NFD Agro

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed 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 of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number

27644

Country

Paraguay

Region

Latin America and the Caribbean

Sector

Grains and Beans

Department

Reg Manufact, Agri & Services, CAF/CLA

Company name

NFD Agro Limited

Environmental category

Status

Active

Date ESRS disclosed	May 22, 2009
Last Updated Date	February 9, 2012
Previous Events	Invested: December 16, 2009 Signed: June 29, 2009 Approved: June 28, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

Evaluation of this project consisted of a review of technical, environmental and social information submitted by the sponsor, interviews with the company management and staff responsible for key business operations, including environmental, occupational health and safety issues, social and human resources. IFC staff visited the offices of Frontera Agropecuaria del Paraguay S.A. (FAP) and Sociedad de Inversión Agropecuaria del Paraguay S.A. (SIAP) and Desarrollo Agrícola del Paraguay S.A. (DAP) (collectively the “Company”) in Asuncion, and operations in San Pedro, and a new operation in Amambay. IFC staff reviewed existing management systems and how these have been implemented across all operations; met with one of the company’s contractors providing agricultural services in one of the operations; and met with Company’s Environmental and Social Affairs Manager. Appropriate documentation is available showing that environmental and occupational health and safety issues are thoroughly addressed.

Project description

The company is one of the principal industrial scale farming companies in Paraguay, and is owned by a group of Paraguayan and Argentinian individual investors (Project Sponsors) through Mercosur Agro Frontiers Fund LLC (MAFF) and NFD Agro Limited (NFD). It started operations in 2005 by acquiring and leasing grazing land and converting it into farm land. The company has since acquired approximately 25,000 ha and leased 10,000 ha of land to cultivate soybean, corn and sunflower. It outsources farming operations to local specialized service providers including seeding, fertilizing, harvesting, storage, and transportation. To take advantage of the leading position it has developed, the company is implementing an expansion plan in Paraguay to bring incremental land into production and increase the supply of food grain (the “Project”).

Identified applicable performance standards

While all Performance Standards (PSs) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment may have impacts which must be managed in a manner consistent with the following PSs:

PS 1: Social and Environmental Assessment and Management PS 2: Labor and Working Conditions.
PS 3: Pollution Prevention and Abatement PS 4: Community Health, Safety, and Security.
PS6: Biodiversity Conservation and Sustainable Natural Resource Management

While PS5: Land Acquisition and Involuntary Resettlement was originally a concern prior to the appraisal, the findings of IFC’s review and site visits indicate that there are no impacts at this stage related to this performance standard. Land acquisition process in Paraguay is on a “willing buyer - willing seller” basis, and the company’s farms are established on existing farming or grazing land.

The review also found that PS 7: Indigenous Peoples and PS 8: Cultural Heritage are not applicable at this stage. In the event that these PS’s become applicable, the company will inform IFC thereby facilitating generation of feedback and issue-specific suggestions. Screening of these issues will be done as part of their environmental and social assessment.

Environmental and social categorization and rationale

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that may be avoided or mitigated by adhering to good international industry practices, IFC’s performance standards, and applicable sections of IFC’s EHS guidelines or design criteria. Purchases of new farms are occurring on existing, cleared and established agricultural land, and there is no destruction of or impact on critical habitat involved. Land acquisition is on a “willing buyer - willing seller” basis, and there is no involuntary displacement of any people. There are no indigenous people’s reserves in the areas where the company operates. As a result, the Category B designation is appropriate.

Key environmental and social issues and mitigation

The Company has presented information which indicates that the proposed project will be developed to comply with IFC’s environmental and social requirements, including host country laws and regulations and IFC’s Performance Standards on Social and Environmental Sustainability, and the applicable sections of IFC’s general and sector-specific environmental, health and safety guidelines. Information about how any potential impacts will be addressed by the company is summarized in the paragraphs below.

PS1: Social and Environmental (S&E) Assessment and Management Systems. IFC’s assessment considered management of environmental, health and safety, and social performance in the company’s operations; compliance with national and local requirements; and its engagement with local communities regarding environmental, health and safety, and social performance.

E&S Assessment:

National regulation in Paraguay does require a formal environmental and social impact assessment for plantations. The company does a thorough technical, environmental and social assessment of all farms they are planning to acquire. Criteria taken into consideration as part of the purchasing procedure include: social and environmental assessment; land development needs; potential area for agriculture; meteorological data; logistics; land titling; environmental licenses; and relationships with local communities. Land smallholders in some areas of Paraguay are strongly against large farms operating in the area. In order to manage this risk, the company does a thorough social assessment of the communities near the areas the company wishes to acquire. This assessment includes meetings with community leaders and members to discuss the project, employment opportunities and technical assistance provided by the company.

Management Systems: The company has a very comprehensive E&S management program. The company will implement a management system in order to obtain OHSAS 18001 and ISO 14001 or equivalent certification for its Paraguay operations. The company will implement an integrated environmental, health and safety and social management system as described in the action plan. Certification will be achieved in an agreed schedule.

Management of E&S matters lies with an Environmental and Social Manager, with direct reporting line to the CEO. The E&S Manager conducts on-going follow-up of the E&S assessment, policies and procedures to ensure they are constantly in effect, and controls the compliance of operations with local regulations.

Training is provided on an ongoing basis to the company's employees and contractors, the content of which covers both occupational health and safety issues and new farming practices to improve productivity and reduce inputs.

Performance of contractors with regards to OHS is also reviewed as part of the management program. However, the company will strengthen technical assistance provided to contractors and monitoring of EHS requirements.

PS2: Labor and Working Conditions.

The company employs directly 127 (data 2008) people in Paraguay and 180 people through contractors. Most of the direct employees are qualified professionals. The company business model relies on agricultural services provided by contractors. The company has a comprehensive human resources policy and procedures in line with national regulations and IFC’s Performance Standard 2. The Human Resources policy and procedures specifically include provisions on codes of conduct at work, working conditions, job descriptions, development and training, wages and benefits, disciplinary practices, and a grievance mechanism. All direct employees have access to medical health and other related benefits. NDF does comply with all relevant Paraguayan Laws and international covenants signed by the Paraguayan Government that includes provisions on non discrimination and equal opportunity and freedom of association. The company’s Human Resources policy and procedures will be communicated to all employees in an appropriate manner.

Contractors and Sub-contractors:
Due to their business model, the company has developed strong relationships with the contractors they work with in Paraguay. The company provides training and capacity building to ensure good services are provided. An interesting area for further collaboration with IFC involves capacity building to contractors. As part of this investment the company will develop a “Code of Conduct” that outlines the labor and working conditions requirements that it requires contractors to meet. This Code of Conduct will be included in all contracts provided to contractors. As part of their management system, the company will strengthen the supervision and monitoring to ensure that all contractors are in compliance with the defined Code of Conduct. Should any contractor breach the requirements stated in the Code of Conduct or any legal requirement, the company will ensure corrective actions are implemented to mitigate any non-compliance and can sanction or remove the contractor from the project.

Occupational Health and Safety:
Health and safety procedures at the company include safety at work; handling and application of agrochemicals; safe driving and working with heavy machinery to ensure that impacts on the health of direct and contracted employees is reduced and avoided; accident prevention; and use of personal protective equipment (PPE). The company conducts annual health tests for its employees.

Health and safety inspections are planned to be conducted by the “farm manager” every week and internal audits are conducted by the E&S manager once a year. Corrective actions are identified and effective implementation is monitored by senior management through the action plan. The company needs to strengthen monitoring of OHS aspects on contractors, specifically related to accident statistics and safety at work.

PS3: Pollution Prevention and Abatement. IFC’s assessment considered the company's operations with regard to emissions to water; management of solid waste; agricultural practices and implementation of an integrated pest management.

Pollution Prevention - Resource Conservation and Energy Efficiency: The company is an efficient and low-cost grower of soybean, corn and sunflower. Through adoption of sustainable agricultural practices, including no-till, crop rotation, double cropping, intercropping, and site-specific farm management, and the company is able to reduce costs, improve yields while conserving natural resources.

All the farms owned by the company are managed under no-till practices and are rain-fed, which means no soil preparation before sowing and no irrigation is used for the field. Consequently, no fuel is consumed and no pollution is generated for field preparation and irrigation. Furthermore, more crops residues are returned to the soil due to no-till, resulting in increased soil fertility and reduced soil erosion.Soils are tested before sowing to determine their fertility. The application of crop fertilizers is based on this soil analysis data, and fertilization techniques for every crop are locally adjusted based on input from agronomists who are used as consultants by the company for each farm. Most of the activities performed at the farms are conducted by contractors. Contractors receive detailed instructions on agricultural practices, including dosages of agrochemicals to be applied, type and method of application. Procedures for each activity are specified as part of their contract and monitoring data are collected at the farms by the company's Farm Manager. This information is then sent to headquarters and is monitored by the Operations Manager.

All the equipment is rented through contractors and left at the farm. the company owns the minimum amount of equipment required for farm maintenance.

Waste management: Organic waste from agricultural production is either used as compost or left on the ground as crop residues to increase soil fertility. Paper, plastic and glass, and oil residue are collected for reuse or recycling. The company has a procedure on collection and disposal of empty agrochemical containers, however the company will implement a waste management procedure at all operations to ensure a consistent approach.

Hazardous materials management: Hazardous materials from the company's operations are mainly pesticides and empty pesticides containers. The application of herbcides is done at the same time of seed sowing by direct drilling rigs handled by professional operators. Pesticides are handled in accordance with local regulations and empty pesticides containers are triple washed and collected without charge for industrial reuse.

Spraying is done by contractors who specialize in spraying. Sprayers receive regular trainings from the company and have to be certified by local regulatory bodies regularly to receive operation permits. Pesticides are stored in dedicated locations with lock and clearly labeled signs. Log sheets are kept on pesticides inventory, usage and handling. Empty containers are collected in dedicated locations for industrial reuse by authorized companies.

Pest management: The company has some elements of an Integrated Pest Management strategy in place and relays on knowledge exchange from seed suppliers. Pesticide use is managed in order to avoid impacts on soil and on water streams. The company provides training to the people responsible in deciding on pesticide use and application. Pesticide application is defined by the company's employees and managers and is done through contractors, which are trained and supervised by the company's farm manager to reduce the likelihood of impacts on workers health, local communities and the environment. Dosage is well monitored at each plantation and records are kept for follow up.

As part of this investment, the company will implement an integrated pest management program that will focus control efforts on entomology and other sciences to identify potential infestations and to determine if they are economically significant followed by implementation of all available non chemical control means and subsequently, if required, highly specific and targeted use of chemical controls. Additionally, the company will phase out the use of Paraquat (Paraquat is classified by the WHO as a Class II Moderately Hazardous Pesticide although it does have an acute oral toxicity) and any other pesticides that are classified by the World Health Organization as Class Ia and Ib, respectively extremely and highly hazardous. Moreover, the company will eliminate stocks and use of WHO Class II moderately hazardous compounds except when needed for specific, well documented circumstances.

Greenhouse Gases Emissions: The company outsources services from contractors for all its agricultural activities, including sowing, spraying, harvesting, transporting, processing and storage of goods. It doesn't own any machinery. With no-till, less fuel is consumed on every acre planted, hence reducing greenhouse gases emission. Furthermore, soil erosion is contained and with more organic matters being left in the soil the ability of soil to store or sequester carbon is increased, another contribution to reducing greenhouse gases emissions. The company will select the best approach to calculate GHG from their activities and will report to IFC through the Annual Monitoring Report.

Emergency Preparedness and Response: The company is in the process of developing and implementing an Emergency Preparedness and Response Plan. Risks addressed by this plan should include transport and vehicle safety, emergency response while handling agrochemicals, and fire safety at offices and plantations (affecting worker health and safety) and spills of diesel and other type of fuel used for transport (affecting surface and groundwater quality). The company has hired a qualified Risk Manager to be in charge of this area of operations.

4. PS 4: Community Health, Safety and Security.

Community Health, Safety and Security: Potential impact and risk to local communities arise from crop spraying and transportation of agricultural goods and agrochemicals. Spraying is done by specialized spraying companies. the company will ensure that these companies have the appropriate procedures to minimize impacts from pesticide application. In Paraguay, field spraying is the preferred method and air spraying is only conducted in special circumstances, such as wet fields, wide-spread disease etc. Sprayers must observe legal requirements such as distance to nearest residential areas when air spraying to be able to operate.

The company provides regular training to its contractors on occupational health and safety issues. Trainings include Managing Fire, Safety Use of Chemicals, Defensive Driving, Safety Use of Machinery, and First Aid.

5. PS5: Land Acquisition and Involuntary Resettlement.

The company plantations are situated on lands that have been already used for grazing or agricultural activity. Land acquired in Paraguay is done through a “willing-buyer, willing-seller” arrangement. Land acquisition follows a thorough technical and legal evaluation which includes land titling documentation and environmental licensing process.

6. PS6: Biodiversity Conservation and Sustainable Natural Resources Management.

One of the company's main policies includes biodiversity conservation and no clearing of natural forest. Before buying land, the company does a technical evaluation which includes environmental and social aspects. The E&S Manager conducts an environmental and social evaluation of each farm to ensure that they can comply with (i) Environmental licensing, and (ii) Protected buffer area around water streams. If the farms have gaps in order to comply with national regulation regarding the percentage of land that needs to be set aside for the Environmental licensing, the company includes an action plan to ensure they are in compliance after a period of time. (iii) Social conditions, communities and social organizations in the farms´s area of influence. Their farms are currently not in the Chaco area. In case current conditions change, the company will notify IFC if they acquire land in the Chaco area. The company is an active member of the Round Table on Responsible Soy and will seek certification under this scheme two years after this certification is available in the region.

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