the most destructive effects
of its operations, environmentalists say the cumulative impacts
of the aquaculture industry cannot be avoided, especially where
it has grown to the point of stressing the natural carrying capacity
of coastal ecosystems.
Industrial shrimp farms in the Gulf of Fonseca have expanded from
5,500 hectares in 1989 to 15,000 hectares in 1998. The result has
been pollution of the estuarial areas with wastewater from the ponds
(contaminated with chemical medicines and biological waste), causing
advanced eutrophication of the estuarial zone, occasional fish kills
and the spread of diseases into wildlife populations.
The IFCs Eckstein say studies conducted by the U.S. Agency
for International Development and others suggest theres
no evidence that the farms have affected the water quality in the
estuary above and beyond the impacts of other land uses in
Eckstein admits that the shrimp farms spread pollution in the form
of nitrogen, phosphorous and suspended solids, but the data
that the farmers provided to us, which were generated by third-party
laboratories, indicates that for much of the year and for many parameters
the farm actually acts as a nutrient sink, because it takes
in heavily burdened water that flows down from Tegucigalpa and other
highland urban areas. Ive been to 25 shrimp farms globally
and GMSB is one of the two best managed farms that Ive been
to. If you were to pick someone to target, you could pick a lot
of people who were doing a lot more damaging things than these guys.
That may not be saying much for the industry as a whole.
According to the Industrial Shrimp Action Network, in less than
two decades, industrial-scale shrimp farms have destroyed over a
million hectares of critical coastal wetlands (including mangrove
forests) around the world, while disrupting and displacing traditional
fishing communities. As a result, ISAN and other groups such as
Greenpeace oppose any World Bank support for the expansion
of what is clearly an unsustainable industry, says Mike Hagler,
Greenpeace USAs oceans campaign coordinator and author of
Shrimp: the Devastating Delicacy.
But IFC officials believe the industry can be pushed into sustainability,
even as it expands into new regions of the world. According to the
Asia Pacific Environmental Exchange (APEX), in the last two years
the IFC has also financed shrimp farming projects in Belize, Peru
And the IFC is poised to expand the industry beyond Asia and Latin
America. In September 2000, IFC investment officers proposed to
loan another $20 million to SOCOTA, one of the major industrial
groups in the Indian Ocean for the expansion of its shrimp
farming operations in Madagascar.
I think weve appraised eight to ten projects in the
last three years to see if they have an appropriate management capacity
and commitment to environmental and social performance, says
Eckstein. Weve turned down the majority of these projects,
especially those that dont understand the issues. So our investments
do take the environmental and social risks and opportunities very
Activists such as CODDEFFAGOLFs Varela say they are not opposed
to IFC making loans to the shrimp industry, so long as the money
is used to clean up existing operations. But the IFCs own
profit-making imperatives make that an unlikely outcome with any
IFCs Corporate Welfare King
No single company benefits more from the IFCs generosity than
Arlington, Virginia-based Applied Energy Services (AES), the largest
independent power producer in the world.
According to Friends of the Earth, the IFC has approved or is considering
financing at least nine AES projects, including controversial projects
such as the Bujagali Falls hydroelectric dam generating project
[See Falling for AESs Plan? Multinational Monitor,
Altogether, AES stands to receive well over a billion dollars in
development assistance from the IFC and other branches of the World
Bank, for projects in Georgia (the Tbilisi Project), Panama (AES
Panama Energy), Bangladesh (Haripur Power Project), Mexico (Merida
III Power Project), Pakistan (Pak Gen Project and the Lal Pir Project),
Tanzania (Songo Songo Gas Development Power Project), Central America
(gas-fired power generation) and El Salvador (electricity service
IFC works with larger companies such as AES because, more
often than not, it is only such companies which are willing to absorb
financial risk and go into politically and financially risky markets
as project sponsors with IFC, says the IFCs Ludwina
Joseph. AES might not have participated in certain deals if
it was not for IFCs presence in a project giving them an added
measure of confidence. Even companies such as AES find it difficult
without IFCs presence to raise funds on the
market for independent power projects in developing countries.
Not surprisingly, AES officials explain their close relationship
to the IFC in a similar manner.
A lot of commercial lenders will not go into countries unless
they feel they have a multilateral lender there that provides them
comfort that they have a higher probability of getting paid,
says Kenneth Woodcock of AES Corporation.
Other Multinationals Benefiting From IFC Projects
Electricite de France
New York Life
|This is only a partial list of multinationals benefiting
from IFC projects, based on IFC monthly reports. A longer list of
projects and beneficiaries, and more detailed information on the projects
in which the companies listed here are involved, is available here