A new briefing from the Environmental Paper Network, Bank Information Center (BIC), AXIAL Naturaleza y Cultura, Instituto Maira, and Heñoi highlights the impacts of a proposed project by the World Bank aimed at expanding industrial tree plantations in Paraguay.
The project is being put forward by the World Bank’s development arm, IBRD (International Bank for Reconstruction and Development), and is intended to use public funds for poverty reduction. However, it is likely to benefit unscrupulous speculators while causing significant harm to the environment and local communities.
Titled “Scaling Up Finance for Sustainable Forestry“, the project, if approved, would provide a $100 million loan to expand large-scale industrial tree plantations in the eastern regions of Paraguay. These plantations have already been shown to cause extensive damage in the area. Expanding plantations on so-called “degraded soils” or deforested land prevents natural forest regeneration and forces previous landowners—typically cattle ranchers—to clear new land to continue their original activities.
Moreover, these plantations fail to bring true development. The tree plantation industry is highly mechanized, employing only a few people. Meanwhile, the agrochemicals used in the plantation process threaten the subsistence agriculture of local communities and Indigenous Peoples. Eucalyptus, commonly planted in these plantations, is known for its high water consumption and spreading fires, and large-scale planting is likely to exacerbate water scarcity and soil degradation. Worse, the expansion of industrial plantations threatens the territorial rights of indigenous communities and small farmers, potentially increasing poverty and marginalization.
In summary, the proposed project offers no real development opportunities. Instead, it will likely erode livelihoods for disadvantaged communities further while accelerating environmental degradation.
Additionally, by insuring developers against the risk of failure, the project encourages speculative ventures, raising risks for ecosystems and affected communities.
In Paraguay, a local oil magnate is building a large pulp mill, Paracel SA, which requires vast expanses of land. Supported by IDB Invest, the investment arm of the Inter-American Development Bank (IADB), the project has been touted as free of land grabbing. However, the reality is quite different: the company established its plantations on land initially intended for local families, and their protests have been met with a heavy military presence.
Given this context, the prospect of further large-scale industrial tree plantations raises serious concerns. It is unacceptable that such an expansion would be financed with public money intended to reduce poverty.
In addition to detailing the proposed project’s impacts, the briefing calls on the World Bank to instead promote alternative sustainable livelihoods and energy solutions. The World Bank should shift its focus from industrial forestry to agroforestry, the restoration and conservation of natural habitats, and biodiversity protection.
The briefing is available at: https://environmentalpaper.org/wp-content/uploads/2025/02/Paraguay-Forestry-report.pdf