boilingspot: World Bank loan 'threatens Amazon'

By Gabriel Elizondo in Maraba, Al Jazeera, October 15, 2008

Brazil exports more beef than any other country in the world [Maria Helena Romero]

The expansion of Brazil's cattle industry is widely regarded as being one of the greatest single threats to the Amazon rainforest.

Now, environmentalists say deforestation in the fragile region, and consequently climate change, are set to worsen following the World Bank's sponsorship of a major loan to Brazil's second-largest beef processors.

The criticism comes after the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, lent Bertin Ltda $90m last year to expand and modernise its beef processing and slaughterhouse operations.

The IFC's own pre-loan analysis called the loan "significant" because the effects could prove to be "irreversible and/or unprecedented".

"Each year Brazil is losing 1.8 million hectares of Amazon forest and the cattle industry is responsible for a big part of that" - Mario Menezes, adjunct director of Amigos da Terra

As world demand for Brazilian beef increases, farmers need more land to rear cattle to supply industrial slaughterhouses in the region, so huge areas of forest are often cut down for cattle grazing.

"Each year Brazil is losing 1.8 million hectares of Amazon forest and the cattle industry is responsible for between 70 and 80 per cent of that I would say," said Mario Menezes, the adjunct director of the environmental group Sao Paulo-based Amigos da Terra and a co-author of an exhaustive study published earlier this year examining the cattle industry in the Amazon.

Brazil exports more beef than any other country in the world, but many international consumers are unaware that nearly 41 per cent of all of all cattle processed in Brazil comes from the Amazon region – one of the world's most important natural ecosystems.

Expanding slaughter

Within Brazil's Amazon region there are about 75 million heads of cattle that account for 300,000 tonnes of beef exports per year - the biggest importers being Israel, Egypt, China, Saudi Arabia, Lebanon, Russia, the UK and United States.

Bertin Ltda, a company based outside of Sao Paulo which exports processed beef and live cattle, can slaughter up to 5,400 head of cattle a day.

But it is aiming to almost double its capacity with the use of the IFC loan and investments from other financial institutions.

In a move that has courted further controversy, Bertin Ltda aims to use $9m of the loan to increase the slaughter capacity of its facility in Maraba - right in the middle of the most heavily deforested area of the Amazon.

The region in the southern part of Brazil's Para state is notorious in Brazil for being a "land without laws" - rife with unabated deforestation and the widespread use of slave labour.

Critics say the fact the IFC is involved in forwarding a loan for this type of activity is akin to tacit approval of such practices that lead directly to new deforestation.

"Maraba has already passed the deforestation stage. There is no forest left," Menezes told Al Jazeera.

"But Bertin has a big area of influence, and their slaughter capacity determines demand for cattle from the region.

"So, when the IFC lends the company money to expand, it encourages farmers to clear more forest for cattle since they know Bertin will have increased demand, which then has an immediate impact on the forest."

'Unprecedented pressure'

All sides agree that cattle ranching is destructive.

But the IFC and World Bank say their involvement is putting unprecedented pressure on the industry to reverse bad environmental habits.

Asked whether the IFC believes the cattle industry causes deforestation in Brazil, Karina Manasseh, IFC's spokesperson in Sao Paulo, responded via email: "Absolutely.

"IFC is aware of the concerns associated with cattle ranching in Brazil and that is precisely the reason we chose to engage with Bertin when we saw an opportunity to leverage, through a big player, a change in the way the industry operates in the region.

"IFC believes that through its involvement in this project, it can raise the standards in the production and supply chain of beef processing in Brazil in general, and in Para's southeast region in particular [where the Bertin slaughterhouse is located]."

Menezes says IFC loans encourage farmers to clear more forest [Maria Helena Romero]

Environmentalists, however, aren't buying it.

They say any encouragement of the industry to expand is akin to signalling to the international community that the industry is sustainable in the Amazon, which, they say, it is not.

Trevor Stevenson, the executive co-director of Amazon Alliance, a network of more than 100 environmental organisations, told Al Jazeera: "Because the World Bank's mission is to reduce poverty and solve worlds' problems, their getting involved in a cattle ranching project implies to the world that this is part of the solution to the world's problem, [that] this is part of the solution to poverty, part of the solution to environmental problems.

"But it's very much not the case - cattle ranching is one of the principal destroyers of the rainforest in the Amazon.

"It is not an appropriate activity for the Amazon region, where it is not a sustainable practice. It never has been, it never will be, and the destruction of forest will create the collapse of the entire region if it continues unabated."

The Brazilian national development bank, as well as other national and international lending institutions, lend far more money to the cattle industry than the World Bank.

But the IFC and World Bank loans, while a small part of a $2bn-a-year industry, carry more significance and lead to greater repercussions, Menezes and others say.

"The dollar amount of the investment from the IFC and World Bank is not very significant," Menezes told Al Jazeera.

"The Brazilian government has a bigger investment in cattle ranching through subsidised financing, but the main problem is that an IFC and World Bank investment represents a guarantee to other international investors and financial institutions that the projects are environmentally sound - and that is not true at all."

Meaningless 'good'?

The IFC and World Bank disagree, saying that money has been flowing into the industry for the past 30 years, long before the pair started making loans.

The World Bank Group in Brasilia also says they manage a $160m fund in Brazil that has helped preserve 100 million hectares of Amazon forest.

Garo Batmanian, the Brazil Amazon co-ordinator for the World Bank Group in Brasilia, says they now have over eight staffers based in Brasilia working specifically on environmental related issues.

But Stevenson said: "On the one hand, the World Bank and IFC are supposedly promoting solutions to environmental problems and climate change."

"On the other, they are funding precisely the thing that is creating deforestation and climate change in the world."

The World Bank internal evaluation unit released a report in July saying 67 per cent of its projects worldwide had achieved a satisfactory level of compliance with environmental policies in the past 10 years.

In Brazil, the number was 62 per cent, and that being before data or case studies could be analysed from the loan to Bertin.

The IFC's total portfolio in Brazil was $2.2bn as of last June, according to the institution.

Last year the IFC made loans totalling $80 million to agribusiness, but it says no money has been lent specifically to slaughterhouse expansion since the Bertin loan.

An IFC spokesperson said the organisation would not rule out future loans to the cattle industry as long as it "meets our criteria for environmental and social standards and has a positive development impact which is in line with the World Bank Group strategy for Brazil".

But that leaves many people questioning whether all the good the World Bank Group says it is doing to save the Amazon is meaningless if it is also lending millions of dollars to the very industry most responsible for destroying it.