• The IMF’s role in the destruction of tropical forests
• The World Bank, Forests and Forest Peoples: Policies, Impacts and Implications
• "Open for business": How the International Finance Corporation subsidises the pulp and paper industry
• The destructive role of Export Credit Agencies

- The IMF’s role in the destruction of tropical forests

Let 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. The IMF continues to believe, or to insist on making us believe that there is a magic or “virtuous” circle in which “sustained” economic growth reduces poverty and increases available resources to improve the environment. Furthermore, this circle has its own feedback (1). Something similar to the invisible hand of Adam Smith.

The IMF itself confesses that it does not take environmental problems into account as it is limited by its mandate and by the scant preparation of its staff in such matters. This institution declares itself to specialize “only in issues referring to macro-economic, monetary, trade and tax policies on a national and international level” and that it is other organizations such as the World Bank, the United Nations or the regional development banks that are “better equipped” to address environmental problems.” (2). In this way, the IMF eludes all responsibility for the environmental impacts generated by its stabilization and structural adjustment programmes.

Three decades have gone by since the first structural adjustment experiments were implemented by the bloody dictatorships of Uruguay, Chile and Argentina in the mid-seventies. Since then and with no distinction of a historical, geographical, cultural or social nature, the IMF has been imposing a single recipe for any country attempting to access its funds, which supposedly aims at achieving economic growth. The IMF takes advantage of the opportunity to impose structural adjustment and stabilization programmes as a conditionality to obtain its loans. These include the implementation of measures aimed at overcoming the budgetary deficit through cuts in public expenditure, the implementation of privatization processes, deregulation of the economy including trade and financial liberalization and economic growth based on an increase in exports. These adjustments involve a structural reform of the State, making it possible to eliminate barriers preventing access to resources and the creation of an environment favourable to foreign investment. Such “barriers” include any type of social regulation (including measures for labour and environmental protection). Summing up, when a country has difficulties with its balance of payments and is on the verge of bankruptcy it finds itself forced to accept the IMF’s financial “assistance,” but in fact it really starts to sink in a process whereby it looses control of its resources (understood in the WIDE sense) and of its sovereignty.

The protests and demonstrations of the affected communities, civil society organizations and studies by environmental organizations have proved over and over again, that in most of the IMF client countries, in addition to the development objectives not being attained, the general results of these policies have been devastating on the environment” (3). And forest ecosystems do not escape this rule. In the year 2002, a study by the American Lands Alliance concluded that the International Monetary Fund (IMF) credits and policies caused a notorious increase in deforestation in Latin American, Asian and African countries possessing great biological wealth. The study points out that the IMF strategy of promoting growth based on exports and foreign investment, while putting pressure on the countries to cut back on their expenditure on environmental programmes, has also accelerated deforestation.” The IMF seems to have promoted the logging of endangered forests in Brazil, Cameroon, Chile, Ecuador, Ghana, Honduras, Indonesia, Côte d’Ivoire, Madagascar, Nicaragua, Papua New Guinea, the Central African Republic, Russia and Tanzania.

The response to this report by the IMF was that it would seem to have been based on “old or incorrect” information. The Fund argues that it has incorporated conditions requiring the reform of forestry policies – aimed at reducing illegal logging and at strengthening forest protection – and that it has even suspended loans to various countries in an attempt to halt illegal logging and deforestation (4). However, the truth is that so far, the Fund refuses to acknowledge the environmental impacts of its structural adjustment programmes.

For example, the study points out that in Brazil, where the tropical forests represent one third of all the rainforests left on the planet, the Government reduced its environmental expenses by almost two thirds, as a condition for an agreement on an emergency package of 41,500 million dollars signed with the IMF in 1998. This implied a budgetary reduction in which 10 of the 16 environmental programmes in Brazil - several of them aimed at enforcing forest exploitation standards and forest protection - ceased to be applied.

In Cameroon, one of the countries with the greatest biological diversity in Africa, the IMF managed to get it to devalue its currency and reduce taxes on exports of forest products. “This made forest exploitation more profitable, and increased the number of commercially viable species, thus increasing the volume logged per hectare.” As a result, the number of logging companies operating in Cameroon increased from 177 to 479 between 1990 and 1998, compared to the scant 106 operating in 1980, with the result that over 75 per cent of the country’s forests have been logged or will have been logged in the near future.

In Papua New Guinea, which hosts 1,500 species of trees, 200 species of mammals and 750 species of birds, half of which are endemic, cuts in public expenditure resulted in the dismantling of the Environmental and Conservation Department. To encourage the timber industry, the IMF managed to have taxes on forest exports cut from 33 per cent to between zero and five per cent in 1998. The result did not take long to appear: various large Malaysian logging companies immediately established themselves in Papua New Guinea, seriously affecting the forests of that country.

The IMF -which mainly reports to the United States Treasury- has not made any substantial changes to improve the situation. It has merely recognized that its policies have some impact on poverty, which has implied a cosmetic change in its structural adjustment programmes. No mention of policies favouring the environment. On June 11, the Ministers of Finance of the G8 made a public declaration on “Development and Debt” including a proposal to cancel the multilateral debt to be submitted to the Annual Meetings of the IMF, the World Bank and the African Development Bank in September 2005. This cancelling of the multilateral debt is still linked to observation of conditions exacerbating poverty, over-exploitation and plundering of natural resources and the perpetuation of domination over the South. In cancelling the debt, no restitution or reparation is commuted for slavery and colonization, for the looting of wealth and natural resources, the exploitation of labour, for human, social and ecological destruction in the South caused by economic activities, military operations and wars protecting the interests of international cleptocracy (5).

The silence of the IMF technocrats, produced by universities such as Harvard and its peers, is not a mere coincidence. They have been trained in function of a single objective: that of removing the obstacles hindering access and control of the planet’s natural resources by the major corporations. Or perhaps the perpetuation of the United States trade deficit aimed at financing the business of world cleptocracy. Once more, the end justifies the means: letters of intent are signed, workshops are organized to build up technical capacity, extortion is exerted with threats of closing access to the markets of international capital and those who have the courage to oppose this neo-liberal development model are repressed. The actors are powerful and well-known: the governments of the rich countries in the North, the multinational corporations, and the corrupt elites and oligarchies of the South. The result can in no way be called development, not if it is done at the expense of destroying healthy ecosystems, the impoverishment and social exclusion of the communities that inhabit them or that depend on them for survival, and the perpetuation at all costs of the present system of global production.

By Marta Zogbi, Friends of the Earth International, e-mail: marta@foei.org

Sources consulted:
1. Ficha técnica - Abril de 2004 “El FMI y el medio ambiente”, http://www.imf.org/external/np/exr/facts/spa/enviros.htm
2. “The IMF and the Environment”, Ved P. Gandhi, July 28, 1998 http://www.imf.org/external/pubs/ft/exrp/environ/
3. "The IMF: Funding Deforestation" by Jason Tockman, American Lands Alliance. The complete report may be read (in English) at http://www.wrm.org.uy/actores/FMI/Jason.doc
4. AMBIENTE: FMI bajo fuego por promover desforestación by Danielle Knight www.tierramerica.net/2002/0203/noticias1.shtml
5. ADITAL 22.06.05 - ARGENTINA “Respuesta de Jubileo Sur a la propuesta sobre Deuda del G8” http://www.adital.org.br/site/noticias/17311.asp?lang=ES&cod=17311

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- The World Bank, Forests and Forest Peoples: Policies, Impacts and Implications

New 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. Forestry ministries, which favour State control and public ownership, and agricultural ministries, which favour private property and free markets, have long been suspicious of each other.

This model of ‘scientific forestry’ was first imposed on developing countries by the British in Burma in the 1840s. Ever since, the political economy in tropical forests has been dominated by unhealthily close relations between those in State agencies, who control forests, and large-scale loggers, prepared to pay them back-handers to get access to the timber. ‘Scientific forestry’ has thus not only favoured collusive corruption but has led to the development of institutionalised graft, whereby substantial proportions of timber profits bank-roll politicians, their patrimonial networks and - in today’s so-called democracies - political parties. Corruption and social exclusion have penetrated the forestry sector so seriously that the goals of ‘scientific forestry’ – which aimed to reserve forests for producing timber for strategic industries and ensure environmental services – have been wholly defeated. Forests have been mined for the economic and political gains of business elites, with severe social and environmental consequences.

This kind of forestry has not only been riven with economic ‘inefficiencies’ – so distasteful to World Bank economists – but has imposed huge costs on local communities and indigenous peoples, whose rights were denied in setting up State forest reserves, to such an extent that the contradiction between forestry and the poor has been too harsh for even the World Bank to ignore. Since the 1980s, the World Bank’s favoured solution to these problems has thus been to promote market-based approaches to the concession system - through measures like competitive bidding, market transparency, undoing log export bans - on the one hand, while promoting ‘social forestry’, usually outside forest reserves, on the other. ‘Social forestry’, based on the Chinese model of mass plantings by State-directed peasantries, was meant to provide rural people with at least some forest products. However, in more capitalist countries it was quickly found that these plantations could be designed to benefit pulp mills and paper industries more than local farmers, whose labour was co-opted for planting and looking after seedlings and saplings but who got scant access to the trees once they matured.

It was only in the mid-1980s, that the World Bank’s approach to forests was seriously challenged by social justice and environment movements. Once it became clear that the World Bank was funding the mass destruction of tropical forests and indigenous peoples – through colonisation schemes, plantations, dams, mines, road building and agribusiness – the World Bank promised reforms. It set up a new environment department, adopted what came to be called ‘safeguard policies’ - required procedures designed to protect vulnerable social groups and environments from the worst impacts – and announced that its goal was to promote ‘sustainable development’, an oxymoron made popular by the Brundtland Commission.

NGO focus on the World Bank’s forestry policy, however, only really started in earnest with the unveiling in 1986 of the Tropical Forestry Action Plan (TFAP), a proposal from the World Bank, FAO, UNDP and World Resources Institute to slosh US$ 7 billion of aid money into tropical forestry. This was to be more of the same – more commercial logging, more plantations modelled on the Aracruz example in Brazil and more top-down social forestry of the kind that was dispossessing peasants and covering ill-named ‘wastelands’ in India with a sea of Eucalyptus. One response from NGOs was to set up the World Rainforest Movement, which was founded at an international conference in Malaysia in 1986 as a riposte to TFAP.

The outcry was so loud and the evidence uncovered by the NGOs so compelling that, in 1990, the G-7 summit called for the TFAP to be revamped – it soon fell apart. For a short period, the critical voice of NGOs was so strong that, when it became clear that there was barely a single example worldwide of sustainable forest management in the tropics, the Bank felt obliged , in 1991, to adopt a forest policy based on a precautionary approach to natural resource exploitation. In the absence of any good evidence that tropical forest logging could be sustainable, the new ‘Forestry policy’ proscribed World Bank funding of projects that would damage primary moist tropical forests.

The Return of the Market: divide and rule. Unfortunately, NGOs did not hold firm in their rejection of market models for forestry reform. True, some such as WRM did prioritise alternative approaches to forests, based on the restitution of the rights of indigenous peoples, land reform to bring justice for peasants and the landless rural poor, the promotion of local livelihoods, gender justice and self-governance. However, many others, including major conservation bodies like the WWF, were attracted by the potential of harnessing market forces to provide the private sector with incentives to manage forests ‘sustainably’, which they hoped would in turn drive forestry reforms. The immediate result was the Forest Stewardship Council, set up in 1993, which while its principles and criteria included strong protections of the rights of local communities, indigenous peoples and workers, led to the rehabilitation of the suspect concept of Sustainable Forest Management. In 1998, the WWF and the World Bank announced a new joint ‘Forest Alliance’ dedicated to promoting the certification of 200 million hectares of forests in World Bank target countries by 2005. The World Bank was back in the forestry game.

The problem remained for the World Bank, that its 1991 forest strategy was not really compatible with a market approach to forests. However, with the NGOs divided, the Bank embarked on a complex manoeuvre designed to legitimise its return to the promotion of tropical forest logging and market based reforms. It carried out a lengthy Forest Policy Implementation Review and Strategy Development, undertook extensive regional consultations, commissioned a series of papers examining worthy matters like poverty alleviation, indigenous peoples and community forestry and, then came to the unsurprising, though contested, conclusion that it was time to do forestry again just as it had in the 1970s and 1980s – promoting market-based reforms of forest industry, while doing ‘community forestry’ to show it still cared about poverty. The proscription on funding logging in primary moist tropical forests was lifted, the precautionary approach dropped.

The new Strategy and associated policy, adopted in 2002, however, has even more of a market emphasis than before. New markets in environmental services are to be promoted, alongside markets in ‘green’ timber, which the policy aims to achieve through voluntary certification. Carbon trading is also being promoted through the Bank’s new Biocarbon Fund.

As detailed in the April issue of the WRM Bulletin (No. 93), unleashed by the new policy, recent World Bank investments are causing serious problems – expansion of socially and environmentally harmful investments in plantations, agribusiness and phoney carbon sinks; top-down community forestry schemes which trample the rights of indigenous peoples, while best practice examples of Bank-funded certified sustainable forestry operations are nowhere to be seen.

Markets without rights. No one should be surprised that the World Bank favours a market approach to dealing with forests, but what is tragically inconsistent about the World Bank’s approach is its treatment of the property rights of the poor. Of course, NGOs tend to argue for the recognition of the land rights of indigenous peoples and local communities on the grounds of human rights and natural justice, but capitalist economists, such as De Soto, have also stressed that development cannot work in favour of the poor without a strong framework to protect property rights.

As the eighteenth century free market philosopher Adam Smith noted, for ‘free markets’ to work, the State must protect ‘as far as possible, every member of the society from the injustice or oppression of every other member of it…’ through the ‘establishment of an exact administration of justice’. The rule of law, Smith concluded, is required for the protection of private property, and this must be done fairly if it is not to ‘excite the indignation of the poor’, leading to the great risk that ‘civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor’ (Adam Smith, The Wealth of Nations).

Yet, the new market-based ‘Forests Policy’ of the World Bank falls into exactly this trap. The World Bank notes that some 1.2 billion poor people worldwide depend on forests for fuel-wood, water and other basic elements in their livelihoods. Of these, 350 million people are forest-dependent people, while only 60 million of these are classified by the Bank as 'Indigenous Peoples'. Although, the new forests policy does require that Bank-funded logging projects ensure ‘recognition and respect for legally documented or customary land tenure and use rights’, no such protections are extended to peoples impacted by other Bank-funded projects that affect forests, like dams, mines, roads, colonisation schemes, agribusiness and plantations. Instead of addressing these concerns head on, the World Bank said it would deal with these broader concerns about tenure in its revised Indigenous Peoples policy, even though this policy is only aimed at some 5% of the 1.2 billion people that the World Bank estimates depend on forests. In effect, the World Bank is prepared to impose its market-based policy for the ‘development’ of forests and plantations without dealing with the tenure rights of some 1.1 billion people who depend on these forests for their well-being.

Moreover, even the Indigenous Peoples policy, which was finally adopted by the World Bank in May 2005, offers very uncertain protections. Although the policy is a slight improvement on discussion drafts issued over the previous four years, the new policy does not call for full recognition of land rights. It only requires borrower governments to set out an ‘action plan’ for either full legal recognition of existing customary land tenure systems, or a process for converting customary rights into ownership rights, or measures for legal recognition of long term use rights.

Indigenous peoples have not been happy with the new policy. A signed statement by many of the main indigenous peoples’ organisations attending the UN Permanent Forum on Indigenous Issues in May 2005 noted of the new World Bank policy that:

“The newly revised policy has made important improvements in several areas, such as requiring that the commercial development of affected indigenous peoples’ cultural resources and knowledge be conditioned upon their prior agreement to such development. Nevertheless, we continue to be extremely concerned about these Multilateral Development Banks lack of recognition of indigenous peoples’ customary rights to their lands, territories and natural resources and to their related right of free prior informed consent, and their derogation of international standards to national law.”

Indigenous peoples have in particular been concerned by the way their demand for recognition of the right of impacted communities to free, prior and informed consent to projects proposed on their customary lands, has been turned into a requirement for ‘free, prior and informed consultation’ leading to ‘broad community support’. According to the Bank’s new policy, such consultation and the assessment of ‘broad community support’ is to be carried out by the borrower government, does not entail the right of the community to veto the project, and is only verified by World Bank staff through their review of documents provided by the government.

All this allows far too much room for projects to be imposed without adequate respect for indigenous peoples’ rights to their lands and to self-determination. As Canadian indigenous rights activist Arthur Manuel noted:

“Consultation sounds good, but does nothing. It's a mechanism to allow for the ultimate theft of our indigenous propriety interests free of charge. Prior informed consent is recognition of our land, culture, and way of life.”

By Marcus Colchester, Forest Peoples Programme, e-mail: marcus@forestpeoples.org. Further details on the implications of the World Bank’s Forests Policy can be found on http://www.wrm.org.uy/actors/WB/brokenpromises.html. For additional background information see: www.forestpeoples.org

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- "Open for business": How the International Finance Corporation subsidises the pulp and paper industry

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; chrislang@t-online.de

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- The destructive role of Export Credit Agencies

Globalisation, 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.

ECAs are Northern-based public agencies that provide the largest source of government --i.e, taxpayer’s-- financing to projects in the South and the East. Through the provision of loans, guarantees, credits and insurance, ECAs allow private corporations from their home country to do business abroad.

During the 1990s, ECAs financing averaged US$80-$100 billion or more per annum, roughly twice the level of the world’s total official development assistance. Worldwide, ECAs currently support an estimated US$ 432 billion in trade and investment – nearly 10 percent of world exports. The system is based on an agreement by the Organisation for Economic Cooperation and Development (OECD) member countries which all have at least one ECA, usually an official or quasi-official branch of the government.

Today, ECAs are collectively among the largest sources of public financial support for foreign corporate involvement in industrial projects in Southern countries. In recent years ECAs are estimated to have supported between US $50 - $70 billion annually in what are called "medium and long-term transactions," a great portion of which are large industrial and infrastructure projects in those countries.

If a deal turns sour, the ECA guarantee covers the losses of the private company, but then adds the sum to the bilateral debt of the home and host countries. As a result, ECAs now account for up to 25 percent of total outstanding Southern debt.

The kind of projects most ECAs often back are projects that even the World Bank Group and other multilateral banks find potentially harmful to support. Hence, ECAs play a major role in the expansion of profitable (mis)development projects of corporate globalization. ECAs are racing to offer credit with the least-binding environmental restrictions and as a result of that race to the bottom, ECA-backed projects often despoil the environment and disrupt the lives of local communities with their environmental, political, social and cultural impacts. For example, ECAs finance greenhouse gas-emitting power plants, large scale dams, mining projects, road development in pristine tropical forests, oil pipelines, forestry and plantation schemes, to name a few.

Most ECAs only recently adopted environmental policies that benchmark against those of the World Bank Group and regional development banks (like the European Bank for Reconstruction and Development, African Development Bank, Asian Development Bank, Inter-American Development Bank). These policies resulted from an agreed set of recommendations, dubbed the "Common Approaches," which was brokered in December, 2003 at the Export Credit Group of the Organization for Economic Cooperation and Development in Paris, France.

The environmental policies of the regional development banks have been criticized for their weaknesses, and the World Bank Group seems poised to weaken its own policies, too. Hence, weak ECA standards are benchmarked against weak regional development bank or World Bank standards, with precious little global leadership to point to. Meanwhile, the Common Approaches agreement is rife with loopholes. For example, it states that ECA-backed projects should "in all cases" comply with World Bank, regional development bank and host country standards, unless an ECA "finds it necessary" to apply lower standards (!).

Another characteristic of ECAs is a wholesale lack of public disclosure of the impacts of their projects. The Common Approaches do not require ECAs to consult with affected communities and civil society in the development of the projects they finance. According to Transparency International, "Bribing foreign officials in order to secure overseas contracts for their exports has become a widespread practice in industrial countries, particularly in certain sectors such as exports of military equipment and public works. Normally these contracts are guaranteed by government-owned or supported Export Credit Insurance (ECI) schemes (HERMES in Germany, COFACE in France, DUCROIRE in Belgium, ECGD in the UK)."

Thanks to ECA support, private commercial banks can shirk much of their responsibilities as well. As a Midland Bank executive in charge of arms deals once described, "You see, before we advance monies to a company, we always insist on any funds being covered by the [UK] Export Credit Guarantee Department...We can't lose. After 90 days, if the Iraqis haven't coughed up, the company gets paid instead by the British Government. Either way, we recover our loan, plus interest of course. It’s beautiful." (Killing Secrets: ECGD, The Export Credit Guarantee Department, 1998.)

One example of ECAs-backed harmful projects is the investment in the Indonesian Pulp and Paper Industry, which is ranked amongst the top ten in the world. This has been made possible by international investment of more than US$15 billion during the 1990s.

Indonesia's two largest pulp producers --Asia Pulp and Paper (APP) and Asia Pacific Resources International, Ltd (APRIL)-- had a nine-fold increase in output between 1988 and 1999, which in turn entailed an increase in annual pulpwood consumption from 1.8 million m3 to 16.7 million m3.

In order to meet the demand of fiber for the pulp industry, the Indonesian government promotes the establishment of tree plantations, despite the social and environmental problems these create. Still, the development of plantations has lagged far behind the increase in processing capacity of the industry, rendering pulp producers dependent on a mix of tropical hardwoods. A World Bank study estimates that deforestation in Indonesia is equivalent to 2 million ha/year, or roughly the size of Belgium.

Another example of ECAs involvement in environmentally destructive projects is the Bolivia-Brazil natural gas pipeline, with a total cost of US$ 2 billion. The construction of the pipeline required the clearing of the forest, and stretches over approximately 3150 kilometers, from Santa Cruz, Bolivia to Brazil’s Mato Grosso do Sul. It cuts across several important ecosystems: the Gran Chaco, a protected area of primary dry tropical forest in Bolivia; the Pantanal, the world’s largest wetland; and the remaining Mata Atlantica Rainforest of Southeastern Brazil.

The project, with its attendant social problems, also has significant impacts on local communities in Brazil and Bolivia. In Bolivia the pipeline traversed a number of indigenous communities and a protected area managed by an indigenous organization. In Brazil, Transportadora Brasileira Gasoduto Bolivia- Brasil (TBG), whose investors include Pertobras, Transredes, Enron and Shell, owns the pipeline; Gas Transboliviano S.A., a consortium comprising Transredes, Enron, Shell and Petrobras, owns the Bolivian portion of the pipeline.

In 1997, the World Bank became the first multilateral agency to fund the pipeline. Other multilateral banks involved include the Inter-American Development Bank and the European Investment Bank (EIB). Export Credit Agencies involved include the Japan Bank for International Cooperation (JBIC), and the Italian Export Credit Agency, SACE, who jointly provided US$ 346 million.

A second pipeline of 630 kilometers starts in Ipiás, Bolivia, where it branches from the main Bolivia-Brazil pipeline and runs northeast to San Matias and on to Cuiaba, Brazil. This pipeline cuts through 200 kilometers of primary Chiquitano tropical forest, 100 kilometers of pristine Pantanal wetlands and bisects Bolivia’s San Matias Integrated Management Area, the only protected area for the world’s largest intact dry tropical forest and the headwaters of the Pantanal. This project is financed by Gas Oriente Boliviano (GOB), a consortium made up of Enron, Shell and Transredes. In 1999, Enron obtained a US$ 200 million financing from the US government via one of its Export Credit Agencies: the overseas Private Investment Corporation (OPIC).

Financing was approved despite the prohibition in the Foreign Assistance Act on funding projects in “primary tropical forests”. The Project’s Environmental Impact Assessment (EIA) and independent scientists classify this region as “primary tropical forest”. Using previous degradation to justify further degradation, Enron, the main project sponsor, contended that the forest is “secondary” due to sporadic logging activities in some parts.

To cut its losses in Enron’s bankruptcy, OPIC pulled out in February 2002. The local impacts on the Chiquitano forest region and the local populations have been significant nonetheless: pollution of local water resources, degradation of local roads, soil and air pollution, an increase in crime, prostitution, and the disruption of local towns by workers camps.

While ECAs play their role, there is increasing awareness that they are very far from being potential vehicles for development and instead embody a form of corrupt, non-transparent, environmentally and socially destructive globalization. Social processes in several southern countries spread against them in search of other possible worlds free from dependency and commercial alienation.

Article based on information from: “The Shadowy World of Export Credits”, Tove Selin, Aaron Goldzimer, and Roy Jones, Asian Labour Update, http://www.amrc.org.hk/4301.htm; “Financial power + ECAs: themes and alternatives”, James Goodman, AID/WATCH and the Minerals Policy Institute, http://www.amrc.org.hk/4302.htm; “What are ECAs?”, ECAWatch, http://www.eca-watch.org/eca/ecas_explained.html; “Export credits: Fuelling illegal logging”, Chantal Marijnissen, FERN, http://www.illegal-logging.info/papers/illegal.pdf