In Paraguay, Paracel SA is building a new pulp mill, including a biomass power station and accompanying monoculture plantations. The project is well underway to severely violate indigenous rights and local communities’ rights and to inflict serious harm on biodiversity and the climate. Paracel has failed to provide complete, understandable and accessible information to the affected communities, and, even worse, has spread misinformation to them. IDB Invest, US Development Finance Corporation, Development Bank of Japan (JICA) and possibly Goldman Sachs are considering financing this project. EPN and its partners are strongly suggesting all financial institutions involved to disassociate from it.
On October 23rd, gunfire shook the village of Cerro Guazú, in the department of Amambay, Paraguay. An armed conflict between the army and the insurgent group EPP (Ejército del Pueblo Paraguayo) left two guerrilla men and two indigenous people dead. Two years ago, in a similar conflict in the nearby village of Yby Yaú, two 11-year-old argentinian girls were shot dead by the Paraguayan security forces around a rebel camp.
The conflict overlaps with the activities of transnational drug cartels, in an overall climate of violence and intimidation, in which, at the end of the day, indigenous and small farmer communities -with limited access to land rights- always pay the price.
This is the region where an obscure business alliance is now planning to build the country’s first giant pulp mill. By heavily interacting with the local land use and with the environment, the new mill project will likely further exacerbate the current situation. Despite this, high profile banks and other financial institutions are queuing to provide fresh money to develop the mill.
Paracel SA (Paracel) is a joint venture composed of three different groups:
- Girindus Investments (a group of companies based in Sweden, of which EPN could not find any meaningful information or even a website),
- The Zapag Group (a Paraguayan oil trade corporation, with no previous experience in the pulp & paper sector), and
- Other Paraguayan companies and family investors, such as Heinzel Group.
In October 2020, the company announced its plans to build a new pulp mill, a biomass power station and monoculture plantations. The mill is expected to be operational in 2023, and will be a Bleached Eucalyptus Kraft Pulp mill with a capacity of 1,500,000 metric tons per annum. In order to supply the mill, Paracel needs a larger amount of fiber from eucalyptus trees than it currently has, and therefore must establish further plantations. The company plans to plant these on former agricultural and cattle range properties, totalling approximately 188,000 ha. This plantation establishment will all be taking place in Paraguay, in the departments of Concepción and Amambay.
Paracel is developing this project for the price of USD 3.6 billion.
Where do the required funds for investment come from? We know that at least one commercial bank, Goldman Sachs, might be involved. The bank has apparently made a debt commitment of 1.4 billion US dollars to the company – which is more than one third of the project costs. EPN has written several times to Goldman Sachs to ask for confirmation of this debt commitment, but has not received a reply on the matter. For the remainder, Paracel is in the process of securing funds from several public development banks (IDB Invest, US Development Finance Corporation and possibly also the JICA, the Development Bank of Japan).
Such a big pulp mill and plantation area is bound to have severe social and environmental impacts – but Indigenous groups were not informed
As we described in our earlier article, one of the most outrageous findings about the Paracel project is the lack of proper consultation with the local communities and the nine Indigenous communities of the Pai Tavytera and Mbya Guarani ethnic groups, who will be severely impacted by Paracel’s activities. The company makes a very bold claim that the Free Prior and Informed Consent (FPIC) of the affected Indigenous communities has been obtained, but does not show how and when. During an investigation by Grupo Sunu and the Bank Information Center, some of the affected indigenous communities reported they believe they have signed agreements about being integrated in the company’s community and social programmes. This is a deceiving tactic and is confirmed by the company’s public report about these meetings.
On top of this, there is a serious lack of transparency and access to the project documentation. The most worrying issue we identified is that not all documents are translated into Spanish, nor to Guaraní, which is an official language for at least 80% of the Paraguayan population. As the project will directly affect nine Indigenous communities, Paracel is required to obtain and retain FPIC – as FPIC is an ongoing process, and the process should happen in the language spoken by the potentially affected communities. Additionally, when EPN partner organisations on the ground spoke to local communities, they learned that Paracel had denied these communities access to the meeting notes.
We conclude that Paracel’s practices are not aligned with the policies of the financial institutions involved with the project that mostly follow the IFC Performance Standard 7 on Indigenous Peoples, including “free, prior and informed consent where applicable”. Furthermore, Goldman Sachs states that it “recognizes that the identities and cultures of indigenous peoples are inextricably linked to the lands on which they live and the natural resources on which they depend. We recognize the rights of these communities regarding issues affecting their lands and territories, traditionally owned or otherwise occupied and used.” There is ample evidence that the FPIC process was not in line with IFC PS 7 nor with the international rights acknowledged to Indigenous communities.
Banks and funders have a key role to prevent further abuse of local communities
The four financial institutions have a great responsibility to ensure that they do not make money over the abuse of local communities and the environment. It is their job to conduct proper due diligence, a process that should identify, prevent, mitigate, halt – and worse case, remedy – any social and environmental harm caused by their client. In this case Paracel.
This is why EPN is calling on the financial institutions involved to ensure that meaningful stakeholder engagement and consultations with the (potentially) affected communities and Indigenous groups is taking place and – if this is not the case – for the funders to immediately stop any involvement in the Paracel project. In particular, if the rumours around a USD 1.4 billion debt commitment are true, we urge Goldman Sachs to re-evaluate the circumstances and social risks of this project and withdraw from the commitment.
Together with its partners, EPN is conducting ongoing research in these areas. You can find the most recent conclusions here: