Let us throw a wider scope on the "Dominion" farm project

, Sent by Martin Ouko;

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WORLD RAINFOREST MOVEMENT
MOVIMIENTO MUNDIAL POR LOS BOSQUES

International Secretariat
Maldonado 1858; Montevideo, Uruguay
E-Mail: wrm At wrm dOt org doT uy
Web page: http://www.wrm.org.uy
Editor: Ricardo Carrere
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W R M   B U L L E T I N   95
June 2005 - English edition

This bulletin is also available in French, Portuguese, and Spanish.  

THE FOCUS OF THIS ISSUE: INTERNATIONAL FINANCIAL INSTITUTIONS

Forest destruction does not simply happen. A web of actors and policies can always be identified as responsible for initiating processes leading to deforestation and forest degradation. Prominent among those actors are International Financial Institutions which promote and make possible activities which result in massive forest loss and in the violation of the rights of forest and forest-dependent peoples. However, the negative role of these institutions is not easily perceived by the general public, as their loans and policies are presented under the disguise of "development assistance". For that reason, the World Rainforest Movement and Friends of the Earth International decided to produce a joint bulletin on this issue, aimed at shedding some light over the obscure dealings of these institutions. We hope that the articles below will contribute to that aim.

In this issue:

* OUR VIEWPOINT

- Another world is possible ... without International Financial Institutions

* SHEDDING SOME LIGHT ON IFIs

- International Financial Institutions: The "development" business

* FINANCING GLOBAL DESTRUCTION

- 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 REGIONAL ACTORS

- Secrets and lies: The Asian Development Bank's new forest policy
- The Inter-American Development Bank, Forests and Plantations
- The European Investment Bank: Surrounded by secrecy

* IMPACTS ON THE GROUND

- IMF and deforestation in Indonesia
- Laos: Did The World Bank Fudge Figures to Justify Nam Theun 2?
- Peru: IDB funds the Camisea gas project that endangers biological and
cultural forest diversity
- Uruguay: Campaign against IFC funding of pulp mill projects

* BUILDING ALTERNATIVES

- The Mumbai-Porto Alegre Forest Initiative as a real alternative for
forests and forest peoples


Until the 1950s, countries were just that: countries. During the US presidency of Harry Truman, countries were classified into "developed" and "underdeveloped", depending on how close or distant they were from the US model. Since then, the negative adjective "underdeveloped" has been replaced by the more positive "developing". The fact that most of the so-called "developing" countries are now in a worse social, economic and environmental situation than they were when they were classified as such is not even a matter of much debate.

What's important - for the "developed" countries - is to maintain the illusion that "developing" countries CAN become similar to Western countries. That is also one of the illusions International Financial Institutions (IFIs) seek to maintain.

The IFIs' unstated aim, of course, is different: to ensure that "developing" countries' resources keep flowing to the economically rich "developed" nations, which in the process become even richer -while the "developing" become poorer. Unfortunately, IFIs have until now been highly successful both in achieving this aim and in maintaining the illusion of a Western future for the South.

The two best known IFIs are the International Monetary Fund and the World Bank. They are assisted by the regional African, Asian and Inter-American Development Banks, as well as by the European Investment Bank and a large number of Northern Export Credit Agencies.

Funding from all those institutions - falsely claimed to be assisting countries to "develop" - has resulted in widespread impoverishment and environmental destruction, while at the same time increasing foreign debt and dependence in Southern countries. That dependency is then used by IFIs to impose favourable conditions - which clearly affect the countries' sovereignty - for northern investment and resource appropriation.

The footprint of IFIs is visible in most processes leading to deforestation. Take the case of the Amazon. Deforestation was first made possible through IFI lending for road-building deep into the forest. This made industrial logging, cattle-ranching, large- scale agriculture, mining, dams and oil exploitation possible, resulting in extensive forest destruction and human rights violations. Most of those activities were themselves made possible through IFI lending. In spite of the plunder of their resources, Amazon countries became indebted and IFI conditionalities forced them to increase resource exploitation for export still further in order to service the external debt. At the same time, structural adjustment programmes opened up the countries' riches to northern corporations even further. A similar pattern can be easily identified in tropical Africa and Asia.

Even now, when the finance ministers of the world's seven richest nations have recently promised to cancel the debts the poorest countries owe to the World Bank and the International Monetary Fund, they are pursuing the same aims as before. This is made clear in paragraph 2 of the finance ministers' statement (11 June 2005), which says that to qualify for debt relief, developing countries must "... boost private- sector development" and eliminate "impediments to private investment, both domestic and foreign". This means opening up the doors even wider to transnational corporations as well as privatizing whatever can be privatized, including basic peoples' needs (such as water, health care, social security, education), state-owned assets of all types and even the atmosphere (through climate change-related carbon trading).

It is clear that what people and the environment need is exactly the opposite: among other things, to boost community development, to establish clear impediments to destructive private investment, to ensure free access by people to water, health care, social security, education. While pushing in the opposite direction, IFIs are thus clearly not part of the solution to the world's problems but a major actor in increasing them. They are tools used by the powerful against the disempowered. Their funding and conditionalities result in socially and environmentally destructive activities. Another world is possible without these institutions.

World Rainforest Movement - Friends of the Earth International

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* SHEDDING SOME LIGHT ON IFIs
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- International Financial Institutions: The "development" business

Development can provide --indeed, it does-- great opportunities for corporations eager to profit from business in so-called "developing" countries. International Financial Institutions (IFIs) have proved to be extremely good instruments for achieving that, and extremely bad for improving southern peoples' livelihoods or protecting the environment.

The World Bank Group -which includes the World Bank (WB) and the International Finance Corporation (IFC)- the Inter-American Development Bank (IDB), the Asian Development Bank (ADB), the African Development Bank (AfDB), the European Investment Bank (EIB), the International Monetary Fund (IMF), and Export-Credit Agencies are the major IFIs.

How do they exert their power? Inequality in the distribution of votes in the IFIs allows for their control. Representation on the executive board is based on the proportion of funding. The IFIs are structurally based on voting power that does not operate on one vote one country but is determined by the amount of money invested by each member country. The significance of the basic vote allocated to all members has declined in proportion to the number of votes allocated according to a country's economic strength. The failure to maintain the value of the basic vote has shifted the balance of power further to industrialised countries. As this 'equity factor' has diminished in significance, the allocation of votes has moved much closer to one- dollar-one-vote.

While more than 180 countries are members of the IMF five of them (USA, Britain, Germany France, Japan and Saudi Arabia) control 44% of the votes. The United States has a controlling share of over 16 per cent of the total votes in both institutions, giving it veto power for major decisions. In the case of the WB, the 24 OECD countries control more than two thirds of the votes. The Board of regional multilateral banks like the Asian Development Bank (AsDB) and the African Development Bank (AfDB), apart from following the same structure of "one-dollar- one-vote", are controlled mainly by non-regional countries, which integrating the banks allows their corporations to benefit from the concessions granted through "development" projects. In the AsDB, the country that holds the highest voting power is the United States, followed by Japan, Canada and Germany ( http://www.bicusa.org/bicusa/issues/ADB_Voting_power_by_country2003.pdf ). In the AfDB, Nigeria leads the list, but followed suit by USA, Japan and Germany ( http://www.afdb.org/pls/portal/docs/PAGE/
ADB_ADMIN_PG/DOCUMENTS/
FINANCIALINFORMATION/2005-VP-ENG-MAY.PDF ).

The unequal allocation of votes is magnified by the system of allocating seats on the IMF and World Bank boards on the basis of one per constituency with the five largest vote holders allocated one seat each (the US, UK, France, Germany and Japan). A further three countries are in single-country constituencies and therefore have guaranteed seats on the boards (China, Russia and Saudi Arabia). The remaining 176 member countries share just 16 seats between them.

This inequality means that the IFIs are a tool whereby G7 countries (Canada, France, Germany, Japan, Italy, UK, US) pursue their economic and foreign policy goals. This small group of countries can agree policies outside the IFIs and implement these policies through them. Southern countries are continually adjusting to the latest economic fashions of the IFIs, which in turn are influenced by the needs of industrialised countries.

Transactions carried out by IFIs in (mis)development projects and other business ventures have several implications. They have taken and still take place in an uneven field: rich nations lend money to impoverished nations, enlarging their already large foreign debt. It's worth noting that in many countries their debt burden soared during military dictatorships through loans granted by IFIs, who have long supported dictatorial regimes.

Although many countries have swept away dictatorships, their governments anyway inherited those debts. Once caught in the trap, indebted countries have to service their financial debt at the expense of their own economy, diverting resources from other areas, including social and environmental programmes.

IFIs are thus related to the circle of an external debt over which dependence is built. By means of dependence powerful nations can impose their conditions on the policies that governments must follow in order to receive the loans.

The policy recipe of IFIs includes structural adjustment programs (SAP) to recover macroeconomic stability in the short-term. SAPs entail a package of economic policies designed to fix the countries' imbalances in trade improving their balance of payments, by increasing exports and reducing imports. Thus, Southern countries have embarked on export-led intensive extraction of natural resources and monoculture activities (the so called "commodities"), also to generate foreign exchange with which to pay the foreign debt. Further policies have forced countries to open their national economies to transnational companies for investment in the exploitation of the countries' natural resources.

Those policies and IFI's investments have more than often implied negative environmental and social consequences as long as they put an increasing and indiscriminate pressure on nature. Fossil fuel projects (like the Bolivia-Brazil Gas Pipeline or the Camisea Gas Project in Peru), mining projects (like the Ok Tedi mine and the Lihir Mine in Papua New Guinea), dams (like Nam Theun 2 dam in Laos), shrimp farming (like the WB/IFC's funded Shrimp Culture Project in Bangladesh, Fisheries Support Services Project in Indonesia, or Shrimp and Fish Culture Project in India), roads, and industrial plantations (eucalyptus, oil palm, teak, rubber trees, soya) everywhere, destroy local and regional environments and livelihoods and lead to deforestation and destruction of other biologically rich areas.

Quite away from any idea of "aid", Northern countries seek their best opportunity everywhere, including the "development" field. Experiences over the past years further show - as in Cambodia, East Timor, Afghanistan and Iraq- that post-conflict, post-war and disaster reconstruction have been another operation field for IFIs, whose reconstruction programmes do not contribute in any meaningful manner to the rebuilding and rehabilitation of the lives of affected peoples and communities. Governments which do not comply with their recipes and conditions are black-listed, which means that investment and technology transfers are frozen and export and import credits are often blocked.

In order to expose how investment in IFIs is profitable for industrialized countries, let the government of the United States speak for itself (it has spared us the task of trying to decode its message!):
"US participation in the development banks provides essential financial support for the work of US export promotion agencies. (...) The development bank's structural adjustment and sectoral lending programs have been extremely important in promoting more open trading systems. In Latin America and the Caribbean, this type of lending, in conjunction with the adjustment programs of the International Monetary Fund, has led to fundamental economic policy reform in some of the larger countries.
(...) As a consequence, they are becoming larger and more important export markets for the United States and other industrial countries.
(...) The important role of the MDBs in the international economy and the economic benefits they provide to the US are not well known.
(...) Since the founding of the World Bank in 1945, we have been their largest and most influential contributing member. We have also been their largest beneficiary in terms of contracts awarded to U.S. firms to help borrowing countries carry out projects financed through the banks. The U.S. procurement record in the development banks reflects the enormous economic stake we as a nation have in promoting continued growth in the international economy. More and more this is where the economic action is. To do well at home, we must be engaged abroad." ("The Multilateral Development Banks: Increasing U.S. Exports and Creating U.S. Jobs", report of the U.S. Department of the Treasury, May 1994.)

Flowing of resources from the South to the North, which can be traced back to colonial times when the powers took over the wealth of their colonies to build Northern "development", is today sustained by IFIs. A massive loss of capital from the poor countries to the rich countries in the North was estimated in $50 billion in 1985 alone. In 1990 there was a net transfer of $156 billion from the "third world" to the North. From Africa alone, the flow to the IMF and WB from 1986 to 1990 was 4.7 billion dollars, while in the case of Latin America alone over 700 billion dollars were transferred as payments to Europe and U.S. banks and multinationals from 1990-98. In other words, as a result of the lending, and the requirement to repay with interest, there is a reverse flow from the South to the North, on an unprecedented scale.

This takes place within a framework of an unfair system of trade controlled by the major countries through the World Trade Organization, bilateral "free trade" agreements, a whole array of commercial devices, and Foreign Direct Investment channeled through the IFIs.

At the root of all this lies the overproduction, overconsumption, and overwaste pattern of Northern industrialized societies, the target of most of Southern production. Their way of living is made possible through the appropriation of resources and cheap labour from Southern countries, and their environmental destruction, including deforestation.

However, resistance expresses in many ways, from local struggles to global campaigns and new insights that add to the construction of other possible worlds that challenge the predominant globalizing model.

The concept of the Ecological Debt, being one of those expressions, is rooted in the historical, social, environmental and cultural debt of the North with the South, the colonialist plunder left in impunity that cut down forests to extract minerals and grow cash crops, appropriated ancestral knowledge, enslaved Southern peoples and brought about irreparable environmental and social harm.

The Ecological Debt builds not only on the underpaid export prices of Southern products that failed to include the several local and global social and environmental costs, but also on the environmental services of their natural wealth that are not paid at all, like their forests, rivers, and biodiversity.

Shifting the position from where to face the debt that has enslaved Southern countries, the Ecological Debt makes Northern countries debtors to Southern countries since it is so huge and historical that the financial debts owed by Southern countries to IFIs have rendered insignificant. The South has already largely paid its debt.

However, incommensurability demolishes the concept of compensation. What's the price of cases of harm to health or death, destruction of cultures or the environment? Can they be compensated with cash? Several indigenous communities, like the U'Wa in Colombia, have rejected money compensation from Occidental Petroleum company to leave their land because for them it has no price, it is their mother earth.

The Ecological Debt is not about turning nature into merchandise but opposing the Ecological Debt to the external debt, which is now being challenged as illegitimate, inhuman and immoral.

Awareness of IFI's role in maintaining an unfair international order that impacts on the environment and on people is increasing. With this bulletin, we join to the several organizations from North and South that are monitoring and disclosing IFI's activities in the search of social and environmental justice.

Article based on information from: "IMF and World Bank: Instruments of Globalisation", Alternative Information & Development Centre (AIDC),, http://www.deudaecologica.org/
a_alier02es.html ; Ecological debt: the desecration of
life, Aurora Donoso, Acci=F3n Ecol=F3gica ,

http://www.accionecologica.org/descargas/alertas/deuda/
pasivos%20en%20la%20mineria.doc ;

"Options for democratising the World Bank and the IMF", Paul Ladd, http://www.sarpn.org.za/documents/d0000527/page3.php#footnote;

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* FINANCING GLOBAL DESTRUCTION
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- 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, C=F4te 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 aT fOei DOt org

Sources consulted:
1. Ficha tcnica - 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 desforestacin by Danielle