End the World Bank's
Corporate Welfare Programs!

by the 50 Years Is Enough Network

from the book

Democratizing the Global Economy

Kevin Danaher - editor

Common Courage Press 2001

During the l990s, the World Bank Group (WBG) saw that private corporations were investing more in some middle-income "developing" countries at the same time as governments were cutting aid budgets. Rather than focus on making up the shortfall to the most impoverished countries, the Bank is determined to jump in front of the investment parade. It is not enough, it seems, that the rules it imposes through its (and the IMF's) notorious structural adjustment programs force markets open for corporations and ensure them a supply of cheap labor and commodities. So the WBG is devoting more attention and resources to its division that lends directly to private corporations, the International Finance Corporation (IFC), and has assigned it the task of devising the WBG's overall "Private Sector Development Strategy."

The Private Sector Development Strategy aims to further the interests of the private sector, including its expansion "into areas traditionally the preserve of governments" in Southern countries, such as "health and education services." But the IFC's record in fighting poverty and protecting the environment is abysmal, and it is even less accountable to the public than the other components of the World Bank Group. Rather than having its influence expand, the IFC should be abolished, along with the Bank's other private sector arm, the Multilateral Investment Guarantee Agency (MIGA) which provides investment insurance for transnational corporations. An impressive consensus on this recommendation is now emerging, one that ranges from conservative economists advising the U.S. government to labor groups, environmental organizations and development agencies: the IFC and MIGA are beyond reform. The 50 Years Is Enough Network further demands that the WBG's existing private-sector investments be liquidated to provide funds for reparations to victims of structural adjustment and environmental devastation caused by WBG projects.

IFC and MIGA Are Not Focused on Poverty Alleviation

Rather than make a meaningful effort to target poverty alleviation, the IFC and MIGA operate on the assumption that any economic growth, regardless of its distribution, will help the poor. They pay almost no attention to who actually benefits from the profits that they claim to generate. They support Domino's Pizza in South Africa and cable television in Brazil. They invest in breweries in Romania, Russia, Tanzania and the Czech Republic, expensive private schools in Pakistan and Uganda, and luxury hotels in Egypt, the Maldives, Vanuatu, Costa Rica and Mexico. These projects are sometimes justified on the grounds that they create employment, but if job creation is the goal, there are more effective ways to use limited resources. The institutions have not even devised a way to gauge the relative impact on impoverished peoples of different forms of investment. Roughly two-thirds of the IFC's funding goes to projects in just 15 countries, most of them "middle-income" and thus presumably less in need than other potential clients, but also lower in risk for the invested dollars of the WBG and its private sector partners.

They Mainly Provide Corporate Welfare for Multinationals The IFC and MIGA's list of clients reads like a "who's who" of transnational corporations. In the past five years MIGA has extended more than $220 million in political risk insurance to support Citibank's global expansion. Exxon-Mobil, Elf and BP received more than $150 million in support from the IFC and MIGA during this period. Likewise, $60 million went to Coca-Cola and Pepsi-Cola, $8 million for Kimberly-Clark in China, and more than $13 million to Radisson and Marriott luxury hotels in Costa Rica. The IFC pays lip-service to the importance of small- and medium-sized enterprises that create jobs and reinvest their earnings locally, but the majority of their resources are used to support the expansion of huge corporations into markets that World Bank and World Trade Organization (WTO) policies have forced open.

They Focus on Environmentally Destructive Sectors

At the heart of the IFC-led "Private Sector Development Strategy" is an emphasis on support for the oil, gas, and mining industries. At the end of November 1999, oil and gas projects accounted for 10 percent of the World Bank's portfolio in both Africa and Latin America, roughly 20 percent in East Asia and the Pacific, and even more in Europe and Central Asia. Between 1995 and 1999, the IFC channeled about 15 percent of its money to oil, gas, and mining, and the corresponding figure for MIGA was even higher.

While these institutions claim to be concerned about global warming, they support fossil fuel projects amounting to billions of dollars. By many gauges, the World Bank Group is the leading financier of fossil fuels in the world. The institutions offer only token support for renewable energy efforts.

Their Projects Often Have Disastrous Outcomes

In Chile, the IFC supported the Pangue hydroelectric dam on the Bio-Bio river, but it failed to assess the impact that the project would have on indigenous peoples and the environment. The foundation that was established to support local communities instead became an agent for their resettlement in order to make way for a further dam. The Committee on Human Rights of the American Anthropological Association concluded that there were "numerous violations of human rights [and] environmental values." Similarly, the IFC is currently supporting a Canadian mining corporation in the Kyrgyz Republic. Transporting chemicals to and from the mine has led to three toxic spills in the last two years, the first of which spilled about two tons of cyanide into the Barskoon River. The river is not only a source of drinking water and irrigation for local communities, but is also upstream from the country's largest lake and biggest tourist attraction. The mining company took almost four hours to notify health authorities about the spill. Approximately 2,600 people were treated and more than 1,000 of them were hospitalized.

They Reject the Public's Right to Information

If the way the IFC and MIGA are spending money is not sufficiently outrageous, their denial of basic information to project-affected communities is further evidence of their unaccountable nature. In the case of the Pangue Dam cited above, a Bank-financed independent inspector's report was so damaging that it was censored by the IFC. A subsequent report, authorized by the IFC, was also suppressed and the author was threatened with legal action if he disclosed his findings. Similarly, even after the three toxic spills at the Kyrgyz mine, the IFC refuses to release the "Emergency Spill Response Plan" to local communities. They claim it is a matter of business confidentiality!

IFC and MIGA hide behind information policies that are an insult to those who believe that public institutions should be accountable to the public. They violate U.S. law by failing to make environmental information available at a sufficiently early stage in the project cycle. Reports used by the Board of Directors to judge the merit of a particular project are deemed confidential. Following Board approval, there are no requirements to release any information about the impacts of a project. Environmental and social monitoring reports, emergency response plans, and evaluations are routinely denied to the public.

Time to Take Action!

While IMF and World Bank structural adjustment policies force an end to subsidies for the most basic goods used by the most impoverished people around the world, the IFC continues to offer generous subsidies to huge transnational corporations so they can make profits in middle-income countries. They also offer insurance to corporations against the possibility of governments one day instituting more assertive economic policies (such as nationalization).

Our public institutions should serve higher interests than guaranteeing private profits, particularly when the fate of the most impoverished countries is concerned.

Democratizing the Global Economy

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"Third Worldization" of America

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