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Private-sector projects in developing countries backed by the export finance agencies of wealthy nations are the most obvious but far from the only examples of finance spearheading projects and activities that are very harmful to the global environment and human rights. Within the most industrialised nations too it is the demands of the finance industry that tilt human behaviour toward crimes agains Nature and Humanity. It may be that reform of these financial institutions is not enough to stop the harm. A whole new approach to international public finance is required. However, lacking public consciousness of the harm that the current group of financial institutions is doing to people and the rest of Nature reform is all that the state and corporate backers of international finance are prepared to even discuss. The Group of Eight industrialised nations called G-8, met in Paris on Dec. 14 -15 to negotiate common guidelines for the export finance and insurance agencies known as ECAs. In 1999, the G-8 said it hoped that by 2001 it would develop common standards for these government agencies that provide loans, guarantees, and insurance to corporations doing business in so-called developing countries. The ECAs have been slow to develop common environmental and human rights guidelines. "The ECAs' lack of minimal standards can turn major infrastructure projects in developing countries into ecological and social time bombs," said Korinna Horta, a senior economist with Environmental Defense. In anticipation of the G-8 negotiations, the national environmental group released three reports on the social and environmental impacts of ECA-backed projects in Africa, Indonesia, and Latin America. Environmental destruction and corruption have been particularly egregious in Indonesia, said Environmental Defense, formerly known as the Environmental Defense Fund. During the 1980s in Indonesia, export finance agencies spent billions of dollars supporting foreign investments in corruption-plagued mega-projects" closely linked to the family of former President Suharto, according to the report. "The heads of industrialised nations have asked for common standards to stop such irresponsible investments of public money, and the ECAs have brazenly dragged their feet in response," said Stephanie Fried, a scientist with Environmental Defense who focuses on Indonesia. Many of the ECA-backed projects in Indonesia are in the power and paper and pulp mill sectors. One such investment is one of the largest paper and pulp mills in Indonesia, known as Tanjung Enim Lestari located in the Benakat region of the island of Sumatra. In 1994, Finnish, German, Japanese, and Swedish ECAs approved a finance package of more than 1 billion dollars for the mill. The company that was designated to prepare massive tree plantations to feed the mill, Musi Hutan Persada, has been accused by local villagers and Indonesian environmentalists of illegal logging and seizing the land of poor subsistence farmers without warning or compensation. In May, Fried visited the region. She said people from neighbouring riverside communities had skin ulcerations from bathing in the river that was polluted by effluent from the mill. The villagers "described the forced land seizures carried out by the company under military guard and the heavy-handed way in which the security forces had terrorised them when they had dared to voice their opinions", said the report. Environmental Defense said that ECA-backed projects in Africa are also plagued by environmental problems, corruption and increasing social conflict. According to the group's report on Africa, export finance institutions play a significant role in several countries on the continent. A large part of the external debt of many African nations is held directly by ECAs, it said. In Nigeria, for example, debt to ECAs is 24.8 billion dollars or 71 percent of the total external debt, while in Lesotho it accounts for 58 percent of total external debt. About half of ECA support in Africa is dedicated to oilfield exploration and development, said the report. But export finance institutions are also heavily backing hydroelectric dams, steel mills, and manufacturing and processing plants. In West Africa, Swiss and German export finance agencies provided risk guarantees for the Manantali and Diama dams. The hydroelectric project was promoted by the governments of Mali, Mauritania and Senegal to foster irrigation, power generation and navigation in the Senegal River Basin. Environmental Defense said the project has damaged the regional ecology, agricultural production, fisheries, public health and political stability in the region. "The Manantali and Diama reservoirs have infested the Bafing and Senegal valleys with water-borne diseases, Bilharziosa being most prevalent," said the report. In anticipation of the expected benefits of the dam projects, land legislation in Mauritania was rewritten and the civil rights of black farmers who had lived along the riverbank for generations were abrogated, it said. "This led to the killing of Senegalese farmers by Mauritanians in 1989, which triggered severe ethnic conflict in Senegal," said the report. In Latin America, export finance institutions played a significant role in Bolivia, Brazil, Ecuador, Peru and Venezuela. Total ECA project value in these countries grew from 180 million dollars to 1.8 billion dollars between 1994 and 1998, and to 8 billion in 1997 and then 15.3 billion in 1998, according to the Environmental Defense report on Latin America. In 1997, the Japanese Export-Import Bank (JEXIM) committed about 64 million dollars for the construction of the Urucu Natural Gas Processing plant in the Amazon rainforest of Brazil. The project expands oil and gas production of the Brazilian State oil company, Petrobas, in the Urucu oil field, a dense tropical forest area in the remote and undisturbed Amazon river basin. Environmentalists have denounced the construction of new roads associated with the project. "No other single factor more clearly leads directly to deforestation, uncontrolled migration, and the invasion of existing protected areas in the Amazon that the opening of new roads," said the report. The three reports by the advocacy group are part of a larger international campaign by environmental and human rights organisations to reform the export finance and insurance institutions. ECAs are now the world's biggest class of public international financial institutions, collectively exceeding in size the World Bank Group. Yet, unlike the World Bank, most ECAs have no social and environmental standards. "These agencies get away with using tax dollars to fund projects like the Three Gorges Dam in China that other institutions, including the World Bank, wouldn't touch because of the social and environmental risks," says Horta with Environmental Defense. The US Export Import Bank and the Overseas Private Investment Corporation are two of the few export finance agencies that have environmental guidelines. The United States has called on other nations to agree upon common standards so that the highly competitive ECAs do not end up in a "race to the bottom" that encourages the absence or lowering of standards. Nevertheless, any state support for ECAs needs to be withdrawn and government money and insurance taken out of the picture. The ECAs need to be more visible because left to itself the finance industry is incapable of defying its fundamental character flaw, the demand to produce profits at all costs, even if it costs the earth. Notes: Prominant ECAs AUSTRALIA Export Finance and Insurance Corporation (EFIC) AUSTRIA Oesterreichische Kontrollbank Aktiengesellschaft (OeKB) CANADA Export Development Corporation (EDC) DENMARK Eksport Kredit Fonden (EKF) FINLAND FINNVERA plc FRANCE COFACE GERMANY Hermes Kreditversicherung-AG (Hermes) ITALY Sezione Speciale Per l¹Assicurazione Del Credito All¹Esportazione (SACE) JAPAN Japan Bank for International Cooperation (JBIC)/International Financial Corporation Export Import & Development Department (EID/MITI) THE NETHERLANDS Nederlandsche Credietverzekering Maatschappij NV (NCM) NORWAY Guarantee Institute for Export Credits (GEIK) SPAIN Compañia Española de Seguros de Crédito a la Exportación, SA (SESCE) Compañia Española de Seguros y Reaseguros de Crédito y Caución, SA (CESCC) SWEDEN Exportkreditnämnden (EKN) SWITZERLAND Geschäftsstelle für die Exportrisikogarantie (ERG) UNITED KINGDOM Export Credit Guarantee Department (ECGD) UNITED STATES Overseas Private Investment Corporation (OPIC) Export-Import Bank of the United States (Ex-Im Bank).
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