4.1 Transnational Corporations Are Big Beneficiaries
IFC's beneficiaries include some of the world's richest corporations: Rio Tinto, Citibank, Marriott, and ExxonMobil, to name a few. The annual sales of some of these companies outrank the GDP of many developing countries. Of the world's top 100 economies (countries ranked by their GDP and companies ranked by their sales), 51 are corporations. Royal Dutch/Shell is the 33rd largest economy and Exxon is the 37th. 39 Figure 2 illustrates the disparity between the earnings of IFC-supported corporations and the GDP of some countries that borrow from the World Bank Group.
In situations where IFC supports transnational or foreign-owned companies, the chances for local benefit are diminished since these companies take most of their profits back home to their shareholders. One cannot assume that a domestically owned company always benefits the community either, but in general, these companies may be closer to the development priorities and needs of a community. Some investments may be better suited for transnational companies just by their nature, but when a transnational or foreign-owned company is the major investor, IFC's role should be to help ensure that local benefits are maximized. In general, IFC should try to prioritize support to domestically owned companies that have a direct interest in the well-being of a community and a country.
| Largest Independent Power Producer Also Largest IFC Borrower
AES (Applied Energy Services Corporation) is the largest independent power producer in the world, with assets of $11 billion and 40,000 MW of electricity generation40 It astutely created and continues to maintain a progressive, "green" image, which has been played up by the media. Press articles invariably mention AES's non-hierarchical, grassroots structure, and focus upon the fact that its co-founder, Roger Sant, is the current chair of the board of World Wildlife Fund USA. The reality, however, is somewhat different from the image AES portrays. AES has a problematic record. It has been accused of corruption and of failing to fulfill its investment obligations in Argentina41 and Uganda.42 Moreover, it has opposed trade unions in countries like Hungary and is regarded as an anti-union company in the U.S. and Europe.43 AES is the same company that falsified reports and misled the EPA in 1992 regarding Shady Point, a 320 MW coal-fired plant in Oklahoma.44 It is involved in several environmentally controversial projects that are actively opposed by local communities, like the Guayama Coal Plant in Puerto Rico.45 On occasion AES has taken to suing the local community, as in the case of Bucksport, Maine, where AES sued the town for opposing the Harriman Cove Project, a coal-fired power plant.46 This happened despite AES's earlier assurances that it would leave if unwanted by the community. In sharp contrast with its green image, AES recently declined to endorse the CERES (Coalition for Environmentally Responsible Economies) principles, corporate environmental responsibility guidelines that more than 50 companies have endorsed.47 Despite these problems with its corporate conduct, AES remains a favorite of the World Bank Group. In an interview about the Bujagali Hydropower Project in Uganda, AES CEO. Dennis Bakke claimed "we (AES) are the biggest private users of World Bank money through IFC. They (IFC) trust AES a lot and are very keen for us to do this."48 A closer study does indeed show a close a relationship. IFC has approved or is in the process of considering seven major AES projects, three of which were approved within this last year. Taken together, these projects total nearly one billion dollars of financial assistance from IFC to AES.49 |
4.2 Corporate Polluters and Human Rights Violators
As a public financial institution, IFC should invest in companies that demonstrate a commitment to corporate responsibility and have a track record of meeting high standards of social and environmental performance. As part of its due diligence process, IFC should review the corporate record of potential clients to determine if a company has a responsible record or not (factors such as violations of environmental laws, problems with community interactions or human rights abuses should be cause for concern). Companies with recent records of poor environmental or social performance should not be eligible for IFC financial assistance until that record changes.
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Photo Credit: Alfredo Quarto |
| Examples of IFC Beneficiaries with Bad Corporate Records
ExxonMobil. IFC provided $250 million to ExxonMobil to build the Chad-Cameroon Oil Pipeline Project. Exxon and Mobil, which merged in 1999, have been the most aggressive opponents of the Kyoto Protocol, an international agreement to cut greenhouse gases. In 1998, the U.S. Department of Justice accused Exxon of approximately 200 violations of the Clean Air Act. Exxon was fined for exceeding benzene limits in Louisiana and discharging chemicals above underground drinking water sources. In addition, Communities for a Better Environment sued Exxon, accusing the company of contaminating drinking water sources in more than 10,000 sites in California. In January 1998 over 40,000 barrels of oil spilled from a ruptured Mobil pipeline off the coast of Nigeria, affecting 120 coastline communities, home to some 500,000 people. Newmont. IFC has supported Canadian mining company Newmont, the second largest mining company in the world, and its operations in Peru. Recent local protests in Peru have charged the project with inadequate safeguards for the environment. Newmont recently reported a mercury spill at its IFC-financed mine in Peru. Its operations in other countries exhibit similar disregard for the environment and local communities. Their operations in Nevada have destroyed sacred Indian grounds of the Western Shoshone. The company's Minahasa Raya gold mine has polluted rivers and coastal waters in Sulawesi, Indonesia.50 The company has a reputation for disregard for local communities.51 |
