ING Group was one of the principle sources of finance for Botnia to complete its investment of more than US$1.2 billion, the largest foreign direct investment in Uruguay’s history and the largest ever investment of a Finnish company abroad. ING informed CEDHA today that it was ceasing all consideration of the investment.
The IFC and MIGA, on their part, are underwriting loans of up to nearly US$1 billion, which would in turn give a green light to private investors to co-finance the pulp mills. However, a decision on these loan has been postponed due to new reports suggesting that previous assessments are incomplete.
The financial environment surrounding the Botnia and ENCE mills is going sour. Botnia’s stock prices collapsed nearly 10% and 6% in on the New York Stock Exchange and Finnish Exchange, following news that Botnia caused the collapse of bilateral negotiations between Presidents Kirchner and Vasquez of Argentina and Uruguay, when Botnia decided it would not heed presidential requests to stop construction of the mills while Argentina and Uruguay ironed out differences. Meanwhile the Spanish official Export Credit Agencies CESCE and ICO are receiving strong public pressure to withdraw consideration of financing ENCE, the Spanish pulp mill.
CEDHA filed a first ever “Equator Principles Compliance Complaint” last December to ING and BBVA (the Spanish Multinational Bank which is considering financing ENCE), for project violations of the Equator Principles, upheld by nearly 40 international financial institutions, including ING and BBVA, promising to invest responsibly and follow IFC Environmental and Social Safeguard Policy.
CEDHA also filed a complaint to the CAO Ombudsman, for IFC’s failure to comply with its environmental and social safeguards in both the Botnia and ENCE projects. This filing resulted in a full compliance audit favorable to CEDHA’s claims, which complicated the investment climate surrounding the Botnia and ENCE projects as well as World Bank consideration of support to the pulp mills.
The withdrawal of ING from the Botnia project responds to the systematic violations of both projects to policy, regulations and norms stipulating conditions for responsible and sustainable investment, including violations to the Equator Principles, violations that have been confirmed by the CAO. A recent report published March 27 by Hatfield Consultants Ltd, contracted by the IFC to review public complaints presented by CEDHA, the Argentine foreign ministry and the general public, raised new doubts over the IFC’s impact assessments resulting in the Bank’s postponement of its decision to finance the mills until these doubts can be properly studied.