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Nicaragua Sugar Estates Limited S.A.
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.
Latin America and the Caribbean
Sugarcane and Beets
NICARAGUA SUGAR ESTATES LIMITED
Date ESRS disclosed
September 21, 2006
Invested: November 2, 2006
Signed: October 27, 2006
Approved: October 25, 2006
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
The appraisal mission took place from August 13 – 18th. Mission members of IFC staff included Robert Horner (IFC environmental specialist), Edward Hsu, Edgar Restrepo, Michael Maynard, and Jose Luis Rueda (IFC environmental specialist). A follow-up visit was made by IFC social specialist John Butler from September 4 to September 7, 2006.
The project sponsor commissioned preparation of an Environment Impact Assessment(EA) for the investment in the 75,000 l/day ethanol plant at Ingenio San Antonio. IFC reviewed this document as well as proposed amelioration tasks described in the environmental management plan to mitigate impacts highlighted in the EA, including social and environmental management specifications. Additionally, IFC reviewed supplemental information requested of the client including proposed environmental and social affairs management programs, community engagement, and disclosure.
IFC communicated closely with client staff responsible for environmental and social affairs including:
- Joaquin Zavala, Corporate Vice-General Manager
- Alvaro Bermudez, Corporate Director of Administration
- Tito Silva, Manager, Mills Operations
- Ivette Reyes, Coordinator, Environment
- Luis Enrique Pena, Head of Human Resources
Field visits and visual inspection of sites included:
- Ingenio San Antonio (ISA) Sugar Estates and ISA Sugar mill at Chichigalpa, Chinandega
- Granja Aquicola/Camaronera
- Headquarters at Centro BAC, Centro Empresarial Pellas in Managua
Nicaragua Sugar Estates Limited (NSEL) is the proprietor of the agro-industrial complex Ingenio San Antonio (ISA) or San Antonio Sugar Mill, whose principal activities include:
- Growing, processing and commercialization of raw and refined sugars and by-products such as molasses and ethanol using approximately 24,223 Ha of cane field, of which 15,106 Ha is owned or leased land;
- Production and sale of electrical energy to the national grid; and production of shrimp.
The NSEL Project Includes:
- Purchase from willing sellers of up to 2,482 Ha of cane rearing lands in Chinandega, irrigation and harvesting and other agricultural equipment for cane rearing activities;
- Investment for de-bottlenecking of milling capacity (emissions scrubbers, radial evaporators, etc.);
- Refinancing debt, and
- Investment in the 75,000 l/day ethanol plant at ISA, recently completed.
Identified applicable 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
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 can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria.
Environmental and social review of the project encompassed evaluation of an environmental impact study commissioned by NSEL. In addition, IFC professional staff performed a physical evaluation of the project site and environs.
Key environmental and social issues and mitigation
Key environmental and social issues are listed below. In addition, specific information defining how elucidated potential impacts will be addressed by the sponsor/project is described. Upon implementation of the featured mitigation measures described below in the attached environment action plan (EAP), the project will comply with environmental and social requirements, host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines.
- Environmental, Health, and Safety Assessment and Management Systems
NSEL has implemented ISO 9001-2000 and currently manages quality as well as other areas including environmental and social affairs. The company’s environmental policy vision and mission statements are well established. New employees are required to undergo orientation that among other things addresses the quality management system and the management of environmental and social affairs. The company currently has ISO 9001-2000 certification and is targeting food safety certification (HACCP) in 2007, as well as ISO 14001 certification in 2008.
NSEL’s management system dictates that each manager for specific operations areas has responsibility for environmental and social affairs. The Estudio de Impacto Ambiental Del Proyecto Planta de Producciķn de Alcohol del Ingenio San Antonio, Abril 2005 (ETHANOL ESIA), was prepared for the new etanol distillery at ISA. Public disclosure occurred for the town of Chichigalpa that is the closest community associated with Ingenio San Antonio. NSEL will ensure that when ESIAs are performed in the future, in accordance with Nicaragua law, for new project components, that the ESIA studies must include consideration of the IFC performance standards in these evaluations.
Ethanol is shipped through the port of Corinto. The port is managed by an independent company. And NSEL rents space in their tank farm. The storage area is fenced and well guarded and managed, and has appropriate fire safety and emergency equipment and plans.
- Labor and Working Conditions
NSEL has adopted a human resources policy that outlines rights, duties and grievances mechanisms for the entire workforce. The policy is made available to all workers as part of the “orientation” process. For “Non-employee workers”, either directly hired or through contractors, NSEL ensures compliance with all Nicaraguan labor regulations, including regulations for child labor. NSEL Human Resources observes in full the ILO Conventions 138 on Minimum Age, and 182 on Worst Forms of Child Labor. NSEL will engage contractors only if these are legitimate enterprises. The Human Resources department will do monitoring to ensure that all workers are vested with all benefits to which they are legally entitled, and that wages are paid in a timely fashion. Ninety percent of the work force at NSEL is enrolled in the five Unions recognized by NSEL top management. NSEL is an equal opportunity employer and does not discriminate with respect to aspects of religion, ethnicity, gender, political opinion, sexual orientation, national or social origin, general working conditions, or physical disabilities. NSEL employs a blind person as receptionist. NSEL provides a safe working environment for the entire workforce and health services for themselves and families. A Safety, Security and Hygiene Coordinator position is filled. It was found that NSEL provides benefits to employees that are beyond those required by law to create a favorable work environment, a few examples are: free hospital care for employees and families, periodical medical exams, free K-12 school, nutritional subsidies, free training to its workforce, etc. Starting with the 2006-2007 harvest, NSEL will develop a record keeping mechanism to register their current supervisory field and mills visits to ensure contractor compliance with legal work and safety regulations, in accordance with the attached EAP.
- Pollution Prevention and Abatement
NSEL’s technology acquisition process includes state-of-the-art R&D facilities aligned with the sugar cane field production and associated agribusiness. The facilities include pest/disease control laboratories where predators are reared following international standards. An integrated pest/disease management system, where biological control (fungus Metarhizium anisopliae and Beauveria sp.) is the main component, has been developed and implemented in all NSEL field operations to promote non-chemical control. This includes fields contracted from independent sugar cane growers (Terceros). Other components of the IPM system include physical control (yellow bags), and various cultural practices throughout the cropping season. The IPM system includes pest/disease mapping and scouting to monitor pest thresholds. The R&D activity also includes variety trials, soil fertility and nutrient cycling management practices, reduced water usage for irrigation, weed control, production of disease free planting materials, integrated crop growth management models and databases, mechanical harvest, precision farming, water use and effluent management in the mills, clarification processes, management of energy, cogeneration and renewable energy, waste management, and forestry management. NSEL has a wide range of international consultants to assist in their innovation processes.
Most fields are irrigated, in addition to water from precipitation. The rain pattern (estimated 900 mm p.a.) has a “dry season” starting around mid November through early May, when harvest and milling takes place (Zafra). NSEL operates sprinkler and drip irrigation systems, and is conducting research to increase the acreage irrigated with such equipment, since mean cane yields obtained can be kept at the 120t/ha level. Ground water is monitored on regular basis, to ensure no impact on the treated waste water.
For crop nutrients, NSEL uses common chemical fertilizers, together with the biodigested vinasse effluent and the composted filter cake and ash from the mill. NSEL uses commonly available herbicides. It also uses chemical ripening agents, which have very low toxicity and half-lives. Use and management of agrochemicals is consistent with IFC’s Plantation and Pesticides Handling and Application Guidelines.
The principal sources of emissions to the environment and the risk of environmental contamination emanate from ISA and the new 75,000 liters/day ethanol distillery. These include air emissions from combustion of bagasse and plantation eucalyptus to generate steam and electric power for the mill and for sale to the National Grid during the Zafra, and for two months beyond the end of Zafra (using eucalyptus); process liquid effluents; and, solid wastes emanating from sugar processing (cachaza or cane laundry mud or press mud); ash from stack scrubbers; and cane washing effluent. During the 1998-1999 harvest season the company first started production of electric power for the national grid and commenced a program of replacing older, low pressure boilers without air emissions controls with high pressure units that provided adequate steam at adequate pressure for the purposes of cogeneration. Current power production from the cogeneration plant includes a total of 59.3 MW internal consumption, this is total capacity for their own use, including operation of the sugar mill (21 MW), and sale of remainder to the national grid (Union Fenosa).
- Particulate stack emissions
NSEL will conduct total particulate matter stack emissions measurements for the three operating boilers at ISA during the 2006-2007 harvest. It will undertake particulate distribution analysis using actual stack emissions data and local meteorological data to define isopleths of particulate distribution and concentration in the downstream air shed, and will compare projected levels to IFC’s General Environmental Guideline for ambient air concentrations, in accordance with the attached EAP.
- Alpha Boiler
NSEL will retrofit the Alpha Boiler (capacity of 200,000 pounds of steam, 600 psi at a temperature of 825 degrees C) with an emissions scrubber during the maintenance period after the 2006-2007 harvest season, to reduce the stack emissions to <100 mg/m3, in accordance to the attached EAP. As part of the action plan agreed with the local environmental authority, NSEL has installed scrubbers in the other two boilers they operate.
- Retrofit stack emissions controls
NSEL will retrofit stack emissions controls in the event that particulate emissions exceed ambient limits established in IFC’s General Environmental Guideline, in connection with the attached EAP.
Solid wastes from sugar processing emanating from sugar mill operations, including stack emissions scrubber ash, juice clarification (cachaza or press mud) sludge, boiler ash and others, are all diluted with effluents and sent to the agricultural fields to improve soil quality. Ground water is monitored to ensure that there is no impact from this practice. The principal waste emanating from the distillery is viņaza or spent wash. The distillery will incorporate a bio digestion unit to digest the waste viņaza to produce biogas and replace boiler fuel for the distillery with generated biogas with a methane content of roughly 52-56%. Digested viņaza and other general plant effluents are also mixed with irrigation waters and applied to agricultural fields. Collected waste oil, paper, or plastic is sold to authorized recycling companies.
- Sanitary landfill
Municipal solid waste from plant operation is currently collected and burned in an open disposal site on the sugar mill property. This activity will be closed and replaced with a sanitary landfill. for the 2006-2007 Zafra maintenance period, in accordance with the attached EAP.
4.0 Community Health, Safety and Security:
NSEL works in close collaboration with the Civil Defense Bureau of Chichigalpa and local Fire Departments to ensure all safety and security issues are implemented. In addition, NSEL has its own fire prevention units stationed at the mill, at the ethanol distillery, and at the Corinto port storage area. One middle management person has a seat on the Civil Defense Committee of Chichigalpa. Security personnel are hired through a legitimate enterprise. The security personnel inside the premises of NSEL are armed as is customary in remote rural areas.
- Land Acquisition and Involuntary Resettlement
NSEL’s land acquisition is strictly one of willing buyer willing seller at prices mutually agreed with sellers. Purchased land must be have a clear title, be free of any litigation or conflicts, and be appropriate for sugar cane.
NSEL has also worked to continually improve the housing conditions of its workers. A case in point was the movement of workers, their dependents, and relatives (those living in their households) from various areas inside the operations to a neighborhood purchased and established by NSEL, where they could own their own property and homes. In 1989 the company had been taken over for a number of years by the Government operators and housing within the operations became less organized. In 1994, management was restored to NSEL directly, the company developed a strategic plan for modernization and expansion. Part of this process involved the Candelaria housing project where households living at various parts of the operation in company housing were moved to the newly established Candelaria neighborhood adjacent to the estates and forming a neighborhood integrated into the town of Chichigalpa. NSEL provided these opportunities to all households on the property in a process that began in 1998 and was concluded in mid 2001, when the last lot was delivered to its new owner. Over this period of time, according to the household census carried out by the company, 1,218 families headed by current workers and heads of household connected to workers past or present were given the opportunity to own their own lots and homes in the Candelaria neighborhood. NSEL developed the Candelaria housing project including layout plans, electricity, water, sewage hookups, and roads for the 1,218 lots (10 x 20 m) which were offered free to the 1,218 families. The company has maintained records on all transactions. Each land title is registered as a public deed under the name of the household head. There was no change in income generation as workers continued working their jobs. Five years after the process was completed, interviews with the workers committee, residents of Candelaria, the mayor of Chichigalpa, and community development specialists confirm that people’s lives have been improved and continuing relations with the NSEL remain very positive.
- Biodiversity Conservation and Sustainable Natural Resource Management
No natural or critical habitat or endangered species have been found to be affected by the project, nor current field and mills operations. No invasive alien species have been introduced. There are no legally protected areas in the vicinity. NSEL enforces a zero hunting regulation within their eucalyptus plantation. Current industry operations follow an environmentally-sound natural resources management plan. NSEL agribusiness operation does not involve modification, conversion, or degradation of critical habitats.
An integrated pest management system (in which biological control is the main component), has been implemented to minimize use of chemical pesticides and enhance natural predator populations. The IPM system has been implemented in all NSEL field operations.
The company’s eucalyptus plantation project was initiated to facilitate the production of 60,000 tons of eucalyptus logs (astillas) per year to enable the company to generate an additional 19.3 MW past the sugar cane harvest season. At present the company has approximately 5,300 manzanas (0.7 ha/mz), of Eucalyptus camaldulensis plantations. It also operates the largest nursery in Nicaragua and one of the largest in Central America, with a production capacity of 2 million plants/year in bags and 500,000 seedlings. The lands used for these activities are typically low productivity sugar cane fields that have been removed from cultivation and other, supplemental agricultural lands used by the company for planting. Trees are cut every 6 years. These plantations reduce the impact of using low productivity lands for sugar cane, which require much higher inputs (fertilizer and pest controls), and also significantly increase habitat and enhances biodiversity in the lands taken out of production. NSEL will develop a plan for achieving independent certification of sustainable forest management for their eucalyptus plantation, in accordance with the attached EAP.
NSEL/ISA also owns and operates a shrimp farm consisting of 520 hectares of rearing ponds. The ponds are situated in marginally productive agricultural lands on which NSEL had not traditionally grown sugar cane. These lands were developed many years previous to current operations. Mangrove areas in the vicinity are well protected and the mangroves and shrimp farm appear to coexist positively. Operations are in line with sound management of natural resources to preserve resource use and biodiversity. The facility is HACCP food safety certified. Water from the Doņa Paula estuary is pumped into the ponds and returned to the estuary. Water quality discharged to Doņa Paula meets both IFC guidelines as well as national regulatory limits.
- Indigenous People
Although some members of the Sutiaba indigenous group have come to the Chichigalpa area in search of work, NSEL activities have never infringed or impacted their lands. Their traditional lands are not in the area of Chichigalpa but further away near the town of Leon. Acquisition of land by NSEL has never involved any Sutiaba traditional lands.
- Cultural Heritage
No cultural heritage or archeological sites are found in the project site or its vicinity. The appraisal mission did not find any evidence for the need to implement a Chance Finds Procedure.
Client's community engagement
NSEL operation together with other Pellas Group operations employ a significant portion of the Chichigalpa community (approximately 4,250 direct jobs alone). NSEL has a “Departamento de Servicios a la Comunidad” (Community Relations Department) with an appointed full time Head (and a staff of 15 social professionals), supervised directly by the Corporate Director of Administration to ensure quality community services. Some of the services provided for free by NSEL to workers, former workers, and their families and dependents, include: full-time social worker specialist, support to the public retirement home, free medical services to community members, free sugar donations to the General Hospitals in Leon and Chichigalpa, support to local police and fire department, building of recreational parks for children (including mechanical toys, water systems, infrastructure, office of monitoring safety, irrigation facilities, etc.). NSEL has built a public stadium, with lightening facilities, and has donated 7000 m2 of land for the construction of a public school. In addition, NSEL supports each year all expenses of a group of Spanish medical doctors that serve for free during two-weeks in the community of Chichigalpa. NSEL also pays for plastic surgery and related expenses to burned children (70 surgeries per annum).
Children come from all parts of Nicaragua, and NSEL covers full room and board expenses of the accompanying parents, and also for the USA medical doctors. NSEL contributes to education programs at the agricultural universities of EARTH and Zamorano, and to the graduate business school INCAE. NSEL works with civil associations, including the “Asociacion de Niņos Quemados de Nicaragua”, and the education and health initiative of the “Asociacion Nicaragua-Americana” linking to several NGOs in poverty reduction activities.
Other benefits to workers and former workers include low interest loans and scholarships for technical and university education. Other programs, including sports and ecological activities like litter clean up and tree planting are co-sponsored with the mayor’s office. All supporting documents and budget expenditures in social activities are found in the Office of the Corporate Director of Administration at Ingenio San Antonio.
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