Milagro S.A.- San Miguel Uruguay S.A.

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	26890
Company name	Milagro S.A.-San Miguel Uruguay S.A.
Country	Uruguay
Sector	Agriculture and Forestry
Environmental category	B
Department	Agribusiness
Status	Active

Date SPI disclosed	November 24, 2008
Projected board date	December 29, 2008
Previous Events	Invested: September 11, 2009 Signed: April 24, 2009 Approved: January 22, 2009

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

San Miguel Uruguay owns and operates approximately 3,744 Ha of land in Uruguay, including 1,444 planted with sweet citrus trees. The project is primarily to modernize and expand sweet citrus plantations and associated activities consistent with the company’s 2008-2017 investment plan. Specific elements of the investment include:

- developing 1,175 ha of new irrigated plantations of sweet citrus,
- enlarging fruit packing plants, and
- building a new packing and an industrial processing plant.

San Miguel Uruguay is a Uruguayan holding company, 100% owned by San Miguel Argentina, which owns 100% of the capital of Milagro S.A. and of Terminal Frutera S.A. The consolidated operation is referred to as Milagro in all text thereafter.

Anticipated development impact of the project

The project is to modernize and expand the production capacity of Milagro. This will contribute to the efficiency of the sweet citrus industry in Uruguay.

The project will also contribute to maintain and generate employment and SME development in Salto.

IFC's expected development contribution

- Providing Long term financing: San Miguel’s citrus plantations, with a ‘useful life’ of about 30 years, are capital intensive. Securing adequate financing in Argentina in the context that has prevailed since 2002 is very difficult, even for an exporter with a strong market share and sound track record. Through the new project, IFC would provide to San Miguel long term financing, with 8-year tenor, which is more adequate for the capital expenditures and expansion plans of the Group.

- EHS standards and implementation: As a by-product of its lemon crushing plant, San Miguel produces a difficult industrial waste, which is highly acidic and buffered. Under IFC’s supervision, the Group is currently installing an anaerobic reactor. Once operational, the waste treatment would be the first in Argentina. It would have a strong demonstration effect in the industry.

- Long term partnership: as San Miguel keeps growing through both domestically and abroad, IFC welcomes the long term partnership, to support the Group’s international expansion strategy.

Additionality:

- Cleaner production and carbon credit: Phase 2 of the waste treatment includes a bio-digester, which will generate biogas that can be collected and put to use on-site, thereby cutting pollution and production costs at the same time. Once phase 2 of the waste treatment is completed, the team will engage with the Group on energy efficiency and potential carbon credits from the waste treatment and industrial processing lines.

- Stamp of approval: San Miguel is locally traded on the Buenos Aires Stock Exchange. Given the volatility still prevailing in Argentina, having IFC as a relationship lender supports the Group’s stable image in the market.

Environmental and social issues - Category B

Milagro is an established company producing and exporting fresh fruit and industrial citrus products including essential oils and concentrated juices. The company owns and operates 3,744 ha of land situated from the northwest to southwest portion of Uruguay. Land and facilities acquisition transpired without economic or physical dislocation. The company uses a high quality assurance manual to guide management of its operations including nursery, farming and processing. Food safety is ensured through good agricultural practice certification (GlobalGAP and Nature’s Choice) on the farms and HACCP certification programs in fruit packing and industrial processing. Milagro’s labor management system and policies are transparent and adequately documented, and occupational health and safety is addressed in all operations.

Organic waste and wastewater from fruit packing and industrial operations are well managed and in compliance with local regulatory agency requirements. Bulk organic waste is sold as an animal food additive. A potential risk to local host communities posed by raw materials and product transport is adequately controlled through the use of professional transport companies for these services. The company is fully cognizant of biodiversity and resource management issues and works closely with government agencies to ensure protection of sensitive and government-designated protected areas.

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

PS1 – Social and Environmental Assessment and Management Systems
PS2 – Labor and Working Conditions
PS3 – Pollution Prevention and Abatement
PS4 – Community Health, Safety and Security
PS5 – Land Acquisition and Involuntary Resettlement
PS6 – Biodiversity Conservation and Sustainable Natural Resources Management

Based on this early review, it is anticipated that this investment will require 30 days disclosure by IFC prior to submission to the Board and has been provisionally categorized as B.

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