Posted on 23-12-2002
Nestle
Puts Pounds Before People
www.guardian.co.uk,
Charlotte Denny, Thursday December 19, 2002, The Guardian
The multinational coffee corporation, Nestle, is demanding a
$6m (£3.7m)
payment from the government of the world's poorest state, Ethiopia,
as the
country struggles to combat its worst famine for nearly 20 years.
The money
is compensation for an Ethiopian business which the previous
military
government nationalised in 1975. It could feed a million people
for a
month, according to Oxfam.
The cash-strapped Ethiopian government has offered to pay $1.5m
to settle
the claim, but yesterday Nestle, which bought the firm's German
parent
company in 1986, was standing by its demand, insisting it was
a "matter of
principle". "In the interest of continued flows of foreign direct
investment which is critical for developing countries, it is
highly
desirable that conflicts are resolved according to international
law and in
a spirit of fairness," a spokesman for the company said.
Nestle's chief executive, Peter Brabeck-Letmathe, acknowledged
three years
ago that the company had responsibilities beyond its bottom
line. "We are
going to be asked: what have you done to fight hunger in developing
countries?" he said. Last month Ethiopia's prime minister Meles
Zenawi said
that 6 million people in his country needed emergency food aid
and that the
number could rise to 15 million within months. The famine, brought
on by
the failure of rains for the third year in a row has been intensified
by a
collapse in the price of coffee which supports a quarter of
the country's
population. Nestle, the world's largest coffee processor, made
$5.5bn in
profits last year.
Aid agencies have reacted furiously to the company's demand.
"At the very
least Nestle ought to be accepting the settlement offered by
the Ethiopian
government," said Sophia Tickell, a policy analyst at Oxfam.
"But frankly
they should be thinking about how the money could be spent on
famine relief
and drop the claim altogether." Ethiopia has the lowest income
per head in
the world, with the average person surviving on $100 a year.
More than a
tenth of its children die before their first birthday.
Aid agencies are worried that the crisis could be even worse
than the 1984
disaster in which a million people died. "Drought is threatening
many
farmers with the prospect of famine," Ms Tickell said. "Nestle,
by contrast
continues to thrive. The company does not need $6m. It is a
highly
profitable company which could easily live up to its commitment
to 'help
fight hunger in developing countries' by writing off this claim."
The World Bank has stepped in to negotiate, but there were few
signs
yesterday that the company was preparing to back down. "This
is a question
of principle. The negotiations are ongoing and it would be rash
to predict
an outcome at the moment," Francois Perroud of Nestle said.
In 1986 Nestle bought a German company, Schweisfurth Group which
had a
majority share in the Ethiopian Livestock Development Company
(Elidco)
seized by the Ethiopian government more than 25 years ago. The
government
sold Elidco to a local firm for $8.7m four years ago. Although
the exact
size of Schweisfurth's share in Elidco is uncertain, the Ethiopian
government is willing to pay$1.5m - just over half the value
of
the company at the time of nationalisation including interest.
But Nestle
is insisting it convert the payment at 1975 exchange rates,
adding a
further $4.5m to the bill. "It is perfectly appropriate to try
and find a
solution to a conflict which has existed since 1975," Mr Perroud
said. "We
are the owners of a claim against the Ethiopian government."
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