22 March 2005
Read the Latin America Program's first update on International Financial Institution activities, projects, and related civil society activities in Brazil.
[También disponible en español]
Written by Cynthia Verastegui Effel
March 2005
Recent News and Developments
Two IDB projects win the " Deal of the Year" award
March 10, 2005: Despite the controversy surrounding these projects, Camisea, a pipeline and gas extraction project located in the Peruvian Amazon, and the Novatrans project, an electric line project in Brazil, won the Deal of the Year award from the Project Finance Magazine. According to the magazine, "Camisea's greatest achievement lies in raising a mixture of multilateral, bilateral and domestic debt to fund a project that struggled to come to fruition." Unfortunately, this prize does not consider the environmental degradation and social impacts of these projects, whose initial problems with financing are a direct result of the large and permanent ecological and social footprints that each is leaving in its wake. Despite massive public opposition to the projects, and concerns raised about the EIAs, the IDB lent Camisea 75 million dollars and funded 66 million dollars of the Novatrans project. Read the press release: Read more about Camisea
Dorothy Stang, a 74-year-old nun, was assassinated in Brazil
Dorothy Stang, a 74 year old nun, American naturalized Brazilian was murdered on February 12, 2005. Sadly, Dorothy had been receiving death threats since March of last year in response to her activism in defense of the environment and indigenous people without lands. Two shots ended her life. Dorothy was on her way to a community meeting in the south of Belém, state of Pará. Her assassination brought to light once more the fight for the land in Brazil. Between 1985 and 2004, 1,379 people were murdered due to conflicts in the rural regions. As of today only 15 of those cases went to court. Dorothy Stang arrived in Brazil 27 years ago. In 1999, she organized a Sustainable Development Project (PDS) in the region of Anapu, benefiting 600 families. The context of her death is succintly described by a local radio station: "Latifundistas, big wood processing companies that exploit the natural resources of the region along with its bands of pistoleros threaten, terrorize the indigenous people, the peasants, and its leaders". Read the article.
Civil society organizations meet with the IADB in Panama. February 20, 2005
Civil society organizations met with the IADB in Panama for the 5th Regional Meeting IADB and Civil Society Organizations. Among the topics discussed included the new Independent Investigation Mechanism (IIM) and its consultation process; indigenous people; the role of civil society participation; regional integration, sustainable development and the new Environmental Policy. On February 24, these same 33 organizations signed a letter to Sr. Enrique Iglesias, president of the Inter American Development Bank, demanding that in the consultation process for the new Independent Investigation Mechanism (IIM) be applied the same high standards set by the Environmental Policy consultations. The letter also suggested that during the consultation process the Bank should ask those who had previously made use of the IIM. For example, those affected by the controversial hydroelectric complex Yacyretá made use of the IIM. Read the letter Read more about the IIM
There is more money for Latin America. February 17, 2005.
IADB's chief economist Guillermo Calvo announced that more capital flows are entering into Latin America due to favorable economic conditions in the region, which is growing at a 5 percent rate. According to Calvo, more investment will flow into the region because the cost of borrowing money has declined. However, the money will not come from the banks (they are not lending at the moment) but rather it will come from the bond market. In addition, China will play a critical role in the region because currently this country has great incentives to invest overseas due to evidence of domestic over-investment and inflationary pressures. According to Calvo, Chinese direct investment is relevant for Latin America because "what enters as foreign direct investment into China turns around and is reinvested outside". According to the experts, Brazil is an example to explain what is happening in the region: "the cost of money has decreased significantly, the real exchange rate has appreciated, the growth rate had an important recovery from 3 to 5.3 percent of annual GDP-the biggest in 15 years". Read about Calvo's assessment.
IADB approves a $2 billion loan to Brazil. December 15, 2004.
The Inter-American Development Bank approved a $2 billion loan to Brazil in order to support its social protection system and small business in Brazil. A loan of $1 billion was given to Banco Nacional de Desenvolvimento Econômico e Social (BNDES) that totals a $3 billion line of credit assigned to this bank. This loan also intends to provide medium to long term financing for investment projects that make firms more competitive. The other $1billion loan is earmarked to strengthen Brazil's social protection system, in particular the Bolsa Familia (family allowance), which is a conditional cash transfer program. Through these loans, authorities also aim to strengthen the Child Labor Eradication Program. More details on this loan can be found at: Press release
The IADB released its paper strategy for Brazil for 2004-2007. November 2004.
The IADB released their paper strategy for Brazil period 2004 - 2007. The Bank will work along with the "Brazil for All" which is a Multiyear Plan (PPA) that outlines the development strategy submitted to the Brazilian Congress by the Federal Government in 2003. These two strategies share three main objectives: a) social inclusion and reduction of inequalities b) environmentally sustainable growth with the generation of employment; reduction of regional inequalities; c) support institutional strengthening and the promotion of democracy and citizen participation. The Brazilian government projects the necessity of US$150 billion to fund these initiatives. The IADB on the other hand projects a lending scenario that would range from US$4.5 billion to US$6.5 billion. Read the complete document.
The World Bank has a new vice-president for Latin America and the Caribbean.
January 11, 2005.
The World Bank has a new vice-president for Latin America and the Caribbean. Pamela Cox is now in charge of overseeing the Bank's lending and poverty-fighting operations. On January 17, she made her first official trip to Brazil where she visited Bank projects and project beneficiaries. She also met with government officials and civil society representatives. The new vice-president replaces David de Ferranti who served in the position for five and a half years. Before Pamela Cox accepted this position, she was the Bank's Director of Strategy and Operation for Africa (2000-2004) and she served as Country Director for some African countries. She has also worked on agricultural and environmental issues in South Asia and Latin America since joining the Bank in 1980. The World Bank serves 30 countries in Latin America and the Caribbean with lending operations that amount up to $5.3 billion in fiscal year 2004 (July 2003-June2004). The Bank's portfolio of projects under implementation in the region totals $19.3 billion. More information can be found at World Bank bio
Projects Activities and Updates
Brazil and the IIRSA
The Initiative for the Integration for the Regional Infrastructure in South America contains 10 different regional hubs. Brazil forms part of seven of them. Unfortunately, there are no updates available regarding the progress on any of these hubs since June 2004. Information is scarce and poorly updated which is why only two hubs figure in this report. For more information go to the IIRSA web page.
Peru - Brazil - Bolivia Hub
According to IADB executives the Bank is not currently financing any IIRSA projects. However, the official list of proposed projects on the IDB Website includes several IIRSA projects. These include a 75 Million dollar loan to build roads connecting costal Perú to the Acre region of Brazil. The IADB is also presently conducting environmental and control of risk studies for some of the IIRSA projects in the Northern Hub. In addition, the Bank financed directly and indirectly a group of projects in 2004, one of it more recent being the loan of 33 million dollars to Bolivia, approved December 1, 2004 to build a highway between La Paz and River Branco - a key project in the Peru-Brazil-Bolivia Hub. More information.
Another critical project within this Hub is the Rio Madera Project. This is the most costly and controversial IIRSA project. It is controversial because of its location on a tributary of the Amazon, in the state of Acre, Brazil. With a cost of more than 6 billion dollars, this hydroelectric complex is more expensive than all 330 official IIRSA projects. However, despite its importance this project is not within the list of the 31 priority projects. Peru/Brasil/Bolivia Hub
The Acre Bridge Project, one of the 31 priority projects selected during the third meeting of South American presidents (December 8, 2004),) was recently distinguished for being one of the first to be financed. The government of the state of Acre funded the project with near 10 million dollars of federal and state funds. Acre government website.
Amazon Hub
This Hub formed by three large systems: the coast, the Andean saw and the Amazon forest is seen as a "buffer" that would be able to interconnect ports of the Pacific (Tumaco in Colombia, Esmeraldas in Equator and Paita in Peru) with the Brazilian ports of Manaos, Belén and Macapá. On December 8, 2004 the Banco Nacional de Desenvolvimento Econômico e Social (BNDES), the main bank of development of Brazil, approved a 400 million dollar loan to Peru to finance the project of rehabilitation and construction of the highway between Cuzco y Acre. This is considered an environmentally problematic project as it will connect the remote Amazon state of Acre with the packed city of Cuzco, Peru. Acre government webpage.
Brazil in the World Bank
The World Bank approved a $4.8 million loan to the state of Amapá, in Northern Brazil. December 7, 2004.
The World Bank approved a $4.8 million loan to the state of Amapá, located in Northern Brazil. The goal of the Amapá Sustainable Communities Project is to support efforts that aim to reduce urban and rural poverty in the Amazon region through environmentally sustainable, economically efficient and socially equitable measures. This project aims to reach 198,000 citizens that live in poverty, such as river dwellers, extractivists, female-headed households, indigenous communities, and Afro-Brazilians (groups at greater risk). "Amapá is an interesting challenge for the Bank given the richness of its environment and the diversity of its population with many indigenous peoples groups and communities of African descendents," said Maria-Valéria Pena, World Bank project manager. This IBRD fixed-spread loan has a repayment period of 15 years, with a seven-year grace period. Read the complete document .
IFC Soy Project subject of Controversy- Categorization as class B under Fire.
The International Finance Corporation (IFC), the private arm of the World Bank, has lent 30 millioin dollars to the Maggi Group to finance a soy production project in the state of Matto Grosso, Brazil. However, there have been protests by civil society groups in Brazil who claim that the project should have been classified as a class A project- one with a high social and environmental risk factor. The Maggi Group found themselves under fire when the CAO (Compliance Advisory Ombudsman) of the World Bank decided to revise the project classification. The CAO, which reports exclusively to the president of the World Bank Group, is the semi-autonomous investigative branch of the World Bank Group that responds to complaints and determines whether the IFC has violated its own policies during the implementation of a project. The narrow scope of the IFC means that even if the project is undesirable for other reasons, it will still go forward if the IFC's weak environmental and social regulations have not been breached. According to Robert Smeraldi, Director of the Friend of the Earth "this audit would not have been necessary if the IFC had listened to civil societies points two months ago". Adding to the tense environment is the fact that the president of the Maggi Group is also the governor of the state of Matto Grosso, the site of the disputed project. Blairo Maggi said that his political platform was based in the necessity to encourage the economic growth of Brazil. In an interview with the magazine Soy Digest a year ago, he stated " my objective as governer is…to triple the agricultural production in Matto Grosso in the next ten years as well as develop the industrial agriculture production so as to add value to the product." When he was questioned about the massive deforestation (almost 40%) that would be caused by his project, he responded " for me 40% of the deforestation in the area doesn't signify anything and I do not feel responsible in the least". Read a civil society analysis.
Read the article.
BNDES - Banco Nacional de Desenvolvimento Econômico e Social
BNDES approved financing of US$200 million for the construction of a natural gas pipeline in Argentina. February 22, 2005.
BNDES approved financing of US$200 million for the construction of a natural gas pipeline in Argentina, between Patagonia and Buenos Aires. This project will also support Brazilian exports of heavy equipment manufacturing companies to Argentina, including Transportadora de Gás Del Sur (TGS), which is controlled by Compania de Inversiones de Energia S. A. (CIESA). This last forms part of PETROBAS ENERGIA S.A. (PESA), subsidiary of the Petrobas in Argentina. According to the BNDES the expansion of the capacity of transportation of the TGS will guarantee much higher availability of natural gas and electricity to the city of Buenos Aires, a city that since the beginning of 2004 has been experiencing an energetic crisis. Read the press release.
Brasília along with the BNDES will fund half of the 33 IIRSA projects. March 4, 2005.
As of today, Brazil's total lending and investment activities in the region totals up to an amount of $2bn. Venezuela represents the largest recipient of BNDES funds. The BNDES is currently financing part of Venezuela's Metro System. In addition, more than half of $825 million worth of projects are already approved; including two hydro-electric plants. The Orinoco River Bridge Project is expected to receive approval for funds later this year. Ecuador has about $532 million for airport and road projects. Brasilia's authorities were accused of favoring its closest political allies, yet Mr. Mantega, the Bank's president, denied this indicating that their lending criteria had to do with the country's credit ratings and ability to put up financial guarantees. Read the article in the Financial Times.
BNDES increased its lending activity up to a 69% in comparison to last year. February 18, 2005.
The BNDES released $1,450 million more in January this year in comparison to the same month last year. The majority of these funds were directed to fund exportation and infrastructure projects. According to Brazilian authorities the goal is to double the amount of credit disbursed within its economy. Being the case, the target for this year is $23 million, which represents almost $2 million more than the World Bank.
BNDES profits little in comparison to its R$ 160 active account.
According to information from the Bank itself, their profits reached a mere R$70 million. This represents a really low number considering the R$ 160 the Bank has in its active account and the R$40 billion disbursed by the Bank for financing purposes. This information was provided by the president of the Bank, Mr. Mantega, in a meeting with the National Council of Industrial Development (CNI). Mr. Mantega gave this information to a group of businessman who were asking the Bank to reduce the so called "spreads". According to the Bank's president, it will be really difficult to reduce the "spread" considering the current numbers. He also made a comparison with the World Bank and the Inter-American Development Bank. Their profits reached up to a 5% of their patrimony. The results for the BNDES are lower. Mr. Mantega remarked that these are development Banks therefore do not pay taxes. Some of the participants suggested the BNDES not to have to pay taxes to the government.
Civil Society Activities
Rios Vivos argues for Preservation of the Southern Pantanal
This civil society organization has sent a letter to the president of MDU, to the Brazilian President; to Marina Silva, Environment Minister; and to the governor of Mato Grosso do Sul state arguing for the preservation of the Pantanal. MDU is the American Company, which plans to build two thermoelectric power plants near the Paraguay River. If plans go accordingly, by 2009, the southern Pantanal will give way to a thermoelectric plant, a petrochemical complex, and an iron mine and steel mill. All these industries should be built in Corumbá, the town on the Paraguay River known as the Capital of the Pantanal. The petrochemical complex would pollute the air, water and soil, affecting animal and plant life, and would generate toxic wastes and other problems for the population of Corumbá. In addition, the steel industry is considered one of the world's most polluting industries. Iron ore mining affects ground water polluting rivers, stream, and wells, leaving sterile rock piles in the place of rich wetlands. The Corumbá region is already being subject to environmental problems. More information.
IBASE launches a Development Newsletter
The Brazilian Institute for Economic and Social Analysis (IBASE) has initiated a project through which it intends to promote debate in regards to projects of development in Brazil. The BNDES, the principal bank of development in Brazil, will be closely monitored by this organization. IBASE, will release a bi-weekly newsletter with information about the development projects in execution or about to be executed, updates regarding the lending activities of the BNDES, details regarding the percentage destined to social projects, etc. In addition, this newsletter is intended to serve as a tool for the different conferences, and community meetings that they will organize. The first newsletter will be released every Friday, starting March 4, 2005.
IBASE website.