A new international lending environment

A new international lending environment – World Bank loan rules

Gina Maranto

During the past decade the ecological consequences of loans to developing nations by the World Bank, the U.S. Agency for International Development, and the Inter-American Development Bank have been scrutinized by conservationists and congressional committees and found wanting. The investigations have determined that these agencies have not paid enough attention to the impact of large-scale construction projects in the Third World. Instead of raising the standard of living, poorly planned hydroelectric dams, irrigation systems, highways, and other projects have in some cases created environmental catastrophes. For instance, a scheme to raise cattle on the grasslands of Botswana is speeding desertification there, and a Brazilian program to resettle peasants in the Amazon is denuding a tract the size of West Germany.

In July, after a three-year internal review and dogged lobbying by environmental groups, the World Bank, which invests $13 billion annually in developing countries, adopted new guidelines de- signed to prevent such fiascos. They require many bank-supported development projects to be accompanied by conservation measures. Robert Goodland, head of environmental and scientific affairs at the bank and an author of the new policy, says that, with few exceptions, projects won’t be funded if they encroach on lands the bank deems ”of special concern”: those with rare or fragile ecosystems or species, or those supporting a high diversity of species, including tropical forests, marshes, estuaries, and coral reefs. Countries will be urged to select as construction sites lands that are the least valuable ecologically. If a high-quality parcel is the only one suited to a project, the loan proposal must include a provision for protecting in perpetuity an ecologically comparable piece of land elsewhere.

The new policy may encourage countries to undertake projects that preserve natural resources and also yield economic benefits. Even before the policy was announced, Malawi took out a loan to develop a fuel-wood plantation, taking the pressure off its diminishing forests, and Bangladesh obtained money for a man-made shrimp fishery to supplement the natural catch. ”Sustainable development is the name of the game,” says Peter Raven, director of the Missouri Botanical Gardens in St. Louis, who specializes in tropical conservation. ”It enables governments to continue paying off their loans. In this way the interests of banks and conservationists are increasingly congruent.”

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