Early repayment by paper firm relieves culpability for violence, says IFC

8 April 2006

The International Finance Corporation (IFC) has washed its hands of a violent eviction carried out by the Brazilian federal police in January on behalf of the pulp and paper company Aracruz Cellulose. The police, who reportedly collaborated with company employees, destroyed the houses of indigenous communities of Córrego D’Ouro e Olho D’Água. Thirteen people were injured. The IFC provided a $50 million loan to the company in December 2004. It now claims that since the company paid back the money ahead of schedule, the IFC is thus relieved of any culpability for the event.

Aracruz Cellulose is the world leader in the production of bleached cellulose from eucalyptus. Its plantations in Brazil cover more than 375,000 hectares of land. It is the biggest landowner in the state of Espírito Santo where, according to statistics of the Brazilian Landless Workers’ Movement (MST), there are almost 70,000 landless families. In the 1960s under the military dictatorship, the company took over indigenous and quilombo lands (communities of African slave descendants) for eucalyptus plantations. The livelihoods of many communities were destroyed either as a result of displacement, or soil degradation and desertification caused by depletion of the water table by the plantations. Since the occupation of the lands in the 1960s, there have been serious conflicts between the company and the local communities struggling to reclaim their land.

The IFC’s decision to finance the company was heavily criticised by Brazilian NGO networks and social movements. In letters and meetings with the IFC they expressed serious concerns about the welfare of the local indigenous and quilombo communities and small farmers; environmental impacts; and numerous allegations regarding Aracruz’s record of social and environmental behaviour including:

destroyed the houses of indigenous communities
  • mass deforestation of 50,000 hectares of Atlantic rainforest in the 60s and 70s;
  • contamination of water with agrochemicals;
  • allegations that the company promotes persecution by police of neighbouring peoples who depend on eucalyptus trimmings for their economic survival; and
  • the illegal pollution and diversion of rivers that supply local communities.

The IFC had given the company a clean bill of health with regard to environmental and social standards in its project document. Moreover, in a letter sent to Brazilian NGO FASE, the IFC stated that it had identified, evaluated and factored “key issues with respect to disadvantaged communities, as well as the environmental impacts associated with Aracruz’s operations” into its investment decision and loan conditions. It also took a positive view of the relationship between the communities, Aracruz and the government.

In response to public pressure following January’s violent events, in March the IFC finally informed groups that Aracruz had paid back their debt earlier than scheduled and therefore the IFC could have no more influence over the company. Brazilian civil society networks assert that the IFC has violated a number of its own safeguard policies, including on indigenous peoples. They are calling for the Bank to take a position on recent events, including to: acknowledge the serious problems with the loan; to commit not to finance similar projects in the future; and to pressure the government to respect populations affected by eucalyptus monoculture. Winnie Overbeek, from Rede Alerta Contra o Deserto Verde asserted, “the Bank must exercise caution when investing in areas where indigenous, ethnic minority or vulnerable groups are denied access to land, and where access to natural resources for livelihoods is still not guaranteed”.