Ignoring civil society groups’ calls to reject agribusiness giant Louis Dreyfus Company loan, IFC fails to uphold its own environmental and social policies

WASHINGTON, D.C. - July 5, 2022 Despite opposition from more than 235 civil society organizations worldwide, shareholders of the World Bank’s private sector arm, the International Finance Corporation (IFC) have approved a $200M loan to Louis Dreyfus Company Brazil (LDC). The loan will support the purchase of soy and corn––mostly destined for factory farms––– from large-scale industrial farms in the heavily threatened Cerrado, a biodiversity hotspot in Brazil. The loan was initially delayed at the request of several governments to allow for a full Board discussion, with the loan subsequently approved on Wednesday June 29th.

“This rushed loan to one of the world largest commodity traders to support environmentally destructive monoculture in Brazil’s highly threatened and biodiverse Cerrado region violates Bank policies and contradicts its commitment to the Paris agreement and Sustainable Development Goals,” said Kari Hamerschlag, deputy director Food and Agriculture program at Friends of the Earth. “I am deeply disappointed that the U.S. government, the IFC’s largest shareholder, supported the loan and did not hold IFC management accountable to their own policies and mandates.”

Civil society groups had been calling for a delay until a more comprehensive Environmental Impact Assessment (EIA) and stakeholder process could be completed in a region “troubled with land conflicts and significant environmental, human health, and labor rights concerns.”

In a letter sent to each of the IFC Executive Director (ED) offices, civil society groups provided evidence of the many ways in which the proposed loan “failed to trigger all the [IFC’s] relevant Performance Standards, particularly PS 3 and 4, and also [ran] counter to the IFC’s pledged support to align its lending with the Sustainable Development Goals and the Paris Agreement.” Communications with the IFC pointed out that “the further entrenchment of industrial monocropping by LDC” and other grain traders “in the Cerrado and elsewhere is inconsistent with any coherent notion of sustainable development.” Additional letters to IFC management provided even more evidence of the loan’s policy violations.

Signatories to the letter also challenged the notion that LDC should be a candidate for public development funding, noting that: “LDC’s 2021 revenues of $49.6B (up 47% from 2020) and $11B in available liquidity mean the company does not need additional public support.”

In addition to raising these concerns, civil society groups presented evidence of LDC’s poor track record on deforestation, land grabbing, and other environmentally and socially destructive practices. An investigative report released June 20 described how Agricola Xingu, an indirect LDC supplier, is not only responsible for deforesting more than 32,100 hectares in the Cerrado but is also one of a group of industrial producers claiming “possession” of an area occupied for more than 300 years by the traditional community of Capao do Modesto in the state of Bahia. While LDC’s joint venture company ALZ Grãos is denying a “commercial relationship” with Agricola Xingu, documents obtained by Repórter Brasil show that soybeans from this agribusiness firm were indirectly delivered to LDC via Nutrade.

“Much of the soy and corn monocultures that will be supported by IFC’s loan will likely be used to feed factory farmed animals. Livestock convert these crops very inefficiently into meat - many more people could be fed if soy and grain were instead used for direct human consumption” said Peter Stevenson of Compassion in World Farming. “The current surging prices and dwindling supply of wheat and corn show that IFC should stop funding the wasteful use of such crops as animal feed.”

“The expansion of commodity plantations by agribusiness corporations is a major cause of deforestation and human rights violations against Indigenous people and small farmers in Brazil,” said Maria Luisa Mendonça, Co-Director of Rede Social de Justiça e Direitos Humanos. “Financial institutions and governments that give incentives to these corporations are contributing to environmental destruction, to the displacement of rural communities and to the global climate crisis.”