Beraca Ingredients

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26747
Company name	Beraca Ingredients
Country	Brazil
Sector	Industrial & Consumer Products
Environmental category	B
Department	Global Manufacturing & Services
Status	Pending Approval

Date SPI disclosed	April 8, 2008
Projected board date	May 8, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Headquartered in the city of Săo Paulo, Beraca Sabará Químicos e Ingredientes Ltda. (Beraca or the company) is a family-owned Brazilian company involved in three activities:

- water treatment (WT);
- heath care and consumer products (HPC); and
- food and feed. Beraca’s Water Treatment division is one of the largest providers of chlorine-based water treatment products and services in Brazil, primarily focused on water and sewage treatment facilities in the Northeast region of the country.

Beraca’s Healthcare and Consumer Products division is one of the main natural oil and extracts suppliers for the cosmetics industry in Brazil. It supplies essential oils, butters, scrubs, and active ingredients from the Amazon rainforest to several Brazilian and international cosmetics companies. The Food & Feed division acts as a distributor for ingredients and additives for the food and animal feed industry.

The project comprises investments in the company’s HPC facility located in the city of Ananindeua, in the state of Pará, and in the company’s WT facility in the city of Anápolis, in the state of Goiás. The investments will allow the company to produce more value-added products for both business units. The project will be implemented in 2008-2010 and is estimated to cost $10.8 million equivalent. The primary investments include:

- acquisition and installation of state of the art equipment, including supercritic extraction equipments and molecular distillation equipments; and
- equipments to produce polyaluminum cholorhydrate, a more efficient floculant as compared to those more commonly used in Brazil.

IFC is considering extending approximately $5 million in funding to the project.

Anticipated development impact of the project

A stronger Beraca contributes to the country’s development in the following ways:

- Promoter of sustainable use of Brazil’s natural resources:

The company wishes to work with IFC due to the shared vision for sustainable development of the Amazon, where the company actively engages with communities in the collection of Amazonian fruits and other sustainable activities that are unrelated to deforestation. With IFC engaging in the Amazon, there would be a positive demonstration effect for other lenders and investors, to commercially and sustainably engage in the region.

- Local Community Development in the Amazon Region:

Beraca works with close to 20 local communities, which collect indigenous fruits and plants through the use of the best sustainable practices. The engagement with local communities provides an additional source of income for more than 3,000 families in the Amazon region. These communities are economically vulnerable to any curtailment in economic activity (and are often driven to deforestation activities), which aggravates the poverty in the region.

- Strengthening of a segment in which there is value addition:

Brazil’s economy is known by its competitiveness in agricultural commodities. However, in most cases, the initial production stages remain in the country, whereas the value-added stages are conducted in other countries. Typical examples are soybean and coffee, which are produced very competitively in the country, but are most frequently industrialized abroad. Beraca’s activities related to extracting and refining natural oils from fruits and plants is an example of value addition that remains in the country and helps develop the local expertise and technology.

IFC's expected development contribution

- Access to long-term financing:

Although access to term financing for larger Brazilian companies has improved in recent years, Beraca, like smaller Brazilian companies, faces difficulties in sourcing appropriate financing due to the high cost of short term funding and limited availability of long-term financing locally. IFC will provide long-term funding at an appropriate cost, thus broadening the company’s sources of long-term financing for capital investment, strengthening competitiveness, matching repayments to cash generation, and helping to reduce financial risk in a volatile environment.

- IFC’s Technical Assistance:

IFC would engage with the company in the following areas of technical assistance:

- assist with organic and eco-certifications of all of the company’s products collected by the communities in the Amazon,
- assist the company in its work with the communities, to enable streamlining of the company’s supply-chain, by, for example, providing training to those communities who could be engaging in more activities than just collection of fruits (i.e., move into drying and some stages of fruit processing).

Environmental and social issues - Category B

This is a Category B project, according to IFC’s procedure for environmental and social review of projects. The review of this project consisted of appraising environmental and social information submitted by the project sponsor and assessing the company’s operations through site visits conducted by the project team. The following potential environmental, health and safety, and social issues were analyzed:

- existence and operation of integrated environmental, social, and health and safety management systems;
- natural resource use (non-timber forest products) and cultivation management practices and policy;
- air, water and solid waste emissions from processing facilities;
- compliance with national food product safety requirements;
- occupational health and safety issues for the workforce;
- supply chain, labor and commercial relations with local Amazon communities; and,
- community engagement programs, including training, capacity building, and pricing;
- hazardous materials management at the bleach plants.

IFC’s environmental and social due diligence indicates that the investment may have impacts that must be managed in a manner consistent with the following Performance Standards (PS):

- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management

PS5: does not apply as there is no land acquisition except for a willing-buyer willing-seller transaction, and no involuntary resettlement involved.

PS7: Indigenous People is not applicable because Beraca currently has no direct affect on lands of Indigenous People affecting their traditional livelihoods.

PS8: Cultural Heritage is not applicable because Beraca is not currently utilizing intangible cultural properties.

The sponsor has presented plans to ensure compliance of Beraca’s projects with applicable host country laws and regulations and IFC requirements.

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