Program to Promote Sustainable Financing in the Amazon region

This project page was written in collaboration with Roberto Espinoza

Multilateral development banks and Amazonian countries are now investing in what they call bioeconomy. In the case of Peru, this concept is being materialized in the PE-L1258 Program to Promote Sustainable Financing in the Amazon region, financed by the Inter-American Development Bank (IDB) and implemented by the Peruvian Development Bank, COFIDE, and Ministry of Environment, MINAM. The project is a $22 million loan program that was approved in 2022 and will be implemented through 2026. It includes $3 million in technical assistance (business advice, monitoring, and dissemination) and a $2 million investment grant from the French Lab for Natural Capital and the IDB. Its ostensible objective is to contribute to the economic growth of the Peruvian Amazon, supporting the sustainable use of natural capital by increasing biobusiness investments in the region.

This project is concerning because, as it’s designed, it prioritizes a bioeconomy led by private businesses without considering the interests and needs of Indigenous Peoples in the Peruvian Amazon. BIC has already raised concerns in a previous analysis on how to promote a bioeconomy based on indigenous life plans that protect the rights of Indigenous Peoples.

When analyzing this project, BIC identified the following shortcomings and concerns, which are also addressed in a recent letter sent by AIDESEP, the largest national Amazonian indigenous organization in Peru, to the implementing agency MINAM.

No measures to promote the indigenous holistic bioeconomy based on indigenous life plans

The Program, as designed, prioritizes benefits for small, medium, and large producers or companies with an ambiguous emphasis on indigenous microenterprises. The program also presents a conceptual bias by relying on a definition of bioeconomy that prioritizes the role of private companies. This definition does not value the overall concept or specificities of the indigenous holistic bioeconomy.

The Program indicators prioritize large companies as they consider “mobilizing US$4 million of financing from other sources, plus US$0.9 million of the developers' own capital, assuming that there will be three large projects that contribute US$0.3 million each one” (PRM report, p.3, indicator 1.3).

The Program is aligned with Peru's national forest plantation plan, which allows for “installing an introduced forest species” or exotic monocultures. These are of central interest to large commodity companies, not to the indigenous economies that propose restoration of the heterogeneity of flora and fauna of the forest. This point again reinforces that the main beneficiaries of this program will be large companies, with no room for support for Indigenous Peoples. It is concerning that the project does not address this point as a risk to be managed in the Environmental and Social Management System (ESMS).

The credit conditionalities offered by the Program as a guarantee of reimbursement and sale volume prioritize commodity products that are better positioned in the market than the more diverse products of the indigenous bioeconomy.

The Program is justified under legal debt regulations on the impacts of COVID-19 (DU 074-2021, Law 31538), a regulation that seeks to protect the most marginalized groups in Peru. However, this program, as outlined in its design, prioritizes benefits for medium and large companies to the detriment of Indigenous Peoples and other marginalized communities (RM 186-MINAM, p.2).

Exacerbation of conflicts due to trafficking in indigenous lands

The Program promotes businesses run by private companies, which, in the face of competition, tend to demand growing areas of Amazon land. This comes amid the current context of significant trafficking of indigenous lands. The Program mentions that there are synergies with other IDB projects that aim to promote indigenous land titling, such as the Land Titling and Registration Project (PTRT-3) in Peru. This was a project that ended up failing to achieve its objective since it promoted individual parceling and not community titles. There is no clarity on the measures that will be considered to prevent potential land conflicts. It includes an ex-post plan to “mitigate, correct, compensate,” but only in the case of safeguards non-compliance (Contract, p. 46, article 6.06).

Additionally, there is concern regarding the capacity of the implementing agency to effectively develop and implement the ESMS. There are no guarantees that COFIDE has the capacity to carry out on-site verifications in relation to the number of hectares or the contribution to forest restoration or to corroborate the accuracy of the reports made by the beneficiaries of the financing.

In the restrictions on what the anchor companies can support or not, there is an exception on the production or activities that affect Indigenous Peoples's lands or lands claimed by Indigenous Peoples. It states that if an authorized or legitimized person can provide the documentation that supports the express consent of those Indigenous Peoples, productions in those lands can be admitted. This is concerning because these are precisely the usual types of devices used to promote land trafficking, creating more uncertainties and vulnerabilities to Indigenous Peoples's land tenure rights (Program Operating Regulations, p.18, article 32).

Barriers to access to financing by communities

The Program creates the same conditions for indigenous micro-enterprises, and small, medium, and large companies to access project financing (Project Profile, p.4). These requirements and rigid conditionalities requested to access credit become barriers of exclusion for indigenous groups.

It is also a problem that only producers organized in individual or associative structures (cooperatives) can access financing (TC Abstract item 2.2) without creating opportunities for the indigenous economic structures, which combine the individual, family, group, communal, and multi-communal.

There is no cultural adaptation since non-reimbursable technical assistance prioritizes “investment portfolio and manuals on financial products.” The same problem occurs with the predominance of the “MYPIMES” (micro, small, and medium-sized enterprises) model (Social and Environmental TDR, p.5) that does not consider organizational adaptations to the indigenous economy.

Risk undervaluation

The Program assumes, without any evidence, that the risks “will not be significant” and “there will be no negative effects on Indigenous Peoples.”

This point is even more relevant when taking into account the lack of track record and capabilities of COFIDE and MINAM on issues of indigenous rights and their own holistic bioeconomy (Project Profile, p.16). In Peru, the risks are very high, since the imposition of interests of large capital, high competition for profitability, and very weak state regulations work together to promote the success of corporations over Indigenous Peoples.

It is insufficient to manage the risks with “exclusion or verification lists and certifications” (Project Profile, p.8). By transferring risk management to an entity like COFIDE that has not demonstrated a strong capacity to manage risks successfully, the serious institutional crisis in Peru is ignored and poses serious risks. There is no clear evidence to support this assumption: “Contextual risk is moderate, considering the experience and institutional capacity of the executing agency, the socio-political context of the country, and considering the productive sector in the Amazon in the last years” (Project profile, Annex III, p. 3).

Furthermore, the Program includes the element of “agriculture,” but defines it in such an ambiguous way that one of the major risks is that it could promote a change in land use. This will be to the detriment of the other productive sectors that are also mentioned in the Program which are more common in indigenous bioeconomies, such as “agroforestry, native forest plantations, non-timber forest products, as well as ecosystem services, fish farming and ecotourism.”

Lack of support for the indigenous economy

The Program includes technical assistance to develop capacities of “accelerators, private consultancies, incubators, NGOs, academia” (TC Abstract, item 5.2). Indigenous organizations are not clearly listed as recipients.

Last Updated

November 1, 2023

Location

Peru

Institution

Inter-American Development Bank

Campaigns

Climate, Forests and Biodiversity, Indigenous Peoples, Stakeholder Engagement

Total Cost

USD 20,000,000.00

Funding

IDB

MDB Financing Status

Active

Monitored by

Carolina
Juaneda