World's Largest Lending Agencies Finance Environmental Destruction, Widespread Corruption

(25 March, 1999 — Washington) An international coalition of environment and development organizations today launched a campaign to reform export finance agencies that support private sector projects in developing countries. The group’s report, A Race To the Bottom: Creating Risk, Generating Debt and Guaranteeing Environmental Destruction, profiles a sample of the environmental and social negligence of these export finance agencies.

Export credit agencies (ECAs) and investment insurance organizations are together the world’s largest public international finance institutions, subsidizing more than 10 percent of world trade. In 1997 they approved more than $105 billion in new loans, guarantees and insurance, more than half of which went for large infrastructure projects in developing countries. Their mandate is to subsidize private sector exports and investment abroad. While bilateral aid agencies and multilateral development institutions, such as the World Bank, have adopted detailed social and environmental procedures, the more obscure ECAs have few, and often times no environmental or social standards.

Among all international financial agencies, ECAs are the least transparent, not even sharing key information on their operations with other ECAs and international institutions such as the World Bank. “Export credit agencies finance projects?many riddled with corruption—that other taxpayer-supported agencies reject as environmentally and economically unsustainable,” said Bruce Rich, Senior Attorney with the Environmental Defense Fund (EDF).

“These agencies are providing corporate welfare and financing environmental destruction worldwide with public money,” said Jon Sohn, Policy Analyst with Friends of the Earth, U.S.

The impact of ECA-funded projects on local communities, human rights and the environment in many countries is devastating. “We in Indonesia want the taxpayers of the industrialized world to stop subsidizing the expropriation of our land, the destruction of our environment, and the ruination of public health through ECA projects that their country’s own aid agencies and the World Bank would reject,” said Titi Soentoro, of Bioforum, Indonesia, representing a coalition of some 70 Indonesian non-governmental groups.

“We await long overdue reforms in Germany that the new government promised in its coalition agreement,” said Heffa Schuecking, who represents a coalition of over 100 church, development and environmental groups that are calling for environmental and social accountability in the German export credit agency Hermes. “We call upon the German government to become a leader in international efforts to set standards to halt the taxpayer-subsidized havoc caused by these agencies.”

Race to The Bottom provides a series of fifteen country and project case studies exploring the gross environmental and social negligence of these publicly-owned institutions. Among them: