World Bank’s “environment” loan to Brazil: for what?

17 April 2009

Once again the World Bank is lending money to Brazil, but without adequate transparency or participation of civil society.

According to the Bank, the latest ‘programmatic environmental sustainability development policy loan project’ loan is aimed at “key sectors such as forest management, water and renewable energy… and will integrate Brazil’s climate change agenda across sectors.” This is the largest loan ever granted to Brazil by the World Bank: $1.3 billion in its initial phase, to be increased in a following phase to a total of $2 billion. Although the loan is for the Brazillian treasury, loan documents reveal that it will go to the National Economic and Social Development Bank (BNDES). The loan has been pushed forward without sufficient information being made available and without prior consultation with Brazilian civil society.

On 5 March, one day before the loan was scheduled to be discussed by the Bank’s board of executive directors, Brazilian environmentalists, social movements and networks monitoring international financial institutions sent a letter to Pamela Cox, Vice-President for Latin America and the Caribbean, saying that this loan is a mistake and demanding a broad consultation with Brazilian civil society. However, the board remained deaf to the Brazilians’ request and approved the loan.

Over the past decade, the World Bank approved a series of technical assistance loans to the Brazilian government, including on improving environmental sustainability, and for power and energy sector reform. In addition, there have been substantial policy reform loans, including $454 million for energy sector reform. In the words of the World Bank, its role now in Brazil, which is no longer financially dependent on its loans, is no longer to “tell the Brazilian government what to do, but how to do it.”

However, these loans have failed to meet their supposed objectives. For example, there is still a lack of effective integration of social and environmental considerations in Brazil’s energy planning. The strategic environmental assessments that the government was to have carried out as a condition of the $503 million ‘first programmatic reform loan for environmental sustainability’ were never done. This has compounded problems with the Brazilian government’s energy policy. Its ten year energy expansion plan (PDE 2008-2017) was put together behind closed doors in the offices of governmental agencies, in consultation only with energy companies.

The PDE gives priority to the construction of 71 large dams, with the involuntary expulsion of more than 100,000 Brazilians and the flooding of indigenous reserves and conservation areas. It promotes the construction of highly polluting thermoelectric generating stations burning oil, coal, and gas, expected to increase greenhouse gas emissions by 172 per cent by 2017 when compared with 2008, equivalent to 39.3 million tons of CO2, in addition to the expansion of biofuels production, which would require an additional 7.5 million hectares of sugar cane plantations.

Beyond the lack of transparency and participation with respect to civil society, there is strong evidence that the loan will be destined to guarantee capital for financing large infrastructure projects. Although the loan is for the Brazilian Treasury, loan documents reveal that it will go through BNDES, which is strongly criticised by civil society.

Recent BNDES loans include the Santo Antonio and Jirau dams on the Madeira River in the Brazilian Amazon, for which the World Bank has made commitments to lend more than $6 billion. These projects promote the destruction of biological diversity, have significant socio-cultural impacts, placing at risk those objectives and commitments assumed by the Brazilian government internationally and internally, in terms of policies and actions relating to the causes and effects of global warming. Another problem raised by the organisations in the letter to the Bank, and acknowledged by Bank staff, is that it is not possible to monitor how the money will be spent.

After a four year grace period, Brazil will repay this loan for the next 20 years. However, it is not publicly known at which interest rate and under what conditions the loan will be repaid. What we do know is that this marks another step in the Bank’s resurgence, after years of a diminishing role, in Latin America.