Of the $1.8 billion of IFC investments reviewed by Mongabay, the largest share went to dairy companies ($686 million), followed by producers of pork ($563 million) and poultry products ($353 million). The remainder was lent to or invested in companies specializing in cattle production, fisheries, and livestock feed.
Campaigners say that by helping large corporations consolidate their control over food supply chains, the IFC is advocating an unsustainable model that contributes to climate change while hurting smaller producers.
“They don’t seem to be considering that they have a role in shaping the food system,” said Daniel Jones, senior campaign manager at Feedback, a U.K.-based organization that promotes reform in food production.
Reducing poverty or building a better balance sheet?
Since its inception in 1956, the IFC has provided financing for private companies to expand their operations around the world. As a member of the World Bank Group, it played a crucial role in pushing for global deregulation and enabling venture capitalists to enter “emerging markets,” a phrase coined by one of its economists in 1981. The IFC was also instrumental in establishing stock exchanges around the world, and it has provided seed money for burgeoning industrial titans such as the South Korean conglomerate LG.
The IFC is owned by its 185 member-state shareholders, with the U.S. accounting for the largest share, at 22%. Unlike other development banks in the World Bank Group, the IFC is a profit-making enterprise. This profit motive, critics say, has led to a blind spot when it comes to the way it judges impact. Until recently, the IFC didn’t evaluate the role of its investments in meeting development goals in the countries where they were located.
“Investment officers at the IFC don’t get an end-of-year bonus like bankers do, but what’s really prized in career progression there is closing the deal, making a lot of money, and getting money out the door,” said Luiz Viera, coordinator of the Bretton Woods Project, a watchdog organization that monitors international financial institutions.
The IFC’s largest investment into the livestock industry was $150 million in financing for a Dutch conglomerate to take a controlling share in a Pakistani dairy producer. Many others were made in middle- and upper-middle-income countries, including $350 million for nine companies in China.
Only three countries where the IFC has invested in livestock over the past decade — Uganda, Madagascar and Ethiopia — are classified by the World Bank as low-income.
Viera said this reflects a troubling pattern of the IFC investing primarily in companies that have a low risk of failure and which are more likely to bring higher returns.
“I personally believe in the role of public banks,” Viera said. “But the role of those banks is theoretically to take risks and provide capital for projects that provide a public good or have a developmental purpose where normal capital markets would be unwilling to invest.”
The IFC points to job creation and increased incomes for farmers as a primary benefit of its investments in the sector. Many of the livestock corporations receiving funds from the IFC rely on medium- and small-sized farms to supply them with animals, entering into production contracts with the operators of those farms.
“Our investments span different sizes of types of agriculture companies, and often include components to strengthen smallholder farmers and improve their capabilities and output, while promoting resource efficiency and savings for the farmers,” the IFC said.
But Shefali Sharma, director of the European branch of the Institute for Agriculture and Trade Policy, says the power dynamics between big companies and smaller contract farmers often don’t favor the farmers. In the U.S., many have razor-thin profit margins and have been forced to shoulder hefty debts.
Sharma said the same dynamic is likely playing out with the IFC’s investments.
“There’s evidence that the more concentrated these markets become, the producers lose in that situation. It’s clear that farmer indebtedness is going up, and that’s because the price paid to producers is below their cost of production,” she said.
“You’re actually catering to the upper-middle class that’s over-consuming dairy products rather than looking at how you can help small and marginalized producers be able to diversify and have a sustainable future,” she added.
Kuyek of GRAIN said that the companies the IFC is investing in will encourage increased consumption of meat and dairy products, but that the resulting profits will be directed away from smaller farmers.
“What this model really excels at is shifting agriculture towards a system where all that natural wealth can be concentrated and redistributed at the top,” he said.
An industry known for environmental degradation
Production of meat and dairy products is one of the primary drivers of climate change, causing nearly 15% of man-made greenhouse gas emissions. Large-scale factory farming has also been associated with air pollution and toxic runoff into rivers.
Experts say that overuse of antibiotics in factory farming reduces their effectiveness in treating human illnesses. In 2016, a review found that Suguna Foods, an Indian poultry producer that received more than $200 million from the IFC between 2007 and 2010, was using antibiotics that are typically prescribed to people suffering from pneumonia and other infections. Suguna was approved for an additional $67.2 million loan by the IFC in late March this year.
To reduce the environmental and social damage caused by companies they invest in, the IFC requires that they release an environmental and social action plan prior to receiving funds. In addition, they must comply with a set of “performance standards.”
“All IFC clients have an obligation to adhere to IFC’s Performance Standards, which we monitor regularly,” the IFC said.
This story first appeared on Mongabay
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