Paracel Pulp Mill

In October 2020, Paracel SA announced its intention to build this new pulp mill and its Forestry Component. The mill is expected to be operational in 2023.

Paracel is a joint venture established by Copetrol (Paraguay) and Girindus Investments (Sweden), among other investors who have joined the Project afterwards. The Company is developing a greenfield kraft pulp mill and associated eucalyptus plantations in the Departments of Concepción and Amambay, Paraguay. Paracel intends to develop and operate a project with both an Industrial and a Forestry Component. The Industrial Component involves the construction and operation of an elementary, chlorine-free Bleached Eucalyptus Kraft Pulp mill with a capacity of 1,500,000 metric tons per annum. The Forestry Component involves the planting and harvesting of eucalyptus trees on 188,000 ha in 19 former agricultural and cattle ranching properties (or “estancias”) acquired by Paracel (in the departments of Concepción and Amambay). The project has been classified as a Category A project because it may cause significant adverse environmental and social risks and impacts.

Partner Organizations: Environmental Paper Network, Instituto Maira, AXIAL Naturaleza y Cultura, International Accountability Project (IAP), and Grupo SUNU de Acción Intercultural, FortaleSer

Environmental concerns 

• Long-term environmental and social costs associated with the efficiency of the mill and the eucalyptus plantations. The eucalyptus plantation extensions may not be enough to cover the planned pulping capacity. Meaning that in order for the mill to operate at the expected levels, Paracel may require more eucalyptus plantations. This will require further expansion of the plantation bank, which may eventually call for acquiring more cattle ranches, pushing this business (far from declining) towards the deforestation front. Also, there is information suggesting that the Paracel project shares borders with “estancias” or ranches that will be either bought by the company or will be used by the owners to plant more eucalyptus in order to supply the demand of the pulp mill. These “estancias” are very close to the indigenous territories. The social and environmental impact assessments of these “third party plantations” are not being properly assessed in the documents produced by Paracel. The impact of the timber plantations on local communities and Indigenous Peoples has not yet been accurately assessed in the Environmental and Social Impact Assessment (ESIA). 
• Deforestation, biodiversity, ecosystem, wildfires, and water sources risks associated with eucalyptus plantations. The mill is planned to be installed at the border of the “deforestation front”, an area mapped by WWF as at risk of deforestation, and possibly impacting Intact Forest Landscapes. There are concerns related to Paracel’s capacity to mitigate these potential impacts through its proposed reforestation program where they will be planting an ‘aggressive invader’ that could dominate a bigger extension of the territory, while harming the biodiversity and ecosystem functions. Additionally, the project poses a risk, not only for climate change, but for biodiversity since the plantations will be adjacent to two Important Bird Areas, internationally recognized as Key Biodiversity Areas. The ESRS highlights the need to conduct a full Critical Habitat Assessment and mentions that the Company will develop an Invasive Alien Species Management Plan, but no further details are offered. Moreover, eucalyptus plantations have a severe impact on water resources. Local communities are deeply concerned by the risk of the water table further deteriorating; with many already reporting severe hydric stress or having completely lost all access to safe water sources. In addition, eucalyptus plantations not only increase fire occurrence by draining the soil, but the manner in which they are planted also fuels forest fires because these large homogenous blocks are densely planted with young trees and have dry undergrowth.
• Climate change and biomass, and drinking water risks. A further climate concern arises from the use of biomass to fuel the power plant. While project documentation states that the plant will avoid a great number of CO2 emissions, energy from woody biomass is increasingly recognized as a high-carbon source of energy, linked to forest and biodiversity destruction and threats to public health. Furthermore, when forests are cut and processed for pulp, much of this carbon is released into the atmosphere because paper is mostly a short-lived product that in many cases ends up in landfills or incinerators a few hours after its first use. Regarding drinking water, there are concerns related to the discharges the mill will generate. The Paracel mill will discharge its effluents via pipeline into the Paraguay river, and while the ESIA mentions that they will go under biological treatment and a self-depuration process along the river, there’s a portion of it -between the mill and Concepción- that has not been considered. This poses a big risk for populations in Concepción that get water provided from this river. 

Social Concerns:

• Risks to the livelihoods of smallholder subsistence agriculture in the area. Concepción is one of the departments in Paraguay where smallholder subsistence agriculture is most developed. Peasants organizations and Guaraní Indigenous Groups in this area have expressed their concerns about the advance of monoculture cropping, and highlighted their role in preventing it. They don’t want to see the expansion of eucalyptus plantations since they won’t be benefited directly, and stressed that any big business or project being implemented in Concepción should protect, respect, and promote a development model that does not undermine their activities or puts at risk their livelihoods. In addition, there are concerns about ‘estancias’, or ranches, that might be acquired by Paracel or will plant eucalyptus to supply Paracel’s demand. These producers have not been included in the environmental and social impact assessments, and are very close to Indigenous territories.  
• Concerns around consultations to obtain Free Prior and Informed Consent (FPIC).  BIC, along with Grupo SUNU, conducted field interviews with five communities and local civil society organizations in the Department of Amambay: Ita Jeguaka and Cerro Akangue who rejected participating in Paracel’s consultation process; Guyra Ñe’engatu Amba and Pãi Reta Chirupoty (also known as Sati), who agreed to participate in the consultation process carried out by Paracel; and one indigenous community (Arroyo Ka’a) that is not explicitly mentioned in the IDB’s Invest ESRS or the Natan Report. In the interviews, the IP communities raised the following issues: 

1. Lack of meaningful consultation that could result in genuine consent: The communities were unaware that the company representatives sought the approval of the Paracel project through the FPIC. In most cases, the community reported that the company’s representatives, who were arranging the meetings with them, showed a profound lack of knowledge of the Pãi Tavyterã culture.
2. Lack of free consultation: In many cases, indigenous communities perceived a clear intention to force agreements with them, restrict their freedom of expression, and close the space for genuine deliberation free of manipulation. Special emphasis was placed on the role of the INDI officials (Instituto Paraguayo del Indigena) (INDI) who accompanied the meetings, however, far from acting as protectors of the rights of Indigenous Peoples, officials used their influence to try to condition communities into accepting the project.
3. Lack of prior consultation: In most cases, community members stated that the requests for community meetings were made with little preparation time and that they had little information about the project before the consultations, especially about the project’s social and environmental risks and impacts. 
4. Lack of informed consultation: There was a lack of clarity about how the information was shared by the project representatives to communities as well as a lack of transparency in the administrative procedures of the consultation. Little effort was made to explain the project’s negative social and environmental impacts and the mitigation measures to address those impacts. The community members mentioned that the company representatives dedicated most of their time to highlight the project’s positive components, such as employment opportunities. Many community members said they didn’t know about the installation of the pulp mill as part of the project. 
5. Lack of transparency: The project representatives did not share or socialize the meeting minutes, or any official documents developed during the consultation, after time was spent communicating with the communities.
6. Lack of a strong FPIC process that is in line with PS 7: The interviewed communities do not have enough information on the Paracel project, and it cannot be determined that a robust FPIC process was carried out in line with the requirements of PS 7. 

• Child SEA/H risks 

The PARACEL project is situated in an area where communities are highly marginalized due to poverty and lack of public services (including health facilities), which exacerbates the risks of child Sexual Exploitation, Abuse, and Harassment (SEA/H). The project documents acknowledge potential SEA/H risks, particularly in connection with labor influx, and include a set of SEA/H prevention and response measures. Several other factors exacerbate these risks, including the presence of armed security forces. 

As of July 2024, findings from project monitoring work reveal that the SEA/H prevention and response measures were insufficient to address child SEA/H or are not yet implemented or developed. 

1. The GRM is not accessible for children, and the community representatives and civil servants interviewed have indicated that the issue of child SEA/H has not been discussed in consultations with Paracel.
2. Training and sensitization sessions around child SEA/H started in mid-September with police officers in Concepcion, but it is unclear if the training included the specific risks of child SEA/H linked to Paracel operations.
3. There is no evidence that a Gender Action Plan has been developed and if it includes SEA/H prevention and response strategies, including measures to handle child SEA/H risks and cases.

Inconsistencies between the IDB’s Invest ERSR and the information we got from communities who decided not to participate in the consultation process as well as reject the project 

• The IDB’s Invest ESRS reports that the Cerro Akangue and Ita Jeguaka decided not to participate in the consultations as they believed that the project “will not impact them since none of them utilize these or any other Project estancias to collect resources or for any other purpose” (page 37, section 4.7.a.ii Participation and Consent). However, we received a different response when we asked the Cerro Akangue and the Ita Jeguaka communities why they didn’t participate in the consultation process. Mainly, the communities didn’t join because: a) they did not understand the information shared with them; b) the invitations to the meetings were not organized in a timely manner; c) the approach of the people, who held the meetings in the community on behalf of Paracel, was inconsiderate, which generated a lot of mistrust in the entire consultation process; d) their concerns about the environmental and social risks and impacts of the project were not properly addressed at the meetings; e) The representatives of Fundacion Natán asked for their ID documents without explaining why they needed those documents. They also requested the legal status and title of the community; f) They did not know if the company representatives recorded their rejection in their minutes since they were not shared with the community (see table 1, row 7 under main findings). 
• Grupo SUNU shared with the Cerro Akangue and Ita Jeguaka communities the information stated in the ESRS (page 37) and the INDI Memorandum No. 28/2022 (see Annex 3) about the justification for why they rejected to participate in the consultation process, in which the communities categorically rejected what is stated in those documents.
• The indigenous community Arroyo Ka’a was consulted and rejected the project (see table 1, row 7 under Main Findings: FPIC consultation process, Paracel, Paraguay). They are not mentioned in the IDB’s Invest ESRS and the Natan Report. However, the INDI Memorandum No. 28/2022 states that they visited the Arroyo Ka’a community on December 15, 2020. One point to highlight is that they mentioned during the interview with Grupo SUNU that they are scared because their community does not have the title to their land, which is still in conflict due to a large overlap with a ranch belonging to the Zapag Group, with which they previously had other problems.

IDB Invest has approved USD $120,000,000 in financing to fund the completion of Paracel’s project in Paraguay. We currently don’t have the information about the funding commitment from the rest of the funding sources (DFC, Japanese Development Bank, Goldman Sachs).

IDB Invest, or any other financier, should postpone its decision about financing this project until the following actions are taken:

• Strengthen the consultation and stakeholder engagement processes: Paracel should conduct effective stakeholder consultations and engagement beyond the boundaries of the actual project site while simultaneously disclosing all information regarding project risks and benefits to project-affected communities and stakeholders in a culturally appropriate and transparent manner. Stakeholders should be able to receive effective information about the impacts, risks, and benefits of the project and all of its components as well as be informed about the different ways in which they can engage and participate throughout the project cycle. Also, the stakeholder engagement process should address communities’ concerns regarding potential negative impacts on their territories and livelihoods. 
• Strengthen environmental and social appraisal and supervision: The IDB Invest should conduct a contextual risk assessment that evaluates external risks of the operating environment, such as legacy issues, unresolved land disputes, the role of intelligence forces, internal armed conflict, etc. All these risks need to be factored into decision-making and overall risk management, including potential unsolved land issues.   
• Undertake a comprehensive review of how the consultation process to obtain FPIC was conducted by Paracel and understand FPIC as a continuous process: IDB Invest should effectively supervise that PS7 is fully applied and the rights of Indigenous groups are upheld. Specifically regarding FPIC, the IDB Invest should conduct an FPIC verification process as part of its own due diligence and oversight. The FPIC process needs to be well documented and it has to be a culturally appropriate process, with respect, to learn from the perception and experience of the community. Paracel needs to provide well-documented evidence about how FPIC has been achieved. Also, FPIC should be understood as a continuous process. 
• Develop a comprehensive analysis of the long-term plantation and mill effluent’s impacts on the drinkable water table and the impacts of agrochemicals on the surrounding environment.
• Take immediate action to implement measures to prevent and respond to child SEA/H and closely supervise their effectiveness: This includes requiring Paracel to develop and publish a comprehensive Gender Action Plan, as outlined in the project documents, with specific measures for the prevention and response to child SEA/H (including actions, timelines, actor(s) responsible, and budget allocations). Additionally, it is crucial for IDB Invest to closely monitor the training sessions provided to stakeholders, addressing the potential child SEA/H risks that the project may introduce or exacerbate. These trainings should include awareness-raising sessions for adolescents in safe environments, such as schools, focused on SEA/H and reporting mechanisms. Paracel’s previous work with the Red Cross on road safety education for students can serve as a foundation for this initiative, leveraging existing relationships with schools. Furthermore, IDB Invest should support Paracel on developing a child-friendly GRM. The GRM should be,  at a minimum, age and gender appropriate and accessible, safe, responsive, and confidential, and located in places and designed in a manner that is accessible to children. Lastly, IDB Invest should require Paracel to display clear signage around the project site stating that all forms of GBV and SEA/H, including child SEA/H, are strictly prohibited, and where incidents can be reported.

• Joint Briefing: Paracel Pulp Mill in Paraguay, a risky project.
• Main Findings: FPIC consultation process, Paracel, Paraguay.

Letter to IDB Invest re Paracel Project

Annexes included in letter