World Bank-Funded Factory Farms Dogged by Alleged Environmental Abuses

By John C. Cannon, Mongabay

18 July 20

Mongabay’s investigation into the funding of livestock operations and factory farms by the World Bank’s International Finance Corporation continues, revealing the environmental and social problems these investments can cause.

pork and chicken producer has expanded its operations in northern Ecuador with the help of funding from the World Bank’s commercial lending arm, despite sustained complaints from local communities about air and water quality, public health and labor issues.

The financing, through the World Bank Group’s International Finance Corporation (IFC), is intended, in part, to kick-start the economies of developing nations. But the funds, given to Quito-based Pronaca between 2004 and 2013 totaling $120 million, haven’t benefited the country’s poorest citizens, critics say.

“In Ecuador, the benefits are only for the big companies, not for the people,” Xavier León of the NGO Acción Ecológica told Mongabay.

Globally, the IFC has provided financing of more than $1.8 billion to livestock producers since 2010, according to IFC data aggregated during an investigation by Mongabay and the Bureau of Investigative Journalism.

Pronaca — short for Procesadora Nacional de Alimentos — is Ecuador’s largest industrial livestock company. The province of Santo Domingo de los Tsáchilas, west of the capital Quito, sits at the base of the Andes Mountains, and it’s been promoted as an ideal location to build out Ecuador’s food production industry, both to feed a growing nation and boost private sector profits.

Pronaca has built more than 30 pork and poultry farms in the province since the 1990s. Each one houses thousands of pigs or millions of birds. Local community members say, however, that the burgeoning industry with Pronaca leading the way has come at the cost of their health, livelihoods and quality of life.

They also allege that the IFC and its office of the Compliance Adviser/Ombudsman (CAO) haven’t addressed their complaints, even as funds have continued to flow from the agency to Pronaca to fuel its expansion.

Pronaca in Santo Domingo de los Tsáchilas

In 2004 and 2008, the IFC provided a total of $50 million to Pronaca in two installments. The tranches comprised a mix of loans the company would eventually have to pay back, typically with terms of seven to 12 years, as well as equity investments that would give the IFC a stake in the company.

But as Pronaca built more farms, local residents began to complain of the effects that the concentrations of industrially farmed animals had, particularly in the local rivers. Santo Domingo de los Tsáchilas has long been populated by smallholder farmers. It’s also home to the Tsáchilas Indigenous group, numbering 3,000 to 4,000 people, who live in seven communes in the province. Both the farmers and the Tsáchilas depend on the rivers to provide fish, to water their crops and animals, and for bathing and cooking.

Today, community members estimate that Pronaca’s farms in the province are home to about 1 million pigs, around double the province’s human population. They say that waste from all of those animals eventually ends up in the river, tainting it with fecal coliform bacteria.

“Several studies of the water quality of the rivers show contamination that in some cases exceeds hundreds of times the maximum permitted limits,” León said.

There is some doubt about the source of the pollution, whether it comes from the farms or it results from poor sewage infrastructure in the communities that line the rivers of Santo Domingo de los Tsáchilas. But critics of the company say that such questions are just a smokescreen, behind which they’re pumping millions of kilograms of pig feces into the region’s waterways.

IFC’s ombudsman gets involved

In December 2010, two community members alerted the IFC’s CAO to the impacts of the expansion of Pronaca’s farms. The complaints alleged that the company was contaminating local rivers, making the water unusable for both farms and households. Community members who came into contact with the water reported skin and gastrointestinal problems, according to the filings, and respiratory issues had arisen as the farms expanded.

They also said that the farms and processing plants polluted the soil and air and emitted foul smells. Additionally, the complainants said that the farms didn’t have environmental licenses from the Ecuadoran government to operate, nor had the farms’ operators carried out environmental impact assessments.

Pronaca did not respond to multiple requests for comment by Mongabay.

These filings triggered an assessment by the CAO in February and March 2011. But local activist Beatriz Andrade said that the process was cursory, with the CAO team present on the ground for only a few days — inadequate, as Andrade sees it, to gain a full understanding of the situation.

CAO’s report states that the team met with “stakeholders” in Quito and Santo Domingo de los Tsáchilas over three days in February and one day in March 2011. The report addresses the concerns about the odors, acknowledging that they were a “nuisance” in the area around the farms. The CAO team also noted the water pollution issue but was not able to determine the source.

“Although everyone seems to agree that there is a serious problem due to the lack of wastewater treatment in the cities and towns of the province, the complainants and several of the interviewees have the understanding that solid and liquid wastes from the PRONACA pig farms are being dumped into the rivers without prior treatment, making them an additional source of significant pollution in the area,” the report says. “PRONACA, on the other hand, says that the facilities that generate industrial effluents have treatment systems and that their liquid wastes meet domestic standards.”

CAO’s interviews also revealed other concerns in the community, such as the proximity of farms to population centers. Ecuadoran regulations require farms to be at least 15 kilometers (9 miles) away from each other and 3 km (1.9 mi) from population centers.

At the end of the process, the CAO team reported that the complainants weren’t willing to participate in a “mediation process” with the company. Rather, they wanted the IFC to stop the flow of money to Pronaca, a demand the CAO doesn’t have the ability to meet.

“Normally, companies reported for polluting should not take advantage of international funds,” said Ilario Signori, who operates a tourist lodge in the town of Valle Hermoso, home to one of Pronaca’s slaughterhouses. “The company has never fulfilled the social obligations towards the community that needed investment.”

On its website, the CAO wrote regarding the Pronaca case, “CAO’s Ombudsman assessment does not entail a judgment on the merits of the complaint. Rather, the aim is to listen to people’s concerns, understand the different perspectives, and gauge whether it is possible to address the concerns in a collaborative process.” (Similar language about the limitations of CAO’s mandate appears in many of its reports from different cases.)

After the complainants declined mediation with the company, the CAO shifted the process to its “compliance function,” leading to an appraisal, also by the CAO.

Dated Nov. 3, 2011, the appraisal report again lays out the details of the complaints. Mongabay confirmed with a spokesperson that the CAO stopped short of a full investigation. This decision was taken despite apparently finding some merit to the accusations. CAO noted that the annual monitoring reports Pronaca submitted evidenced “a variety of noncompliances with IFC/World Bank Group guidelines.”

The appraisal findings indicated that, following the IFC’s second investment in 2008, the annual monitoring report data demonstrated “that the operations of PRONACA were showing continued improvement in emissions to air and water and were in compliance with IFC guidelines for most parameters and most locations.”

But at the end of the appraisal report, the authors also note, “The CAO finds that the reporting of data to IFC (for example, in the [annual monitoring reports]) is insufficient to give IFC full assurance that the operations are in compliance with applicable IFC guidelines.”

The appraisal also acknowledges that environmental licenses weren’t yet in place for all of the farms and processing plants. The authors of the appraisal report attributed that to holdups in Ecuador’s Ministry of the Environment — circumstances that were “outside the control” of the company.

Furthermore, the appraisal notes that full environmental impact assessments, though previously requested by the IFC, weren’t required because the Pronaca project was classified as a “Category B” project. According to the IFC’s environmental and social categorization, category B projects have “potential limited adverse environmental or social risks and/or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures.”

The IFC did not respond to repeated requests for comment about why industrial farming operations involving millions of animals did not require assessments to determine how expansion would affect the local environment and people.

The appraisal ends with the finding that, although “it would have been desirable for IFC to have identified gaps earlier and for PRONACA to have responded more quickly to these gaps such that the pace of implementing identified actions was quicker,” they determined that the interaction didn’t rise to the level of one requiring an audit. At that point, they closed the case.

The appraisal did mention that Pronaca had undertaken several mitigation measures, such as the implementation of deep bedding for the pigs. In this animal-rearing technique, frequent replacement of the rice straw on which the pigs live is supposed to lock away more of the smells from pig waste, among other touted benefits. The document also suggests that biodigesters would help address the odor problem.

A resident of Santo Domingo de los Tsáchilas who spoke on the condition of anonymity out of concern for retribution from officials and company representatives said that few farms installed the biodigesters, which in any case “only serve to capture and burn off methane gas.”

Acción Ecologica’s Xavier Leon added that Pronaca didn’t implement these measures in a way that was proportional to the massive expansion of the region’s farms.

“My personal opinion was that this was only for the social responsibility publicity for Pronaca,” León added.

Beatriz Andrade went a step further. “The deep bedding — it’s a fraud. It’s more contaminating,” she said. “It’s not a solution.”

Thus, as financing continued to flow, Andrade and others in the community sent further complaints to the IFC. But she said they never received meaningful responses in the form of further investigations about Pronaca’s operations and whether they were in line with IFC and Ecuadoran regulations.

A continuing relationship

In 2013, the IFC issued another loan of up to $70 million to Pronaca, again slated for further expansion of the company’s livestock operations in Santo Domingo de los Tsáchilas.

More than a year later, on Dec. 24, 2014 — Christmas Eve — Ecuador’s Ministry of the Environment approved the licenses of 14 of Pronaca’s farms.

León said that locals, dubious of the raft of licenses approved all at once just before the Christmas holiday, fought the hurried legalization.

Regardless, he said, the continued investment before all of the farms were properly licensed was perplexing.

“I don’t understand why the International Finance Corporation financed these farms if the farms were not legalized in these years,” León said.

A 2017 IFC document on improving the organization’s management of environmental and social risks indicates that further investments to a client, such as the $70 million provided to Pronaca in 2013, would trigger a new set of assessments on this front. “[I]t would be considered as a new project with separate E&S due diligence, categorization, and public disclosure period prior to Board approval,” according to the document.

Still, today, many of the problems that instigated the communities’ protests a decade ago remain, according to people who live in Santo Domingo de los Tsáchilas. The reek of thousands of pigs living in close quarters still pervades the areas around the farms. People say the rivers are too polluted to use. The town of Santo Domingo is trying to improve the water quality of the Pove River, but sources say that that’s the only such effort in the province.

León and others say that more frequent and routine testing of the river would help provide a better sense of the problem. Currently, authorities typically test the rivers only once a year.

At the moment, Pronaca isn’t adding facilities in Santo Domingo de los Tsáchilas, Andrade said, perhaps as a result of the communities’ pressure.

For others, though, the damage has already been done.

Illario Signori, the lodge operator, said that the rural tourism industry has been devastated by Pronaca’s presence due to “the terrible smells coming from [the] farms, the contamination of rivers and the threats from the company so that the people don’t protest.”

He pointed out that Valle Hermoso sits just 200 km (124 mi) from the outer edge of Quito, and was once a nearby rural retreat for some of the capital city’s 1.6 million residents. He blames the installation of a 10,000-hog farm in the town in 2000 for the decline in annual visitors to the town.

The lesson remains clear to Xavier León: “I think these investments continued because the financing is more powerful than the interests of the people.”

This article was originally published on Mongabay.