TL: FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund SO: Greenpeace International (GP) DT: September 1988 Keywords: greenpeace reports banks world bank imf problems development aid gp economy / Note: To find sections in sequence, search for [] [] Table of Contents FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund Tropical Forests and Wetlands: Critical Ecosystems Six Fatal Projects Botswana - Livestock Ill Brazil - Carajas Iron Ore Project Brazil - Power Sector 11 Loan India - Sardar Sarovar Indonesia - Transmigration Sudan - Pesticides Treadmill Institutional Failure of Executive Agencies Recommended Reforms in World Bank Structure and Policy Third World Debt and Natural Resources Conservation [] Tropical Forests and Wetlands: Critical Ecosystems FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund Tropical forests cover 7% of our planet's land surface, but are habitat for over 80% of the plant and animal species on Earth, according to the latest estimates. This rich vegetation plays a key role in moderating climate and maintaining the balance of carbon dioxide in the atmosphere. The abundant ecological wealth of tropical forests translates into dramatic, tangible, and life-saving advances in medicine, agriculture, and industry such as anti-cancer medicines, disease resistant seed varieties, and tree sap nearly identical to diesel fuel. In addition to tropical forests, the world's remaining tropical wetlands are under a tremendous threat. Wetlands, an often neglected but nonetheless critical resource in many developing nations, and an essential ingredient in the successful development of many countries, are tremendously important for flood control, water purification, and economically valuable fisheries and wildlife. One form of coastal wetlands, mangroves, are one of the most productive and biologically diverse ecosystems in the world, providing habitat for more than a thousand species of fish, invertebrates, and plants. Yet, in regions of the tropical world, major mangrove and wetland ecosystems at current rates of loss will disappear by the 1990's. Just as we are learning the value of these tropical ecosystems, they are disappearing. Scientists estimate the rate of deforestation at 1% to 2% annually. Every minute more than a hundred acres (40 hectares) of tropical forest are wiped out or seriously degraded. Every day more than 240 square miles (620 square kilometers) fall before the bulldozer, the chainsaw, and the axe. An area the size of Great Britain is destroyed annually. Millions of plant, animal, and insect species which have evolved over hundreds of millions of years face extinction as their habitats are levelled. Nearly half of the tropical rain forests have been destroyed in the last two centuries. The remainder - about 3.5 million square miles (9 million square kilometers) could be gone in the next 50 years. What is causing this massive deforestation? Inappropriate conversion of the tropical forests to agriculture - plantation crops, cattle ranches, and slash and burn farming - is frequently unsustainable as well as highly destructive. Industrial development, much of it subsidized by the World Bank and other multilateral institutions, results in dams, mines, roads, timber concessions, and colonization schemes being developed with little regard to the ecological consequences. There is growing pressure on the wildlands for firewood, the only affordable fuel in much of the tropics. The result of all these pressures is unsustainable use of tropical lands. The thin soil often wastes away, leaving a barren landscape in place of the biologically complex forest. Botanist Peter Raven, Director of the Missouri Botanical Garden, explains the consequences of the reckless tropical deforestation and loss of biological diversity: 'The extinction rates of the present are a thousand times those of the past tens of millions of years. We are literally destroying the resource base that is vital for the future survival of our species as well as the web of life on our planet. About 85% of our food is derived directly or indirectly from 20 species of plants, and some 60% comes from only three: corn, wheat, and rice. It stands to reason that among the world's remaining estimated 235,000 known flowering plant species, there must be many more that could provide important sources of food - not to mention medicines, oils, chemicals, and sources of renewable fuels. Tragically, we are busily exterminating these life forms even before we have discovered their potential value'. 'Over the next 15 to 20 years,' states Raven, 'we can expect the rate of extinction to average perhaps 100 to 200 species a day, with the rate increasing from perhaps a few species a day now to several hundred by the early years of the next century., Millions of native people and their extraordinary cultures are on the verge of physical and cultural extinction due to the deforestation of the lands they have inhabited for thousands of years. With their intimate knowledge of living sustainably in the forests and of the medicinal value of obscure plants they are the best custodians of the rainforests. Yet in the name of development, their skills and livelihood are being lost forever. In response to the invasion of their traditional lands by loggers, and the offer of bribes, the Penan people of Sarawak responded, 'Keep your money. You can print money, but you can't print land. We want our land.' (quote from Eric Hansen's book, 'Stranger in the Forest'). The disappearance of the tropical forests is significantly altering regional climates. The heating of the atmosphere is accelerated by the loss of vegetation that absorbs the heat of the sun and converts carbon dioxide to oxygen. The carbon locked in the trees, equal to about half the carbon in the atmosphere, is released into the air as the forests burn. The 'greenhouse effect', caused by increasing levels of carbon dioxide, is inexorably raising the temperature of the seas and the atmosphere and is already causing changes in rainfall patterns. The temperate 'breadbaskets' of North America, Europe, the Soviet Union, Australia, and Argentina may become drier and less productive. Harvard biologist Edward O. Wilson warned prophetically in 1980: 'The one process ongoing in the 1980's that will take millions of years to correct is the loss of genetic and species diversity by the destruction of natural habitats. This is the folly our descendants are least likely to forgive us.' [] The Dirty Half Dozen: Six Fatal Projects FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund Over the past six years, the lending programs of the World Bank have become synonymous with environmental and social debacle. Indigenous peoples who have lived in, and maintained delicate rainforest ecosystems for millennia, have been stripped of their rights and pushed to the very margins of existence. Massive deforestation, erosion and desertification which destroys the natural resource base upon which all future development depends is tragically exacerbated by a number of Bank financed projects such as the Botswana Livestock project, the Carajas Iron Ore project and Power Sector loan in Brazil, Transmigration in Indonesia, the Sardar Sarovar dam in India, and the inappropriate use of pesticides in the Sudan, which are described in this booklet. Recently, the World Bank conducted a series of environmental policy reforms as part of its reorganisation. These reforms include the creation of a top level Environmental Department to help set the direction of Bank policy, planning and research work, as well as increased environmental emphasis in the regional offices. But the projects described in this booklet are testimony to the repeated failure of the Bank to implement their own environmental and social policy guidelines. The reasons are varied, but are often a combination of flawed and unsustainable project design (Carajas), institutional unwillingness to implement guidelines (Transmigration), or institutional incapability to implement them (Brazil Power Sector, Carajas, Polonoroeste). World Bank announcements of a doubling in forestry lending in the coming years have received a mixed reception among non-governmental organisations, who have witnessed the poor environmental and social record of previous Bank financed forestry programs. Many environmental NGOs in the 'South' are sceptical of any real improvement in forest lending programs. In particular, they have seen very little change in practice where it counts - with respect to regularly involving and consulting with NGOs and affected communities in the borrowing countries - and equally significantly, few changes in the orientation of Bank financed projects towards those that are environmentally beneficial and respect tribals and local communities. A statement on behalf of the Environmental Defence Fund and Friends of the Earth concerning the environmental performance of tile Multilateral Development Banks, to the U.S. Senate Appropriations Committee, concluded that there were three critical areas where the Bank was not acting to either prioritise or implement its environmental and social policies in its operations: 1) The Bank is not enforcing its loan conditions and environmental guidelines. For example, despite international appeals and blatant violations of its own loan conditions, the Bank has refused to take measures to prevent massive deforestation in the legal project area of its Carajas Iron Ore project, where charcoal fired pig iron smelters buying ore from a Bank financed mine and using a Bank financed railroad will destroy an area of tropical rainforest the size of the US state of Wisconsin. Brazil's second Power Sector loan will result in the flooding of unique and fragile rainforests, which would almost certainly qualify as 'Wildlands of Special Concern' - a first priority for conservation of biodiversity under the Bank's own 'Environment and Wildlands' policy. 2) The Bank continues to rely on, and finance government institutions that have failed to carry out obligations under past and ongoing Bank loans, without addressing the fundamental lack of will or capability of these institutions to fulfil their contractual obligations. The failure of the national institutions charged with protecting the rights of indigenous peoples are addressed in a separate section. 3) Third, recent statements of Bank operations staff on the relation of Bank sector lending to the Bank's internal regulations and publicly stated policies on the environment, forced resettlement and indigenous peoples' rights, appear to directly contradict the Bank's high level commitment to ensure improved environmental performance and attention to populations that could be adversely affected by its projects. Lending to the Brazilian electrical power sector will cause monumental environmental damage and displace tens of thousands of indigenous peoples, running directly counter to the Bank's stated intention of improving the environmental quality of its operations. The criteria by which the Bank's environmental and social reforms must be judged will be improvement in the ecological soundness of Bank projects and programs, and satisfactory performance in ongoing projects. Indeed, approval of future loans should be made conditional upon the satisfactory environmental and social performance of existing projects. The capability and willingness of recipient governments to implement the Bank's Tribal People, Resettlement, Cultural Property, Environment and Wildlands Policies must not be in doubt. The following case studies: Botswana Livestock, Carajas Iron Ore, Brazil's Power Sector II loan, Transmigration, Sardar Samovar and Sudan pesticides, contain specific recommendations of environmental and social reform which the Bank must seriously review with reference to future lending programs. [] Botswana: Livestock III FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund In June 1985 the World Bank approved a $10.7 million loan for the 'National Land Management and Livestock Project,' more commonly known as 'Livestock III,' in the Southern African nation of Botswana. For more than two years, concerned observers have strenuously objected that the project, which is intended to finance the establishment of 130 commercial cattle ranches on collectively owned lands, is fundamentally flawed. Critics charge that, in repeating the mistakes of two previous livestock projects in Botswana, the new project will intensify an already highly skewed income distribution from the cattle sector, encourage further overgrazing and desertification on overstressed rangelands, and drive once great herds of wildlife to destruction. Before the seven-year drought, Botswana had one of the world's highest ratios of cattle to human population - nearly three to one. The unrelenting pressure of nearly three million cattle on fragile grasslands has caused rampant overgrazing and desertification. According to a 1984 United Nations report, 'The degradation of the rangelands caused by overgrazing is doubtless the most severe environmental problem facing Botswana.' Now that the rains have returned, government officials predict that the national cattle herd could increase to as many as 4 million animals. Botswana obtains preferential access to lucrative European markets through an annual quota of nearly 19,000 tons of beef granted by the European Economic Community (EEC). Moreover, Botswana has the unique and enviable right to take over the unfulfilled quotas of other Third World countries that export beef to Western Europe. Ironically, Europe now has a glut of beef, which it exports at a third of the price paid for imports from Botswana. With additional markets available in South Africa, Botswana can export virtually unlimited amounts of beef. The World Bank has projected that Botswana will have to find markets for an additional 12,000 tons of beef over the next fifteen years. These export-driven pressures, coupled with government subsidies for the livestock sector, mean that environmental stresses on Botswana's threatened range resources will continue for the foreseeable future. Negotiations are already underway for an extension of the EEC beef quota in a new 'Lome IV' agreement. Income from beef exports in Botswana is highly skewed. A 1986 Dutch study found that about two-thirds of export revenues from the cattle industry benefit approximately 7% of cattle-owning households. Discriminatory quotas that favour large commercial producers have disadvantaged cooperatives representing small and medium scale farmers struggling to obtain access to slaughtering facilities. Moreover, poor people benefit very little from the Bank's emphasis on commercial cattle ranching, which is highly capital intensive but generates few employment opportunities among the rural poor. The cattle industry in Botswana has taken a disastrous toll on Botswana's once plentiful wildlife. As a result of EEC requirements that Botswana beef be free of 'foot and mouth' disease thought to be transmitted from wildlife, the country has erected more than 800 miles of 'veterinary cordon' fencing designed to separate wild animals from cattle. Fencing has caused the deaths of hundreds of thousands of antelope and other wild animals in recent years. The effects of massive numbers of cattle also threaten the traditional way of life of the Bushmen hunter gatherers who depend on the undisturbed environment and wild game for survival. The World Bank's first livestock project in Botswana, a $1.65 million loan for a $5.4 million project approved in 1972, was intended to establish cattle and sheep ranches in the environmentally sensitive Western Kalahari. The project experienced cost overruns of $2.9 million, ultimately producing negative economic return despite initial projections of a 21 % yield. Despite the failure of its Livestock I project, the Bank in 1977 approved a new $6.5 million loan to finance a $13.4 million project to establish 100 ranches on collectively owned lands. A 1982 evaluation by the International Livestock Centre for Africa - the Bank's own consultants - warned of disaster. The Centre found that range management on the commercial ranches was often no better than traditional farming in the communal areas and contributed to further overgrazing. When the project was complete in 1984, the Bank staff concluded that the economic return on the project would be 'inconsequential.' The majority, if not all, of the loans to finance the commercial ranches underwritten by credit provided through Livestock II are now in default. Like the previous Botswana projects, Livestock III has the confused and contradictory goals of simultaneously increasing productivity, reversing the ecological deterioration of the range, and increasing the supply of beef for the export market. Commercial ranchers will continue to retain their rights to keep cattle in communal areas after overgrazing their own ranches. Although the World Bank optimistically projects that the total national herd size will not increase as a result of the project, limitations that would assure effective control of the number of cattle are not included in Livestock III. There is little or no monitoring or enforcement of cattle ranches financed through the Bank, with some ranches carrying up to twice the permitted number of animals. And the Bank itself admits that ranches financed by the project, each of which will typically require 60 kilometers of fencing, 'will undoubtedly further hinder traditional wildlife migrations.' The Bank nonetheless continues to assert that more commercial ranches are a sound development policy for Botswana and it envisions continued assistance to the livestock subsector. Alerted to these defects in the new project, in August 1986 the U.S. Secretary of the Treasury, James Baker, issued instructions to U.S. representatives to the Bank to seek specific changes in the Botswana project, including a redirecting of financing away from ranches and toward small-scale farmers. Baker insisted that the Bank re-examine revenue-earning alternatives to cattle, such as wildlife ranching and tourism. Moreover, he issued strict instructions that in order to receive U.S. support, all future development livestock projects in sub-Saharan Africa would have to meet stringent ecological, social, and economic standards, including avoiding harm to wildlife. Those instructions have resulted in a series of abstentions by the United States on similar loans proposed by the African Development Bank, which is now committed to re-examining its livestock development policies. The Bank has belatedly recognized these defects in the design and implementation of its Botswana cattle projects by suspending disbursements for the Livestock III ranches. However, the reason given by the Bank is the massive number of defaults on loans for cattle ranches underwritten by the previous project. We urge the Bank to take a broader view than the narrow financial perspective it had cited in suspending payments on Livestock Ill. Before it permits further disbursements, the World Bank should insist on the implementation of concrete reforms in the livestock sector, including at a minimum the following: termination and relinquishment of so-called 'dual rights', which undermine incentives for sound ranch management by providing alternative communal sites for grazing animals that cannot be handled by poorly supervised ranches; strict monitoring and enforcement of conditions designed to ensure sound ranch management, such as limitations of numbers of animals and requirements that absentee ranchers hire professionally trained managers; and assurance that the loans do not adversely affect the rights and livelihoods of the Bushmen hunter-gatherers. The Bank should also encourage the Government of Botswana to seek Bank funding for alternative investments to provide employment for the rural population, such as tourism and wildlife ranching, instead of further livestock development loans. [] Carajas Iron Ore Project FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund The World Bank financed Carajas Iron Ore project is one of most alarming examples of the flagrant violation of the Bank's loan conditions, and of the institutional incapacity of certain of its executing agencies. In 1982, the World Bank provided $304.5 million in loans to a government controlled mining company, the Vale do Rio Doce Company (CVRD), to construct the Carajas iron ore mine, a 890 kilometre railroad and a deepwater port. This Bank financed infrastructure is being used for charcoal-fired iron and steel industries situated along the railroad, that will directly devastate an area of pristine and irreplaceable tropical rainforest three quarters the size of the Central American country of El Salvador. Once these industries are operational, there will be additional socio-economic pressure that could, according to the chief environmental officer of CVRD, lead to the total eradication of the native forests in the entire region within 15 to 20 years. Twenty-two blast furnaces have already been approved by a special Interministerial Council of the Brazilian government. Scandalously, three are already operating without the environmental impact assessments (ElAs) required under Brazilian law. Operated by private companies, they are expected to produce an annual total of 2.5 million tonnes of pig iron or alloy. All 22 approved furnaces will burn charcoal made from native tropical forest, treated as having zero value. As charcoal represents nearly 70% of the cost of pig iron, it would be too expensive if planted forests were used, indeed there is no example of an economically successful and sustainable commercial wood plantation in Amazonia, despite numerous attempts and massive injections of capital and labour. Even to advocate the establishment of the massive scale of plantation necessary to feed the furnaces, belies a basic ignorance of the fundamental ecological and financial constraints imposed by this ill-fated project. As it is, the pig iron smelters would not exist without massive government tax incentives. Section 3.10 of the World Bank loan agreement for Carajas requires that, 'the borrower shall take all action, as shall be required to ensure that the execution and operation of the Project are carried out with due regard to ecological and environmental factors . . .'. The area of responsibility actually extends beyond the immediate site of the Carajas iron mine to a zone defined as the area in a radius of 100 km, from the iron mine and the railroad. The loan conditions to CVRD include provisions to protect the area, as well as a Special project to assist the more than 10,000 Indians in 23 groups that live in the zone of influence. CVRD not only built the railroad and mine, but they collaborate directly in the activities of the pig iron smelters by selling and transporting the iron ore to the smelting companies. The environmental conditions for building the mine itself have been satisfied, but it is self-evident that within the zone of influence, or more appropriately the 'zone of destruction', that the conditions have been directly violated, thus breaking the company's loan contract with the Bank. It is hard to envisage a more environmentally insensitive and unsustainable use of rainforest as the destruction and degradation for charcoal production. The full process of legally demarcating the India areas required of the loan are only complete in 12 of the Indian areas. Unless the Indian areas are fully demarcated and protected, it is inconceivable that they will survive the onslaught of a 'charcoal army' of poor labourers desperate for the small income to be made from charcoal production poised to descend upon them. Of the groups which will be affected, the pig-iron smelters will almost certainly mean the final destruction of the Guaja, Brazil's last purely nomadic, hunter-gatherer people, who are totally dependent upon the rainforest for their livelihood. The Greater Carajas Interministerial Council accepts no obligation to consider the environmental and social problems caused by the licensing of the pig iron smelters, unlike CVRD, whose Superintendent of the environment has stated, 'No iron or steel industry can exist in the North without the support of CVRD ... To preserve only the forests under its direct control will not be sufficient to lessen its responsibility'. CVRD therefore accepts the fact that the Iron ore project and Greater Carajas Project are inseparable both economically and conceptually. The Bank however argues that since the pig iron smelters are part of the Greater Carajas Project which the Bank have not financed, the negative affects are not attributable to them. But it is clear that the present disastrous situation would not exist without the World Bank's participation. Since the Bank has already disbursed its funds for the Carajas project, it must find other mechanisms to ensure that the unfulfilled conditions of the Carajas Iron Ore Project are met. The Bank should tie disbursement of any further funds to Brazil with the satisfactory implementation of the loan agreement for the Carajas Iron Ore Project. Unless it does, the World Bank's efforts to ensure that its funds do not finance ecological and cultural destruction will come to nothing. [] Brazil Power Sector Loan FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund In recent years an increasing proportion of World Bank funds have gone to massively accelerated lending programs targeted at whole sectors of the economy such as agriculture or energy, instead of discrete, identifiable projects. Brazil's Power Sector has received more than $2 billion in loans from the World Bank and the Inter American Development Bank since 1980, but instead of promoting economic recovery and policy reform, the Power Sector has become a by-word for inefficiency, staggering environmental destruction and systematic failure to address the interests of indigenous peoples. Ambitious hydroelectric projects are central to Brazil's energy plans, and the awesome potential of the Amazon and its tributaries is the raw energy with which to fulfil them. Under the Power Sector's 2010 Plan, some 136 new hydroelectric dams, many of them in the Amazon, will inundate tens of thousands of square kilometres of pristine, uninventoried, but inhabited tropical rainforest. The dams will forcibly displace over 500,000 people. The first Brazilian power sector loan was disbursed in two tranches of $500 million within a period of six months. Not surprisingly, the destruction of 1600 square kilometres of tropical rainforests, the draconian displacement of thousands of people, and the promotion of an unsound, inequitable and inefficient pricing policy through massive subsidies to industrial users, met with immediate and fierce international criticism. Furthermore, the loan bailed out a number of notorious projects, some of which had been previously rejected on economic, social and environmental grounds. Foremost among those refused funding by the Bank in the late 70s was the ill-conceived and mis-managed Tucurui Dam. The Parakana Indians suffered the immediate effects of the flooding of nearly 2500 square kilometres of virgin rainforest, and the increased risk of debilitating waterborne diseases among their community. Having previously endured 10 relocations, the Parakana were never consulted over their fate, and no amount of compensation is adequate to redress the destruction of their livelihood and the disintegration of their community. The loan also financed the completion of the Balbina dam, called by the Director of Brazil's special secretariat for the environment (SEMA), 'a disaster ... one of the greatest errors committed in the Amazon'. In the face of mounting international pressure, the tragic and disorganized displacement of 400 Waimiri-Atroari Indians, the flooding without clearance of up to 1900 square kilometres of rainforest, and the violation of national laws to protect the environment and indigenous peoples, even the Bank conceded that the dam was 'ill-conceived'. The experience of serious water fouling and toxic and acidic chemicals corroding turbines gained from the Brokopondo dam in Surinam, were largely ignored despite worse problems predicted due to Balbina's shallowness, failure to clear the forest and slow water movement. Comparison with Tucurui compounded the scale of the disaster. Tucurui will generate an output of between 4000 to 8000 mw, while Balbina covering an almost equivalent area, will generate only 125 to 250 MW. The environmental and social cost of that relatively small amount of power is probably the highest in the world. So complete had been the failure to address the environmental and social impact, that only after the dam gates had closed was it 'discovered' that the dam severed the lifeline of 300 regional peoples living downstream. The Itaparica dam is filling up. The necessary resettlement of nearly 40,000 persons cannot take place without extensive human suffering and bitter recrimination. In the case of Itaparica, the loan conditions included for the first time the preparation of detailed arrangements to resettle the people affected by the project. The Bank has always argued that Sector loans cannot be identified with particular projects. If negative environmental or social problems arise from a project, the Bank can always deny that they directly funded it. But the precedent set by Itaparica proves that sector loans can be made conditional upon the resolution of problems attached to specific projects. More widely, the decision to release the second tranche of the first power sector loan was made conditional upon the preparation of an Environmental Master Plan designed to avoid future occurrence of negative environmental and socio-cultural effects for all the sector's operations, present and future, including Tucurui and Balbina. Despite provisions for strengthening the institutional capability of the executing agencies to meet environmental and social guidelines in the Master Plan, the poor record of Electrobras (of which Electronorte and Electrosul are concessionaries) in implementing resettlement and environmental components in the Sobradinho and Machadinho dams casts their capability into severe doubt. The Machadinho dam, on the Uruguai River is only one of 22 dams proposed by Electrosul in the region. Some 18,000 people will be dislocated by Machadinho. After ten years of conflict and pressure, local non-governmental organisations recently negotiated and signed an agreement with the company specifying that the company would either pay indemnification or provide land for resettlement to affected families, by July of this year. Now, however, the company has broken the agreement, and claims that the indemnifications will not even begin until a year from now. Local organisations representing the affected population find this entirely unacceptable. These people have been denied access to basic information and have been kept in a state of constant uncertainty for ten years. Their economic future has simply been put on hold by the power company. In July, the communities affected by Machadinho resolved that since the company has abrogated its most recent agreement, they categorically oppose construction of the dam and will not permit Electrosul to carry out any further operations on their land. These communities have been seeking a voice in the planning process for ten years, and negotiated an agreement in good faith that the company has broken. If the World Bank agrees to finance the second power sector loan without insisting that Machadinho be cancelled, the Bank will bear part of the responsibility for fomenting serious social conflict. This project has become an intractable point of dispute as a result of the company's unwillingness to negotiate openly and accept the participation of affected communities in the decision making process, and consequently should be cancelled before the conflicts become even more serious. The Ji-Parana dam on the Rio Machado in Rondonia epitomizes the lack of commitment to environmental and social concerns characteristic of the first power sector loan. The Bank refers to Ji-Parana as having 'some potential marginal effects on Amerindians and the environment', claiming that 'appropriate studies have been made, and the results have been reflected in the design of the project', yet absurdly the project risks inundating or seriously affecting two Indian reserves and the Jaru biological reserve, which the Bank insisted be protected as conditions of their Polonoreste loan. The US alternate executive director to the Bank called Ji-Parana 'pure folly'. History looks set to repeat itself with the second Brazil Power Sector Loan of $500 million. This loan was originally scheduled for approval by the Bank's Board of Directors in mid 1987, but has been delayed twice, in part because of non-compliance with environmental and social components on the first loan, and also for continued failings in economic efficiency. As with the first loan, the Bank's funds are not earmarked to particular projects, but it is certain that the Brazilian government will use them to complete or begin the construction of more hydroelectric dams. Itaparica set a precedent in showing that approval of sector loans can be made conditional on the resolution of identified problems in particular projects. By the Bank's own standards and policy laid out in the Operational Manual Statements on Tribal People, Resettlement, Cultural Property, Environment and Wetlands, funding for the Power Sector II loan should be withheld. Just one example of where the funds will be going, the Altamira complex on the great bend of the torrential Xingu river, makes this abundantly clear. The complex will be comprised of two dams, Babaquara and Kararao, which are expected to flood 5,600 and 1,225 square kilometres of primary rainforest respectively. Babaquara will be the world's largest artificial lake, completely destroying a huge area of Earth's most valuable ecosystem. The unique and fragile forest due to be flooded by the dams will almost certainly qualify for designation as a Wildlands of Special Concern in line with the Bank's Operational Manual Statements. Indeed, the Bank has designated certain of the threatened areas as 'First Priority' for 'Wildlands management'. These are the 'Pleistocene Refugia', centres of high species concentration and endemism. Unique species are to be found in these areas and nowhere else in the world. In addition, the area flooded will include between 6 and 9 indigenous territories, the city of Altamira and part of the Trans-Amazon Highway. If the entire Xingu Basin is used for the proposed 5 dams, a monumental 18,000 square kilometres will be inundated, an area half the size of Switzerland. The project will cost an estimated $10.6 billion, one tenth of Brazil's foreign debt, and is expected to add further to the burden through high transmission and maintenance costs (if the destination for the energy is to be the industrial South), or heavily subsidized energy prices to industries in Greater Carajas. There is no evidence that alternatives to this project have been considered, nor that the environmental and social effects of the project have been given any serious consideration. Consultation and discussion with affected communities and citizen's groups is made deliberately difficult, and the project proceeded to construction without both the legally required environmental impact study (RIMA), and the evaluation and authorization of the state environmental agency of Para. Under intense pressure from environmental and human rights groups, a hurriedly prepared RIMA was rushed through. There remain serious doubts and logging and mining scandals in Indian reserves involving Brazil's Indian Agency FUNAI, and inherent and proven institutional weaknesses of both FUNAI and IBDF the Brazilian Institute for Forestry Development, that the Environmental Master Plan can be effectively implemented by these, Electrobras or any other regional agencies. For this reason alone, funds for the Power Sector II loan should be withheld (until the Bank ensures that the Master Plan adequately addresses the environmental and indigenous peoples issues, and that the implementation of the Master Plan can be assured through effective enforcement mechanisms). This in turn cannot be assured until the conditions and responsibilities of previous loans, most notably the Carajas Iron Ore Project, are complied with. Environmental Effects: A number of power sector projects would have direct effects on national parks and other protected areas already constituted by the relevant environmental agencies. These include the Capanema dam, which would flood part of the Iguacu National Park, perhaps the most important natural area in the south of Brazil, the Rosanna dam, the Ji-Parana dam in Rondonia, and the Cachoeira Porteira dam in Amazonas will flood parts of already existing forest reserves. Given the institutional capacity of the environmental agency responsible for these areas, the IBDF, it is clear that insufficient data exists to carry out adequate ecological studies to determine what is to be lost, much less whether the dams that flood these protected areas are justified in the light of the environmental damage they will cause. The level of information on such nationally protected areas that exists is suggested by an internal review of the legal status of land in Brazil's conservation units. IBDF is responsible for some 13,900,000 ha. of protected areas nationally, including National Parks, Biological Reserves, and National Forests, out of a total of 18,664,000 hectares of protected areas. Of the area under IBDF's control, about 15 % has been legally regularized; that is, the land has been legally documented as being environmentally protected. About 25% is in the process of being regularized. About 60%, however, was found by the internal study to be 'undefined' - there is not even sufficient information on these areas to determine the legal status of this land, supposedly protected. The capacity of IBDF to provide the necessary information for flora and fauna surveys, which is the key role for the agency in the Master Plan, is then extremely limited. It is therefore not surprising that the studies that have been undertaken in this area have not had any concrete results in the sector's projects. The Bank has undertaken to strengthen IBDF and other environmental agencies in a proposed project for a National Environment Program. This important project has been considerably delayed. Given the massive impacts of the power sector's projects, preparation and appraisal of this project should be completed before the second power sector loan is approved. General Recommendations: Strengthening the Environmental Master Plan. The plan should include timetables for the demarcation of Indian land affected by power sector projects. Indigenous land demarcation on all previous loans must be carried out to completion before appraising any further loans to the power sector. The plan should adequately address provisions for implementing the Bank's Environment and Wildlands Policy, with particular reference to first priority areas or 'Wildlands of Special Concern'. The Bank should ensure that resettlement planning and implementation on previous and ongoing loans are respected, in particular, with reference to the Machadinho and ltaparica dams. The Bank should ensure that the investment plan represents the least cost solution for energy needs. This requires a complete reform of wasteful energy price subsidies to industries such as aluminium, and an emphasis on energy efficiency and conservation. The Bank should ensure that environmental conditions on previous loans are met, before approving any further loans to the power sector (See Carajas). Affected communities and non-governmental organisations must be involved at all stages in the project cycle and decision making process. Access to information on sector plans and projects is particularly important. [] Sardar Sarovar Dam FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund The tribal peoples living under the shadow of the Sardar Sarovar dam have begun to despair of their future. The endless thunder of passing trucks and the boom of blasting as the dam's foundations are carved from the rock, only serve to remind them of the inevitable - that their lands are soon to be flooded and they will have to move elsewhere. The Government's commitment to the technical aspects of the project has not been matched by a concern for its impact on the tribal peoples, who have been completely isolated from all planning and decision-making. As one elder from the village Vadgam told a Survival International investigative mission: 'It is not that we are dead but we are living dead. The government has made us these promises but it is not implementing them.' Over-view The Sardar Sarovar Dam in Gujurat, which will forcibly displace some 80,000 people, is part of a proposed development scheme which would involve the construction of 30 major dams, 135 medium size dams, and over 3000 small dams over the next 40 to 50 years to provide irrigation and hydro-electric power to an area covering parts of four states (Gujurat, Maharashtra, Madhya Pradesh and Rajastan) in Western India. The entire scheme would forcibly displace more than 1.5 million people, mostly of tribal and minority origin, constituting 5% of India's entire tribal population. Over the last few years, the events surrounding the construction of Sardar Sarovar have caused enormous controversy in India, and a growing number of environmental and indigenous peoples NGOs are now flatly opposed to the dam's construction. Indian and international NGOs familiar with the project believe that the incomplete environmental impact assessment, the inadequate cost benefit analysis and the chaos surrounding the resettlement and rehabilitation of the people to be displaced are setting a dangerous precedent not only for development in the Narmada Valley, but for all future large scale water projects in India. Environmental Impact Studies In 1985, the World Bank approved a loan and two credits totalling $450 million for Sardar Sarovar in spite of the fact that India's Department of Environment and Forests had not been granted an environmental clearance for the project. The clearance had been refused because crucial studies on the dam had not been completed. These crucial studies - which have yet to be completed even today - include plans for the treatment and management of the catchment area, development of the command area, compensatory afforestation, a study of the flora and fauna, and of the public health impacts of the dam. Last June, in circumstances of great political pressure, the Department of Environment and Forests granted the environmental clearance for Sardar Sarovar. But the environmental clearance itself even stated that the studies will not be completed until 1989. The Bank has done nothing to promote timely completion of the studies. The Bank's own environmental assessment in its appraisal of Sardar Sarovar failed to take into account the substantial ecological stress that the movement of displaced people into areas already suffering from deforestation, sheet erosion, and other environmental degradation would cause. Resettlement and Rehabilitation Sardar Sarovar will displace a total of 289 villages - 234 in Madhya Pradesh, 36 in Maharashtra and 19 in Gujarat (though estimates vary). Over the last few years, resettlement and rehabilitation plans for the people to be displaced have been handled with such negligence and disorganisation by the Bank and the three state governments involved (Gujarat, Maharashtra, and Madhya Pradesh) that NGOs in India now wonder whether resettlement can ever be properly executed. Lack of availability of land, lack of a common policy for all three states, little or no involvement of local oustee communities in the resettlement plans, and several violations of the World Bank/Government of India Sardar Sarovar loan agreement are some of the current problems cited by Indian NGOs. Resettlement and rehabilitation of the oustees is governed by the World Bank/Government of India Loan Agreement and the Narmada Water Disputes Tribunal Award. Because many of the principles and conditions of these two documents are very general, each state involved has developed its own policy on resettlement - a situation which has resulted in inequitable treatment of oustees. An example of this is the treatment of oustees who have been cultivating land without legal title (encroacher oustees). According to Indian and international NGOs, these titleless cultivators make up in fact the majority of the population that will be displaced by Sardar Samovar. Until last year, none of the states involved officially recognised the traditional land ownership rights of these oustees, who had been cultivating land for generations without legal title. After considerable public pressure, Gujarat State announced in a December 1987 resolution that encroacher oustees who have been cultivating government or Forest Department land are now entitled to two hectares of land as well as payments for the difference between the land they now cultivate and the land they would receive. The other two states - Maharashtra and Madhya Pradesh - have yet to even announce satisfactory resolutions regarding encroacher oustees or landless oustees. This is no small matter, since the majority of the oustees - 60,000 - reside in those two states. NGOs working in the region have also questioned whether enough land is actually available for resettlement. According to NGOs in Gujarat, the government's claim of availability of land has proved to be 'illusory', because recent NGO inspections in the Vadodara and Bharuch districts revealed that initial data on available land was incorrect. In Maharashtra, even the government has reached the conclusion that no land for resettlement is available except for denuded forest land, which the Forest Department has not agreed to release. The fact that the land has not been released appears to be a violation of the World Bank loan agreement (paragraph 8.01) of the Sardar Sarovar Appraisal report, where it is stated that the Government of India agreed to 'take all actions necessary to release forest lands reserved by the Forest (Conservation) Act, 1980, within the boundaries of the States of Gujarat, MP and Maharashtra if required for the purpose of implementing the Sardar Sarovar Dam and Power Project including the resettlement and rehabilitation programs and plans' (para 4.38.a.i). In Madhya Pradesh, not only does land for the oustees remain to be identified, but the initial step of determining the number of oustees has not even occurred. In fact the government of Madhya Pradesh has no intention of providing land to the 162 villages being displaced from their ancestral territories. In its latest resettlement plan for this dam, the government of Madya Pradesh states: 'Land for land has been the objective in the past but is no longer the solution. Practically all land worth cultivation has been brought under plough and even grazing land area shrunk precariously. Another solution in days gone by was to clear the forest area but this is not possible as the Forest Conservation Act is binding. So the oustees will have to be settled outside the forest area and since no land is available elsewhere, they will have to be shifted to occupations other than agriculture.' In other words, in this case the government of Madhya Pradesh has no intention of observing international law, and this is despite the fact that a confidential report of the Tribal Welfare Commissioners stated: '... it is essential to include the settlement of agricultural land within the parameters of the rehabilitation programme. The tribals ... are mainly agriculturists and without land they are doomed. Compensation in the form of money will not suffice to rehabilitate them.' It is particularly troubling that Madhya Pradesh, the one state which has lagged far behind in resettlement and rehabilitation plans for oustees at Sardah Sarovar is now pushing for Bank approval of Narmada Sagar, the next major Narmada dam, claiming that it has now come up with a 'model plan' for resettlement and rehabilitation of the Narmada Sagar oustees. The resettlement and rehabilitation problems at Sardar Sarovar are compounded by the fact that state government officials do not involve or consult local communities in the preparation of plans for their displacement. This is a breach of general principles in the World Bank/GOI loan agreement, as well as the Bank's own policy guidelines on involuntary resettlement. Nor do local communities have access to the most basic information regarding their impending displacement. NGOs have requested but not received several documents, including copies of ongoing or completed resettlement plans of the three states, maps of areas to be submerged, lists of villages to be submerged, maps or documents which identify available land for resettlement, a timetable for resettlement and submergence, and a list of State and Central government officials responsible for land acquisition, displacement and resettlement. Some World Bank staff must be given credit for making efforts to meet with NGOs representing the oustees while they were in the Narmada Valley on mission last year. But NGOs have received very little follow-up to those meetings and often wonder whether their complaints are even taken seriously. As one NGO representative stated in a recent letter to four World Bank Executive Directors, 'The World Bank missions keep visiting India ... we keep meeting them whenever possible to give them feedback on the latest field situation. We can never know, however, what is finally concluded and reported by them to the bank and to all of you ... there is never a formal two-way communication that would make a difference.' Independent monitoring and evaluation units on resettlement and rehabilitation which were supposed to be set up for all three states as a condition of the loan agreement have not been established in a timely manner. Only the monitoring unit for Gujarat has been fully established and has put out a draft report. Moreover, Indian NGOs have expressed concern that this monitoring unit is not independent and unbiased in making out its reports, because a draft report must be sent to the Government of Gujarat for approval and modification before it is sent to the Bank. The oustees in the villages that have been resettled to date - eight villages from Gujarat and one from Maharashtra - face serious rehabilitation problems such as water shortages, no fuelwood, no fodder or land for cattle or farming and no forests. NGOs working with oustees have reported that some Maharashtra oustees who have been resettled in Gujarat have resorted to returning to their old land to collect fuelwood and fodder. Some of the tribals in the new settlements have found that the land they have been given is already mortgaged. Now they are encumbered with debts they cannot possibly pay. Others have been forced to move again to make way for the irrigation canals radiating from the dam site. It is a depressing catalogue of Government incompetence and lack of concern. A few of the villages have disintegrated completely because they were not resettled as a unit. Indian NGOs are particularly distressed that in spite of the chaotic situation at Sardar Sarovar, the World Bank has been preparing for a reappraisal of the next major Narmada dam - Narmada Sagar - and a vote for a $350 million loan and credit for this dam may come before the Board in late 1988. The level of frustration and anger among oustees has grown more intense over the last six months - a situation the Bank cannot afford to ignore. On January 30th, 1988, 4,000 oustees from all three states took action to demand just compensation. Many of them trekked for five days down the valley to the dam site and presented their demands at a public rally. 'We will struggle to our last breath to get our land', they told Survival International. 'We will drown in the river and not move out unless land is made available to us. We have made our demands but we have got no response. If we move without our demands being met we will die anyway, so why not die fighting? It is a matter of life and death for us. What we are doing, we are doing for our children. Our children have to survive.' Additionally, a petition has been filed on behalf of the oustees in the Supreme Court of India for an injunction to halt construction of the dam. Last month, NGOs representing oustees from all three states discussed a Gandhi-style resistance to all resettlement until all three states ensure a resettlement and rehabilitation process which is acceptable to the oustees, and is in compliance with the governing documents. According to Survival International the construction process is itself having severe effects on the local communities. The influx of migrant labourers has brought in its train the inevitable social ills - prostitution, alcoholism and disease. Poor safety standards have led to a number of severe injuries and even fatalities among those tribals who have found work on the site. One girl lost both her feet when a mechanical claw fell on her legs. Two women were crushed to death by a reversing truck. One tribal working as a watchman was crushed by a bulldozer and another died in a blasting accident. Cost-Benefit Analysis Many Indian NGOs, as well as several well known Indian scientists and engineers, believe that the original cost benefit analysis of Sardar Sarovar either underestimated or totally excluded some of the most serious costs of the project - such as the cost of public health measures, the cost of preventing waterlogging and salinity and the environmental loss of forest submergence. For example, The Department of Forest and Environment calculated in 1987 the value of the forests to be submerged by the Sardar Sarovar and Narmada Sagar at billions of rupees more than was calculated in the original cost benefit analysis. Other NGOs have cited exaggerated benefits of the dam such as the projected crop yields for rice, wheat, cotton, and tobacco in the command area of Sardar Sarovar which are much higher than those achieved anywhere else in India. Moreover, Indian NGOs maintain that since 1984 there has been a massive escalation of project costs, which in all likelihood may render the original cost benefit analysis obsolete. Conclusion The World Bank's continued involvement in the construction of Sardar Sarover and the forced resettlement of 80,000 people can only be justified by a complete re-appraisal of the project, including a new cost/benefit analysis. International environmental and human rights organisations strongly support the growing conviction among Indian NGOs that all World Bank disbursements on Sardar Sarovar should be suspended immediately until the state governments - in collaboration with local NGOs and affected communities - ensure a comprehensive resettlement and rehabilitation process which is in compliance with the World Bank/GOI loan agreement, the Narmada Water Disputes Tribunal Award, and the Bank's own policy guidelines on Involuntary Resettlement in Development Projects. In particular, full attention must be paid to the two main demands of the 'oustees', that they must be compensated with land for land and forest for forest. International trades unions have been active in supporting the tribals and have filed complaints with the International Labour Organisation that the resettlement process does not respect international law by failures to offer land for land lost. The ILO after carefully evaluating these complaints has agreed that the resettlement appears to be inadequate and has urged the Indian government to revise its resettlement policy. The World Bank, in collaboration with the Indian government and in consultation with affected communities and NGOs, should actively research and develop less risky, socially acceptable and environmentally sensitive development schemes for the Narmada Valley such as smaller scale dams and energy efficiency improvements. [] Indonesian Transmigration FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund "The largest resettlement plan in the world is moving millions of people from the densely populated fertile inner islands of Java and Bali to the fragile tropical forests in the sparsely settled outer islands - Kalimantan (Borneo), Sulawesi, and Irian Jaya (Western New Guinea). Between 1984 and 1989, the Indonesian government intends to move 750,000 families more than 3 million people - with financial assistance from the World Bank and Asian Development Bank.' ('Bankrolling Disasters', The Sierra Club, 1986) "The Project has proven to be ecologically devastating, threatening the destruction of 3.3 million hectares of pristine tropical rainforests and the livelihoods and rights of indigenous people living in the forests. Although Indonesian government studies have revealed that the livelihood of 300,000 settlers in existing sites is critically threatening ecological collapse, the program remains a priority of the government.' ('Financing Ecological Destruction', 1986) Since World Bank support for the Transmigration Programme became the focus for sustained international concern and controversy, the Bank has sought to reassure critics by repeatedly asserting that the number of migrants being moved under the programme has been sharply curtailed. Though, undoubtedly, the oil price collapse has resulted in fewer available resources for the programme, transmigration continues at a significant pace. In the period 1986/7, 158,333 families were moved; 8,333 more than originally targeted. In March 1987, the Minister for Transmigration announced that the 1987/88 target be raised to 160,000 families. To sustain these rates of migration, the 1988/89 Transmigration budget has been increased by 56%. The number of families migrating is likely to be twice the official target; according to Bank estimates, each sponsored family tends to 'pull', at minimum one 'spontaneous' family with it. Non-governmental organisations estimate that some 60,000 sponsored families, or 600,000 transmigrants will be settled in Irian Jaya (West Papua) alone between 1984 and 1998. By then, the Papuans will have been outnumbered in their own lands. This is hardly compatible with the Bank's Transmigration Sector Review, which recommends 'slow, well-planned transmigration coupled with sound programmes to benefit the local people and respect their cultural identity.' The Bank believes that the estimate of 600,000 transmigrants to Irian Jaya is 'not likely to be achieved for several reasons.' For example: the government has indicated that it would focus its efforts on second stage development rather than on the movement of sponsored transmigrants during Repelita V and beyond; and the budgetary allocations are likely to stay at low levels, and be directed in large measure towards completing facilities at existing settlements. The evidence shows this not to be the case. Despite the severe budgetary constraints imposed by declining oil revenues, in August 1988, the Indonesian Ministry of Transmigration announced proposals to settle transmigrants in the very heart of Irian Jaya. This announcement to open Jayawaijaya district to transmigrants indicates that the Transmigration programme in Irian Jaya is entering a new phase. The colonisation plan poses a direct threat to the lands and cultures of the Papuan peoples of the Highlands and will seriously affect the environment of this densely settled area. From the point of view of continued Bank involvement in transmigration, 'the emphasis has shifted to improving the welfare of settlers in existing settlements and improving policy and institutional arrangements for future new settlement.' The Bank's Transmigration VI loan now in preparation is to be directed exclusively towards second stage development, and will promote 'sustainable economic activities' in ten sites in eight provinces. The priority given to second stage development is indicative of the deteriorating ecological and economic conditions in existing sites which according to some Bank staff is becoming a matter of serious concern. It even appears that the remaining disbursements on the Transmigration V loan are being re-programmed from new site selection to second stage development. That the Bank has recognised that the failing economic situation in existing sites is a matter of urgency, and that mitigation of the resulting ecological damage and human suffering is a priority, can only be welcomed. But, with a new emphasis on Nucleus Estate plantations and extensive tree crops, the Bank is still clearly experimenting with approaches to attempt to make transmigration a viable activity. The second stage development of tree crops in transmigration sites is designed to supplement the income of migrants reliant on failure-prone food crops. The Nucleus Estate plantations - mainly for palm oil and rubber -are being promoted almost exclusively in forested areas in the outer islands, and are viewed by some Indonesian commentators as serious a threat, or even more serious a threat to forests in some areas, as transmigration. The last large lowland forest in Sumatra in the Riau province is being destroyed at a massive rate for Nucleus Estate plantations, some of which are financed by the World Bank's Nucleus Estate loans. Sumatran lowland forests are of critical importance for the conservation of biodiversity, and in particular, the forests are the habitat of the endangered Sumatran rhino. The Bank recognises the severity of deforestation, but places the blame squarely on private plantation companies and large scale timber exploiters who are estimated to have destroyed up to 800,000 hectares of primary rainforest in Riau province. The Bank claims that of the 329,251 hectares of Bank financed Nucleus Estate plantations in Indonesia, only between 10 to 15% is converted primary forests, the remainder being established on secondary forest areas or grassland. This is by no means marginal, and furthermore, in funding Nucleus Estates at all, the Bank is endorsing and supporting a trend that has disastrous longer term implications. As Emmy Hafild, coordinator of the Indonesian NGO network on forest conservation,SKEPHI, stated: 'our concern is that new World Bank funded plantations are being sited in tropical forest lands cleared specifically for the purpose . . . once a forest area is opened for plantations, the surrounding forest will slowly, but surely disappear. The plantation and the transportation system that maintains 'it are like a cancer in the forest.' Indonesian NGOs estimate that the Bank together with private companies have already been responsible for the conversion of 800,000 hectares of biologically invaluable rainforest. The advisability of making so many Indonesian rural peoples dependent upon the vagaries of the international commodity markets seems highly questionable, especially at a time when the markets in palm oil and rubber are so depressed. WALHI, an environmental and development organisation representing 400 NGOs working in Indonesia, has stated: 'This move to turn transmigration sites into monoculture cash-crop production farms could prove to have even worse economic and environmental consequences than transmigration as it was originally conceived.' NGOs have acknowledged that the Indonesian government is responding to outside concerns by introducing new environmental policies. In 1986, a law requiring Environmental Impact Assessments was passed, and the implementing regulations were promulgated in June 1987. But NGOs remain sceptical that these national policy reforms will make any real difference. In particular, NGOs are concerned that: 1) In relation to the new environmental legislation, there should be greater support from donors such as the World Bank for technical and environmental training and institution building in all the government ministries, executing agencies and the university-based environmental study centres. 2) There should be greater involvement and participation from environmental NGOs and local communities at all stages in the project cycle. In particular, an NGO Monitoring Forum for Transmigrationn projects, with the support of both the World Bank and the Indonesian government is a priority. 3) The Indonesian government offers the Bank guarantees that Transmigration will be carried out in line with the Bank's policy guidelines and will not lead to the destruction of the environment, the alienation of tribal peoples from their traditional lands and the abuse of their rights to self-determination. 4) The Bank undertakes an immediate review of the Nucleus Estate plantations program from social and environmental points of view. [] Pesticide Treadmill in the Sudan FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund Introduction: In December 1987, the Board of Directors of the World Bank approved a US $85 million loan to Sudan. It included US $50 million for pesticides for the 1987/88 cotton crop. Environmentalists challenged the loan on the basis that Sudan's two million acre cotton plantations, including the Gezira region, are on the verge of collapse due to increasing infestations of resistant pests. Farmers are using more chemicals on more insects: an addiction known as the 'pesticide treadmill'. Multilateral and bilateral assistance for Sudan's pesticide purchase is becoming an annual event. In 1982/83, foreign aid contributed 29% of the total input finance; 75% in 1984/5; and 100% in 1985/86. The Bank provided a loan for the 1984/85 crop; Germany, the United Kingdom and Italy provided for the next season's dose when the World Bank turned down Sudan's proposal. Now, once again, it is the World Bank providing pesticide funds. This financing continues despite the fact that pesticide overuse in the Gezira region of Sudan has resulted in more pests and less cotton. Experts have characterised monocrop cotton production as a series of stages culminating in a 'disaster' period when the cost of production due to escalating pest problems exceeds the value of the yield. The final stage is the rehabilitation stage, using 'integrated pest management', or IPM. IPM is a pest control method which aims to maintain pests at harmless levels using biological and cultural means rather than seeking to eradicate them with chemicals. Experts believe that Sudan may have reached the disaster stage. Sudan is the largest country in Africa and has a population of 22 million and a 1987 per capita GDP of US $340. The nation is endowed with abundant natural resources and untapped agricultural potential sufficient to make it a 'garden basket' among African countries. However, it has the greatest external debt and some of the worst agricultural pest problems. Despite its potential to be a primary food producer for northern Africa, Sudan is increasing its dependence on imported wheat. Moreover, the country is faced by hunger and disease, aggravated by the World Bank's paradoxical emphasis on investments in irrigated projects to grow cotton for export. Bankrolling Disaster: Despite the Bank's pesticide guidelines which identify IPM as the preferred pest control method, the latest loan provides less than 1% for IPM. Since IPM depends on natural enemies to attack pests, Sudan's reliance on massive aerial chemical spraying eliminates beneficial insects and makes IPM virtually impossible. For these reasons, the U.S. Executive Director abstained on the December 1987 loan, but it was approved, nonetheless, and the chemicals have been purchased. Insect and pesticide problems in the government controlled Gezira region (the world's largest farm under one ownership) are a result of a complex of factors. In addition to long staple cotton that accounted for 36% of export earnings in 1986/87, the area produces groundnuts, sorghum and wheat. Originally, these crops were grown in a rotation pattern that included 'closed periods' when the ground was left unplanted so no vegetation remained to provide food for pests. As the irrigation schemes expanded and economists devised planting schedules to maximise the potential of the abundant water and topsoil, crop rotation gave way to intensified agriculture. As one crop is harvested another is sown. Now, pests have a constant supply of vegetation bridges to move freely between fields and from one season to the next. There is as well no 'safe refuge' or border area where the pests' natural predators can escape from the ubiquitous pesticides. Commercial spraying operations were first recorded in 1945. Initially there was a good cost/benefit result and spraying operations expanded rapidly. However, by the end of the 1961/62 season, Sudan recorded its lowest cotton harvest. The American bollworm was reaching damaging levels, contributing to both an increased spraying regime and reduced yield. Sudan's primary cotton pests are jassids, bollworms and whitefly. Sprays are applied four to six times per season: an uncommonly low number for such crops. However, they are a 'chemical cocktail' of several pesticides which add up to the equivalent of almost 20 different chemical sprays per season. This is causing the buildup of genetic resistance in the pest population to a wide variety of chemicals and decreasing the effectiveness of the pesticides. Moreover, aerial spraying results in uneven and poorly targeted distribution of pesticides. It leads to contamination of irrigation canals reducing fish populations, and this may be a contributing factor in the increase of schistosomiasis in the area, a disease carried by water snails in the canals. Resistance is not the only problem. Non-selective pesticides kill both pests and their natural enemies. The loss of natural predators results in a resurgence of pests and the appearance of pests which otherwise would have been kept in natural check by predators. All these phenomena are part of the observed treadmill in the Gezira. The results are reduced yields and increasing production costs. The cost of pesticide inputs in Sudan has now reached a third of the crop value. In fact, the 1985/86 cotton exports earned $136 million, but production costs (including US $44 million for pesticides) may have exceeded earnings. Sudan's centralised, top-down pest management creates further problems. Farmers receive profits from cotton sales after pesticide costs have been deducted. They neither pay for pesticides directly nor decide what chemicals to use and when. There is no incentive to practice IPM because pest control is not their responsibility. Further complicating this agricultural dilemma is Sudan's worsening economic crisis. Rapid borrowing in the 1970s for agricultural expansion, a succession of non-performing 'prestige' products, quadrupled oil prices and a slump in commodity export prices converged to push Sudan's external debt to more than US $11 billion. It is in arrears on those payments by more than US $4 billion; an amount seven times greater than the full value of Sudan's exports. That includes the US $770 million owed to the IMF since April 1985, making the country ineligible for additional emergency loans. Given the harsh conditions the IMF imposed - currency devaluation, import restrictions, and pressure to increase exports - its prescription appears to be more lethal than the country's economic problems. In effect, Sudan is being pressured to mine its topsoil to grow export cotton so it can remain current on debt payments it cannot afford. Solutions: Sudan could reshape its agricultural economy and become self-sufficient in food production. It will take the cooperation of the World Bank and other donor countries to provide the financial means for Sudan to break its chemical dependence and shift to IPM and sustainable farming. The World Bank recognises that Sudan's cotton pest control must change. It is trying to initiate IPM. But all concerned recognise that it will take a long term commitment to remedy the now escalating pest problems and develop an integrated pest management system. If a solution is to be found, both IPM research and practice must be integral to future loans to Sudan - and all agricultural development loans, for that matter. The Bank supports the need for research. Equally important - though not yet provided - is the long term financial commitment that is needed to assure that IPM can be promoted by the government. There are four clear steps towards achieving a rational and sustainable pest management system in the Sudan: Firstly, redesigned crop patterns, rotation and re-introduction of 'closed' periods, protection of beneficial insects, and pesticide resistance management must become the new pest control tools for Sudan. Secondly, extension agents must be trained appropriately to help farmers implement this safer pest control programme. Thirdly, if an IPM program is established in the Gezira, it must be self-perpetuating and originate with each farmer. Extension agents can interpret data and give advice, but pest monitoring and response to infestations must become a way of life and a primary responsibility of farmers. Decisions on crop selection, planting schedules and pest management strategies should be shared with the tenant farmers. This is a major and essential revision of Sudan's agricultural policies in the Gezira. Finally, if Sudan, like many Sub-Saharan countries, is to be able to rehabilitate its environment and to realise its potential as a food producer, debt relief is essential. [] Institutional Failure of Executing Agencies FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund No matter how thorough or genuine are the Bank's environmental and tribal guidelines and policies, they are doomed to failure if those institutions charged with implementing them are either unwilling or incapable of doing so. For example, a vigorously pursued integrationist policy for tribal peoples such as is the stated aim of the Indonesian government is a complete contradiction of the Bank's tribal policy to carry out development in tribal areas 'in a way that preserves the identity (of tribal groups), as well as their individual and collective rights.' The unwillingness to implement Bank recommendations is not always a question of policy. The section of this booklet on the Sardar Sarovar dam in India documents the position of the government of Madhya Pradesh which states that it has no intention of following the Bank's guidelines on the resettlement of peoples displaced by the dam. The reasons, they claim, are practical. In both cases, it is highly likely that even if there were to be radical changes in policy and the creation of the political will to follow the Bank's guidelines, there would be a serious lack in the institutional capacity to implement them. Often, the institutional weaknesses can be resolved by massive strengthening of the executing agency. This is arguably so in the case of the Brazilian Institute of Forestry Development (IBDF), as has been described in this booklet, in the section on the environmental effects of Brazil's Power Sector II loans. However, the total and repeated failure of certain national agencies charged with protecting the environment and tribal rights under World Bank projects is a much more serious problem, and is illustrated by the example of FUNAI, Brazil's National Indian Foundation. The following case-study detailing FUNAI's poor record, is taken from evidence submitted on behalf of the Environmental Defense Fund and Friends of the Earth, to the US Senate Appropriations Committee in June 1988: One point that emerges very clearly from the Bank's experience in the Carajas project, and elsewhere, is that the attempts to strengthen the National Indian Foundation, (FUNAI) the agency responsible for protecting the rights and welfare of Brazil's Indians, have not succeeded. It is therefore disturbing that the proposed Bank loans, such as the second Power Sector loan, which would have massive effects on indigenous populations, do not address this problem directly. The situation in the Bank's notorious Polonoroeste project illustrates this point. Under present conditions there is not the slightest possibility of FUNAI effectively protecting the interests of indigenous populations affected by development projects or carrying out measures to mitigate the impacts of such projects. The World Bank called for the institutional strengthening of FUNAI at the outset of its now notorious Polonoroeste program, in 1981, and has invested considerable effort in seeing that the terms of its loan agreement relating to indigenous land protection were carried out, with very limited success. Eight of 45 recognised Indian areas in the Polonoroeste area of influence have been fully documented as legally protected Indian areas. (CEDI, Aconteceu Especial 17: Povos Indigenas no Brasil 85/86). Such legal documentation is a minimal precondition to actual protection of Indian areas, not in itself a sufficient step to defend these lands from predatory exploitation and resource destruction. A 1987 World Bank report on the indigenous people's situation in Polonoroeste, leaked to the press, summed up current conditions: 'The security and health of the Indians in the area of influence of Polonoroeste are seriously threatened, since the agency responsible for defending their interests seems unequipped to deal with the indigenous reality.' (Journal do Brasil 07/23/87). The report noted the presence of illegal loggers on five indigenous reserves, as well as an illegal gold mine on one. 'The administrators of the indigenous areas, the agents responsible for FUNAI posts, and at times the Indians themselves make agreements contrary to existing regulations, permitting the extraction of wood, gold, and the construction of roads and other activities damaging to the well-being of the Indians.' (Ibid). The report goes on to criticise the administrative disorganisation of FUNAI, with particular emphasis on the 'total lack of control or efficiency in the health services in the indigenous areas, citing 'constant epidemics of tuberculosis, measles, and malaria, without due medical attention, which is the exclusive responsibility of FUNAI.' This scandalous situation lamentably represents not a local irregularity, but the administrative character of the agency on the national level. The Federal Accounting Tribunal, a federal auditing agency roughly equivalent to the General Accounting Office, on November 11, 1987, instituted a formal investigation of contracts signed by the president of FUNAI with logging firms for logging on Indian lands. A previous investigation of misappropriation of funds was already underway. The head of the Tribunal, Minister Adhemar Ghisi, stated that FUNAI's behaviour, 'with respect to budget and finance questions is uncontrollable and contrary to the simplest principles of self-control and respect for the law.' (Journal do Brasil 11/12/87). In addition to the Tribunal's investigations, criminal investigation charges of extortion were initiated by the Attorney General. The President of FUNAI publicly admits that he has signed contracts for logging on Indian lands, claiming that the agency is attempting to control a situation that exists in fact and ensure that the Indians get a fair price for the timber, However, the contracts are signed without public bidding, often in exchange for the construction of roads, houses, airstrips, and other works that are the responsibility of the agency to provide, where necessary (Journal do Brasil 11/05/87), and signed without consulting the Forestry Institute (IBDF) in order that a resource management plan for logging be approved, as required by law. In one case, FUNAI signed a contract with a logging firm that had been fined by IBDF for illegally operating in a joint Indian reserve and National Park, in effect giving back timber that IBDF had confiscated (J. do B. 11/14/87). The value of the wood being removed often vastly exceeds the cost of the works given in exchange(J. do B. 11/20/87). This may be explained by under the table payments extracted by FUNAI in exchange for the nominal legalization of illegal logging operations. This is in fact the charge in the extortion case now pending, In light of such monumental irregularities, and the Bank's own assessment of FUNAIs record and capabilities in the Polonoroeste area, as well as the Bank's failure to secure compliance with the conditions of the Carajas Iron Ore Project, it would seem ill advised at best for the Bank to rely on efficient action on the part of this agency without substantial institutional changes. Nonetheless, this is just what the Bank appears to intend with its second Power Sector Loan. Specific recommendations: Massive strengthening of IBDF. Under present circumstances, the Bank should work with the government to create a new institutional mechanism for demarcation of Indian lands, since the National Indian Foundation (FUNAI) has proven unwilling or unable to execute its legal mandate or its obligations under Bank loans. General recommendations (see NGO Statement on the occasion of the World Bank and IMF Annual meeting, 1987). [] NGO Gathering September 28 - October 2, 1987 FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund Statement on the Occasion of the 1987 World Bank-IMF Annual Meeting 1. Introduction During the 1987 World Bank-IMF annual meeting, 35 non-government organizations (NGOs) from fourteen countries assembled in Washington D.C to review among themselves the environmental and socio-cultural performance of the World Bank over the last year. NGOs also attended the annual meeting as visitors, and held meetings with Bank staff, country delegations and executive directors. Based on these meetings, the undersigned organizations request the World Bank to adopt the following reforms in order to improve the environmental and social soundness of its policies and projects. II. Recommended Reforms 1. In order to promote sustainable development, the World Bank must allow NGO and public participation in development projects, country economic planning, and structural adjustment programs. Access to information is an essential element of local community and NGO participation in the development process. The World Bank must allow access to information to all interested NGOs and local communities in borrower countries in the following categories: A. Adequate notification of upcoming projects through public announcements in the media. Notification should occur 90 days before executive directors vote on any project. B. Executive directors voting records should be made available upon request. C. Monthly operational summaries, terms of reference for feasibility studies, staff appraisal reports, environmental assessments, reports to executive directors, mission reports, sector analysis papers and other relevant documents should be available upon request. 2. The World Bank and other multilateral development banks (MDBs) must create a mechanism for systematic public participation and public monitoring of projects at all stages of the project cycle. NGOs with concerns should have access to project sites. 3. The World Bank must take responsibility for ensuring that environmental and human rights conditions in loan agreements and policy documents are adhered to. 4. The World Bank, as part of the United Nations system, should: A. Uphold the Universal Declaration of Human Rights and the Charter of Nature adopted by the U.N. General Assembly, recognizing the intrinsic rights of all cultures and species. B. Adopt procedures for NGOs to be accorded official observer status within the Bank, with a right to attend all Bank meetings, including meetings of the Board of Directors. 5. The Bank must continue to increase its staff of professional ecologists, anthropologists, and social scientists in order to assure thorough systematic appraisal, review and monitoring of environmental and socio-cultural impacts of projects. 6. The Bank must systematically involve ministries of environment, health and welfare in borrower countries in project planning, country program planning and strategy sessions. 7. Non-project lending, such as sector, policy based on structural adjustment lending, must be designed to promote sustainable management of resources and to protect the land and cultural identity of vulnerable minorities. The World Bank must require that these loans contain analyses of the impact of such lending on natural resources and indigenous people, and allow NGOs the opportunity of informed involvement in negotiations on said loans. It must be stipulated in sector loan agreements that disbursements under these loans must not contribute to projects previously rejected by the Bank because they failed to meet adequate environmental and socioeconomic criteria. 8. We continue to be deeply concerned about the Bank's involvement in projects which cause widespread tropical deforestation, contribute to global problems of desertification, spread of waterborne disease and forced resettlement of indigenous people such as those described in 'Financing Ecological Destruction', an NGO booklet published during the World Bank-IMF annual meeting. The rainforests of the Amazon, Central America, Africa and Southeast Asia are being destroyed at an increasing rate, as are critical wetlands and other important ecosystems that provide the basis of all life, in part as a result of World Bank financed projects. These include major dam projects in the Narmada Valley of India, transmigration in Indonesia and cattle- ranching in Botswana. Immediate steps must be taken in the World Bank and other MDBs to ensure that their involvement in these projects prevents irreversible ecological and cultural destruction, and provides adequate provision for resettlement and rehabilitation of displaced people. 9. The World Bank and other MDBs must actively pursue initiatives to ensure the protection of the environment and vulnerable cultures, including the implementation of existing policies on wildlands and tribal peoples. 10. MDBs should create a 'World Conservation Bank' as recommended by the World Commission on Environment and Development. A crucial aspect of this bank will be to develop initiatives which enable developing countries to repay portions of their outstanding public and private international debts through investments in natural resource conservation. 11. The IMF must incorporate ecological, socio-cultural considerations in its lending policies and should initiate studies to determine the long term environmental and social effect of its lending programs. The World Bank and the IMF should include NGOs in the formulation of these new policies. 12. The Bank must shift its lending priorities so that a much greater proportion of its loans go for smaller scale, environmentally and socially beneficial projects and project components, resource rehabilitation projects, and appropriate or light technology projects. 13. We call on the World Bank and other MDBs, as a priority, to channel future energy sector investments into economically and ecologically more viable alternatives to large dams. Alternative investments include end use efficiency and conservation improvements in the industrial, urban and agricultural sectors. 14. We call for a moratorium on MDB investments in new, large dam projects, until these institutions reform their appraisal methodology, as a precondition of all feasibility studies, to fully assess and address the environmental and social costs of such projects. We call for a moratorium on loan disbursements on existing large dam projects where rehabilitation plans are either unprepared, inadequate or not properly implemented. Environmental Policy Institute USA Nicaraguan Association of Biologists and Ecologists, Nicaragua Environmental Defense Fund, USA lnstituto de Estudos Amazonicos, Brazil Friends of the Earth, Sweden European Youth Forest Action, The Netherlands Friends of the Earth, USA Plan Sierra, Dominican Republic National Wildlife Federation, USA Development Group for Alternative Policies, USA Sierra Club, USA Native Forest Action Council, New Zealand Rainforest Information Centre, Australia Fundacion para la Investigacion y Protection del Medio Ambiente, Columbia International Dams Newsletter, USA Survival International, USA Rainforest Action Network, USA Narmada Dharangrast Samiti, India Probe International, Canada Regenwalder Information, Germany Robin Wood, Germany Iran Jaya Rural Community Development Foundation, Indonesia Monitor International, USA International Centre for Development Policy, USA Australian Coalition for the Reform of the Multilateral Development Banks, Australia Tropical Ecosystem Research and Rescue Alliance, USA Natural Resources Defense Council, USA Greenpeace, USA Environmental Project on Central America, USA Friends of the Earth-UK and Friends of the Earth International endorse these recommendations. [] Third World Debt and Natural Resources Conservation: The Role of the World Bank and the International Monetary Fund FINANCING ECOLOGICAL DESTRUCTION The World Bank and the International Monetary Fund The Global Bargain The linkage between the debt crisis and natural resources conservation requires some explanation, since it is not immediately obvious. The connection is important, however, not just in terms of understanding the present pace of environmental deterioration in developing countries, but also in the search for solutions. Since a significant part of the debt is unlikely to be repaid anyway, without unacceptable social costs, it should be possible as part of the solution to the debt crisis, to negotiate a bargain: why not trade partial debt relief by the creditors in return for new environmental/social policies and local currency investments in conservation/development programs by the borrowers? In this way, something of value for the future of mankind can be salvaged from the tragedy of the present financial impasse. The Debt Crisis Recently, the international debt crisis is being recognised as a long-term problem that will require years to work out. It was precipitated by the skyrocketting oil prices and interest rates of the late 1970s combined with a recession in most industrialized countries in the early 1980s. This led to a glut on the world market and low prices for most of the goods (usually raw materials) produced by developing countries. But these precipitating events only made the problem visible in the newspapers. The debt was quietly building up for years before it became a 'crisis' in 1982. The combination of high interest payments on the debt and low prices for the goods they sell means that most developing countries are short of the foreign exchange needed to finance imports, even the spare parts to keep machinery going. This situation is compounded by the fact that many countries borrowed large sums of money for ill-advised and unproductive 'development' projects, as documented elsewhere in this publication. Now, many countries cannot afford to pay interest on the debt and simultaneously finance programs for real development. So they have fallen into a continuing state of recession, with declining income, nutrition, health and education, especially among the poor majority. The external debt of the Third World is approximately $1 trillion. A significant portion of this sum is owed by Mexico, Brazil, Argentina and a few other countries of Latin America. Default by any of these would cause a crisis in the North American banking system. The external debt of another group of 40 to 50 countries, mostly in Africa, is not large enough to precipitate an international financial crisis, but is enormous in relation to their own economies. Approximately two-thirds of Latin American debt is owed to commercial banks, and one-third to official creditors. In Africa, the reverse situation is true, with most of the debt owed to official sources such as government agencies and the World Bank. When the debt crisis began to hit one country after another, in the early 1980s, the International Monetary Fund took on a new role. Originally, it had the responsibility to help individual countries through temporary imbalances in their international trade. Now the IMF, with its short-term perspective, suddenly found itself advising dozens of countries and arranging crisis loans, in a situation that turned out to be long-term in nature. The IMF was giving all the ailing nations the same advice cut government spending, cut imports, increase exports, devalue the local currency. These so-called 'austerity measures' were the conditions for receiving IMF structural adjustment loans - ie. loans to help countries through the painful period of implementing the austerity conditions and thereby 'adjusting' their economies. Working out an agreement with the IMF for such structural adjustment has been the required 'seal of approval' which qualified a country for new loans from other sources, such as the World Bank, commercial banks and foreign governments, While the economies of many developing countries were undoubtedly mismanaged, with subsidies for wasteful overproduction and state-owned enterprises, the MF-prescribed austerity measures could only work if they were addressing the basic problems. But it is manifestly impossible for scores of developing countries to prosper if they are all competing with each other to sell more and more of the same limited range of products and raw materials. As the debt crisis lengthened into years of recession, the bitter IMF medicine, aimed at a 'quick fix', has sent developing country economies into reverse. Unemployment and underemployment have skyrocketted. Basic long- term investments in education, health and natural resources management have been retarded as part of the required cuts in government spending. UNICEF has documented significant rises in the rates of malnutrition and infant mortality, along with reductions in literacy, and life expectancy in many of the debt- ridden developing countries. The effects of the IMF's unproductive austerity regimen will be felt for many years. Now the prescriptions, such as the U.S. Treasury Secretary's 'Baker Plan', have somewhat changed: instead of economic contraction, the advice is to grow out of the debt crisis, again with an emphasis on exports. But by now the commercial banks have realized the long-term nature of the debt crisis, and most are uninterested in throwing good money after bad in new loans. So new lending for economic growth has slowed, and many developing countries are wallowing in a continuing recession. It seems clear to more and more policy makers, in the United States and Europe, that for many countries, the only possibility for returning to economic progress is to negotiate some form of debt relief. If, in appropriate cases, this debt relief is linked to commitments by the borrowers to conserve and manage their basic natural resources, the combination could put them on the road to the kind of sustainable development described in 'Our Common Future', the report of the U.N.'s World Commission on Environment and Development. Natural Resources Conservation and Development Sustainable development depends upon a healthy natural resource base. Yet, the debt crisis and the need to increase short-term economic productivity is forcing developing nations to accelerate the exploitation of their natural resources, and to cut or delay the implementation of conservation measures that could reduce long-term resource degradation: timber extraction without replanting, conversion of mixed farmlands to massive unsustainable cash crop monocultures, and destruction of valuable wetlands are all increasing. This degradation will reduce the potential for sustainable development in agriculture, forestry and fisheries. In the state of Sao Paulo, Brazil, thousands of people have been thrown out of their jobs by the recession accompanying the debt crisis. As a consequence, whole communities have invaded and cut forests along steep coastal hills in search of fuelwood and homesites. Destruction of the forest is leading not only to extinction of potentially valuable plant and animal species, but also to massive soil erosion, which is cutting off highways and falling on homes and factories below. Haiti, once rich in mahogany forests, is in danger of being reduced to a barren rock by desperately poor people who cut down trees for fuel. Mexico is rapidly squandering the groundwater supply in the northern states to irrigate vast fields of vegetables grown for the U.S. market. As the water table drops, irrigation pumping costs are increasing. Within a few years, the farms may no longer be economically viable. Unfortunately, by then lack of water will reduce the alternative development options for the region. The IMF and the World Bank play a critical role in the development/environment/debt connection. In some cases, as documented in other chapters of this publication, the World Bank has funded projects which resulted in serious damage to forests, farmlands and watersheds, natural systems essential for sustainable development. Similarly, austerity measures, demanded by the IMF for short-term goals of structural adjustment, have discouraged sound investments in natural resource management for long-term development. Moreover, IMF policies may stimulate the development of fragile lands for agriculture exports, or induce the rapid depletion of forests, For example, a sudden cut in fossil-fuel subsidy programs, where firewood is scarce, can lead to severe degradation of existing marginal woodlands, erosion and loss of soil productivity. Instead, continuation of the subsidy is needed while fuelwood plantations are established. Towards a Solution Protection of the natural resource base and welfare of the poor should be a vital part of all negotiations on the debt crisis. As part of each economic recovery program, borrowers will need assistance to design a strategy for sustainable development, since the temptation to continue patterns of investment for short-term profit, at the expense of the future will be hard to resist. At the same time, structural adjustment policies and the conditions for all new loans from the World Bank and the IMF must be re-designed so that they encourage sustainable development. This is particularly crucial because their loan conditions and policies are being used as benchmarks for lending by other institutions. The World Bank is shifting emphasis in this direction, setting policy guidelines to avoid or minimize damage to tropical forests and watersheds. Similar measures should be implemented by the IMF. The normal formula for structural adjustment loans is outdated and unproductive; a new sustainable development conditionality should be adopted: First, along with basic nutrition, health and education, several kinds of natural resources programs should be exempted form austerity budget cutting, especially forestry and watershed management, coastal fisheries management, and soil conservation programs. Second, if a country has undertaken land tenure reform or redistribution programs with the aim of creating a more equitable and environmentally sustainable livelihood for the poor, funding support should be given. Such programs can relieve pressure on marginal lands and give new landowners a stake in practising sustainable agriculture. Finally, export incentives should only be given for projects that avoid long-term costs, particularly the destruction of tropical forests and marginal lands. Equally important is the need to address the heavy debt with which many developing countries are already burdened. Growing numbers of creditor banks and official agencies are realizing that many debtors simply will not be able to continue paying even the interest unless the burden is eased. The private sector is already arranging small-scale swaps, offering modest debt relief in exchange for nature conservation; Bolivia, Costa Rica and Ecuador recently announced programs in which foreign (commercial bank) debt is cancelled in return for an agreement by the borrowing country to place an equivalent sum of local currency into a fund, managed by local conservation groups, to support national parks, sustainable agriculture projects, etc. But debt swaps should not be seen as saving banks from the responsibility they should take for their past lending decisions. They are rather an opportunity created out of a crisis, which can form part of a strategy to deal positively and fairly with debt. The United State Treasury Department has called upon the World Bank to support such 'debt-for-nature' exchanges, with technical assistance grants, financial advice and environmental loans where appropriate. But while helpful, this nominal assistance to private efforts is not enough. More and more government and legislative initiatives in Europe and lately in the United States are taking steps toward debt reduction. In the end, as part of the solution to the debt crisis, a global bargain must be negotiated, in which significant debt relief is traded for major changes in environmental policies and programs to assist the poor in the debtor countries. Affected communities and citizens organisations should be fully involved in the design and implementation of the changes. In addition, the wasteful consumption of energy and raw materials, and the need for appropriate economic adjustment (such as the removal of trade barriers) by the industrialized countries would have to be addressed in such debt negotiations. The IMF and the World Bank could establish an international forum for these discussions. If they do not take a leading role in promoting negotiations for debt relief and sustainable development, they will one day find themselves by-passed and marginal players in the serious business of assuming a habitable earth for the future. This booklet was made possible through funding from Greenpeace International and Friends of the Earth (UK) and the Mott Foundation. Many thanks for contributions and advice from: Environmental Defense Fund 1616 P Street N.W., Suite 150 Washington D.C. USA 20036 Greenpeace International Temple House 25-26 High Street Lewes East Sussex BN7 2LU UK Friends of the Earth UK 26-28 Underwood Street London N1 Friends of the Earth US 530 7th Street SE Washington DC USA 20003 Natural Resources Defense Council 1350 New York Avenue N.W. Washington D.C. USA 20005 National Wildlife Federation 1412 16th Street NW Washington DC USA 20036 Environmental Policy Institute 218 D Street S.E. Washington D.C. USA 20003 Bank Information Centre 731 8th Street S.E. Washington D.C. USA 20003 World Rainforest Movement International Secretariat 87, Cantonment Road, 10250 Penang MALAYSIA Rainforest Action Network 300 Broadway San Francisco, California USA 94133 Survival International 310 Edgeware Road London W2 UK Cover Photo: Polonoroste, Brazil Central Photo Information All rights reserved. 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