Brazil: Amaggi Expansion-01/IFC Executive Vice President Request
At request of IFC Executive Vice President
The Amaggi Expansion Project was a soybean investment sponsored by a Brazilian company, Grupo André Maggi Participaçoes Limitada and located in the Brazilian state of Mato Grosso. At the time the project loan was approved, Amaggi was an existing client of IFC (having received a prior loan of US$30 million in September 2002). This project attracted considerable criticism from various community organizations in relation to the issue of categorization of adverse environmental impacts. Criticism of IFC’s categorization of the project primarily rested on the indirect impacts of Amaggi’s third-party soybean suppliers on deforestation in Mato Grosso.
In November 2004, the Executive Vice President of IFC requested that CAO audit IFC’s environmental categorization of the Amaggi Expansion Project. During the IFC’s project review process, the Amaggi Expansion was categorized with a Category B rating as opposed to a Category A rating, which signifies the potential for significant adverse environmental impacts. In contrast, a project is assigned to Category B if ‘if its potential adverse environmental impacts on human populations or environmentally important areas. . . .are less adverse than those of Category A projects’. Various community organizations considered the project ought to have been categorized as Category A due to possible ‘sensitive, diverse or unprecedented adverse’ environmental consequences.
The compliance audit, completed in June 2005, found that IFC failed:
• To adequately assure itself as to whether the Environmental & Social Management System (ESMS) would afford sufficient environmental and social protection;
• To undertake an adequately rigorous assessment of the status of Amaggi’s ESMS implementation;
• To clearly define its expectations of Amaggi concerning various issues.
Accordingly, CAO deemed the categorization of the project to be unjustifiable in light of these failures. Furthermore, CAO recommended that IFC publicly disclose documentation concerning the actions it intended to take in order to meet the abovementioned conditions. The audit was closed in June 2005.