NFD Agro

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	27644
Company name	NFD Agro Limited
Country	Paraguay
Sector	Agriculture and Forestry
Environmental category	B
Department	Agribusiness
Status	Pending Disbursement

Date SPI disclosed	May 22, 2009
Projected board date	June 22, 2009
Previous Events	Signed: June 29, 2009 Approved: June 28, 2009

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Frontera Agropecuaria del Paraguay S.A. (FAP), Sociedad de Inversión Agropecuaria del Paraguay S.A. (SIAP) and Desarrollo Agrícola del Paraguay S.A. (DAP), collectively the company is one of the main organized industrial scale agriculture farming companies in Paraguay. It started operations in Paraguay 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 operation to local specialized service providers such as seeding, fertilizing, harvesting, storage, and transportation operators. 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 supply of food grain (the “Project”).

Anticipated development impact of the project

IFC’s participation in the project will have significant development impact, through the support of the industrial scale farming enterprise in Paraguay, which is expected to make significant contribution to rural economic development. The Company’s development is expected to have significant development impact as follows:

- Improvements in land productivity of owned and leased farms and increased supply of grains and oilseeds
- Transfer of conservation (no-till) technology expertise and world class agricultural model, increasing the productivity of owned/leased farms
- Demonstration impact of agronomic best practices, unlocking production potential of frontier agricultural land
- Development of agri services and supply chain sector in Paraguay. Historically this sector has not been developed in the country and the Company’s entry has led to at least 5 independent services companies being established in Paraguay.
- Linkages with local businesses, and SME contractors in rural areas, which provide various agronomic services to the Project has developed 6 SME contractors who have invested over $8 million in machinery
- Incremental income tax for the government
- Geographically dispersed operations could become anchors for the development of surrounding rural communities. The company has built alliances with leading national NGOs and local community organizations to carry out the development work with neighboring rural communities.

IFC's expected development contribution

IFC is positioned to play a unique role in financing this project:

- Providing financing for farming business, which had very limited access to financing under the financial crisis.
- Supporting the development of agribusiness SME services providers in Paraguay
- Stamp of approval to company and sector in Paraguay: IFC's participation will provide confidence for potential investors to participate and support agricultural production in Paraguay.
- Environmental and Social expertise: The inclusion of IFC’s environmental and social sustainability standards and the monitoring of compliance by IFC will reinforce The company’s practices and serve as a demonstration effect to other agricultural producers which usually lag in this area.

Environmental and social issues - Category B

This is a category B project according to IFC’s environmental and social review procedure. A summary of IFC’s environmental and social review findings for the project including the rationale for the B categorization is publicly available in the Environmental and Social Review Summary (ESRS).

The company is managed with a “triple bottom line” system, where social and environmental matters are dealt with at the highest level of managerial decision-making. A full-time Environmental and Social Manager reports directly to the Company General Manager.

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 performance standards (PSs):

PS 1: Social and Environmental Assessment and Management Systems with respect to the Company’s management of its environmental, food safety, health and safety, and social performance; compliance with national and local permitting requirements; and engagement with local communities.

PS 2: Labor and Working Conditions with regard to terms of employment, working conditions and occupational health and safety of direct and contracted workers during operation and maintenance at all operations.

PS 3: Pollution Prevention and Abatement with regard to efforts to optimize resource inputs; energy consumption and energy efficiency; management of solid, liquid and hazardous waste; integrated pest management; agricultural practices; and sustainability water consumption.

PS 4: Community Health, Safety, and Security with regard to the impacts to nearby communities related to pesticide use; and transport of goods.

PS6: Biodiversity Conservation and Sustainable Natural Resource Management with regards to biodiversity conservation, and certification of best agricultural practices.

While PS5: Land Acquisition and Involuntary Resettlement was originally a concern during the appraisal, the findings of the 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 farms are established 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 for us to provide feedback and suggestions. Screening of these issues will be done as part of their environmental and social assessment.

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