Amaggi Expansion

completed

The project consists of a 2004-2005 investment program to allow Amaggi Exportaçao e Importaçao Ltda. (Amaggi or the company) a Brazilian soybean merchandiser, crusher and exporter to expand its soybean related business. As a producer, merchandiser and supplier of agricultural credit to soybean producers, the company plays a major role in agricultural development in western central Brazil. The investment program includes construction of new silos in the state of Mato Grosso (MT), where the company has it main activities, as well as working capital. As a lender to Amaggi, IFC’s past and present goals are to assist the company in reinforcing its approach to sound environmental, occupational health and social practices through the development and implementation of an Environmental and Social Management System (ESMS). One element of this program is to perform environmental due diligence when extending financing to soybean producers. Through this program the company’s sustainable practices in its own operations are extended to a larger base of farmers and have an attendant multiplier effect. Implementation of the ESMS also contributes to increased environmental and social due diligence in pre-financing activities, which is a vehicle for controlling agricultural expansion in center-west Brazil. The Brazilian government is promoting soy exports and soy has become the dominant arable crop in Brazil’s center west. In part because of a rapid growth in soy production, some sectors of society have expressed apprehension about the impact of soy cultivation on the environment, due mainly to infrastructure development proposals that would open up new areas of land, particularly in the Amazon rain forest, convert sensitive ecological habitats, utilize production methods that are heavily mechanized and dependent on large scale agricultural operations and inputs, and use of genetically modified soy. Perceived limitations in the capacity of both the Federal Government and States to monitor and enforce land-use requirements have also been raised as a concern. Recent figures from Brazil’s Space Research Institute (INPE) indicate that deforestation in the Amazon rain forest region continues unabated. The current pace of deforestation (legal and illegal) in the Amazon region is linked to a series of complex factors including high commodity prices for soy and meat, limitations in the existing legal framework, weakness and lack of resources in enforcement capacity, and the perception, mainly by farmers, that the legislation that regulates deforestation may be changed in the near future. In view of these considerations, IFC and Amaggi recognize that there are strong reasons to support and encourage sustainable cultivation of soy on legally titled land. Amaggi has adopted a range of good agricultural practices (described in Section 2) and requires the proper land title and appropriate environmental and social practices by independent farmers through its crop prefinancing program. Amaggi is also committed to wider improvements in soy production and to enhanced dialogue and discussion on environmental and social issues associated with the production, transport and processing of soy. An important element of this is the commitment that Amaggi is making to develop a stakeholder dialogue with NGOs, academics and the soy industry. The structure and form of the dialogue is developing and information will be posted on the Amaggi website. The dialogue, which is being partly financed through IFC’s Corporate Citizenship Facility, aims to clarify the scope and scale of impacts, provide an open and transparent forum for discussion of these issues among a range of stakeholders, and potentially be a source of guidance on good practice for the industry in Brazil.