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."