11007 - Gloria, S.A.

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Environmental Review Summary

Project Number

11007

Company Name

Gloria S.A.

Date ERS Disclosed

Sep 10, 2001

Country

Peru

Region

Latin America and the Caribbean

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Feb 8, 2002
Signed : Jul 2, 2003
Invested : Aug 8, 2005

Sector

Other Food

Industry

other

Department

Regional Industry MAS LAC & EUR

Project Description

Gloria, S.A is a diversified conglomerate with three principal business divisions: food, paper products, and pharmaceuticals. The food division (90% of sales) is involved primarily in the production, sale, and distribution of dairy products including evaporated, condensed, and UHT milk, yogurt, and cheese. The pharmaceutical division (5% of sales) produces and distributes a range of proprietary and generic prescription and over-the-counter medicines and cosmetic products. The paper division (5% of sales) manufactures cartons and corrugated board (30% of its output satisfies 100% of the company’s own packaging needs, while 70% is sold to third parties). The proposed project involves investments with the following key objectives: (i) consolidate Gloria’s dairy sector operations into a new, state-of-the-art production facility in Huachipa, near Lima; (ii) leverage Gloria’s brand name and distribution network by expanding its range of branded consumer food items; and (iii) expand and rationalize Gloria’s paper division with a new plant in Huachipa. IFC has been requested to make a corporate A Loan to Gloria, the proceeds of which would mainly be used to refinance debt assumed by the company to carry out the above investment program.

Environmental and Social

The following paragraphs provide a discussion of how each of these potential impacts will be mitigated in the company’s project. The food division’s three principal operating installations are situated in southern Peru in Arequipa, in the Lima area in Huachipa, and in northern Peru in Cajamarca. The following paragraphs address environmental management and occupational safety and health programs in these plants as well as in Gloria’s Packaging and Pharmaceutical Divisions.

1. Arequipa Plant. A previously completed preliminary Environmental Diagnosis [Diagnostico Ambiental Preliminar (DAP)], which was prepared to define Peruvian environmental and occupational health requirements applicable to existing operations, will be updated to incorporate the requirements of IFC policies and guidelines. A facility-wide Environmental Compliance Program [Programa de Adecuacion al Medio Ambiente (PAMA)] that is aimed at defining the specific activities required to maintain compliance with Peruvian regulatory requirements and IFC/World Bank Group guideline limits will be carried out and will be implemented as part of the attached corrective action plan (CAP) after approval by the Peruvian Natural Resources Institute (INRENA) and IFC. Certain Arequipa air emissions and liquid effluents parameters currently exceed Peruvian regulatory and IFC requirements. Technical modifications that are required to bring air emissions and treated liquid effluents into compliance are being developed and will be implemented as part of the CAP. Solid waste goes to a municipal landfill.

2. Huachipa Plant. Both a DAP and an associated PAMA have been completed for this operation. Sanitary and industrial wastewater treatment systems must be expanded to adequately treat wastewater generated from Huachipa industrial milk operations and the relocated corrugation and carton plant to comply with Peruvian regulations and IFC guideline limits. Completion of ongoing construction, plant start-up and demonstration of adequacy of operations for the sanitary wastewater plant is scheduled for April 2002. Construction of the new industrial wastewater treatment plant will be completed October 2002. Completion of construction and startup of both sanitary and industrial plants are incorporated into the CAP. Solid and hazardous waste from Huachipa operations is managed in a fashion similar to Arequipa.

3. Cajamarca Plant. As part of the CAP, Gloria S.A. is preparing a DAP incorporating Peruvian regulatory requirements in addition to IFC policies and guideline requirements. Upon completion of the DAP analysis, the PAMA will be prepared and submitted to INRENA and to IFC for review. Upon approval, the PAMA will be fully implemented. Rectification of any identified shortcomings relating to discharges to the environment (e.g. air emissions, liquid effluents, and solid waste) or other environmental and social issues is incorporated into the Gloria S.A. CAP.

4. Planta Centro Papelero El Augustino. This operation, situated in Lima, is a Kraft paper and corrugated carton manufacturing operation. The facility processes roughly ninety tons per day of recycled carton to produce new Kraft paper used to manufacture corrugated boxes for Gloria S.A.’s needs and for sale to outside customers. Approximately 10% new fiber is used predominantly to satisfy specific customer requirements. All corrugating and box manufacturing operations are being relocated to Huachipa. The El Augustino plant will continue to manufacture Kraft paper. The DAP and PAMA were completed in June 2000. Environmental compliance monitoring is ongoing to ensure compliance with Peruvian regulatory and IFC guideline requirements. All process wastewater employed in manufacturing is recycled after extensive physical and chemical treatment. Solid waste and hazardous chemical waste from these operations are managed as at Huachipa.

5. Farpasa Pharmaceutical. This operation is situated in Lima. As part of the CAP, Gloria S.A. is preparing a DAP incorporating Peruvian regulatory in addition to IFC policies and guideline requirements. Upon completion of the DAP analysis, the PAMA will be prepared and submitted to the Ministry of Industry, Tourism, Integration and Commerce (MITINCI) and to IFC for review. Upon approval, the PAMA will be fully implemented. Wastewater from demineralization, processes and cleaning is pretreated in accordance with municipal (SEDAPAL) requirements and disposed to municipal sewerage. Domestic solid waste and non-hazardous solid waste is collected and transported to a solid waste landfill by Metropolitan Service, a specialized subcontractor. Active pharmaceutical ingredients rejected by Farpasa, liquid and solid hazardous waste, waste hydrocarbons, products returned from distributors, and out-of-date products are incinerated by Descon, SA, a specialized subcontractor.

6. Industrial hygiene, general occupational safety and health, corporate environmental management and life and fire safety. Gloria S.A. has a corporate health and safety coordinator responsible for ensuring proper employee training and collection and evaluation of occupational safety and health statistics. The corporate coordinator is assisted in this endeavor by environmental management and safety coordinators in each operation with environmental engineering and monitoring services provided by a specialized contractor. Employees are trained in sanitation, job safety, fire safety, workplace injury avoidance, and utilization of personal protective equipment, and they are afforded the opportunity to up-grade skills. All new and existing Gloria S.A. buildings accessible to the public will be designed and operated in full compliance with local building codes, local fire department regulations, local legal/insurance requirements, and in accordance with internationally acceptable life and fire safety standards.

7. Energy management. In its industrial milk, paper and pharmaceutical plants, Gloria S.A. monitors a diverse system of indices: production efficiency, preventive and corrective maintenance orders, raw materials usage, losses, and energy consumption to understand production costs. As an extension of existing programs, and to promote energy awareness and reductions, each plant will prepare and implement an energy plan to define the energy policy for each facility. The degree of detail required in each energy plan and the approach to be taken will depend on the size of the facility, its energy use and the pre-existing systems in place. The energy plan will demonstrate each facility’s commitment to continuous improvement in use of energy to meet the targets set by and for the facility.

8. Land acquisition, cultural property and sensitive natural habitats. With the exception of Huachipa, Gloria S.A.’s facilities were purchased as existing, long-standing operations from other entities or the Peruvian government in privatisation programs. Land for the Huachipa operation was purchased from one owner and there was no resettlement as the land was used exclusively for agriculture. An environmental assessment consistent with the requirements of Peruvian environmental regulations was carried out prior to the commencement of construction. No cultural properties or sensitive natural habitats were identified during EA surveys.

9. Community development. Gloria S.A. currently supports social development initiatives, community events, and public service activities with an annual value of $200,000. These efforts include: Fundación Por Los Niños Del Peru, Hogar de Cristo, and assorted programs for street children and local sports teams. Gloria S.A. also funds university student internships. Company nurseries annually produce close to 1 million tree seedlings for use by local communities to reforest Peruvian highlands (more than 5,000 hectares by the end of 2000). Commencing in third quarter 2001 and until the end of this year labels for canned Leche Gloria will contain a free public service message and telephone numbers for Alcoholics Anonymous and CEDRO (an NGO that works to combat drug addiction in Peru).

10. Technical support for milk producers. Over the past 3 years, Gloria S.A. has expanded its milk collection network in dairy areas around Lima and in the north. Gloria S.A. provides an array of technical services to all producers including visits (initial evaluations and issues resolution), publication of a producers’ newsletter entitled El Poronguito (addressing current issues, disease prevention, genetics and similar subjects), regional seminars on topics of local importance, enriched feed sales, small loan programs, semen bank and insemination, veterinary and agronomist outreach, reliable milk collection (365 days/year), regular payment, and the ability to pay for feed and technical services with milk production revenue. Further examples of Gloria S.A. technical activities that benefit the milk industry and the country in general include participation in the following organizations and activities. In the southern milk production area, Gloria S.A. along with an association of dairy farmers, the Ministry of Agriculture, the Medical Veterinary College, and the two universities in Arequipa collaborate in an animal surveillance activity. The purpose of the so-called LABVETSUR Directive is to monitor the incidence of illnesses in dairy cattle and other species (e.g. chickens, pigs and horses) and to suggest appropriate measures for regional governments to prevent zoonoses and public health impacts. Similarly, Gloria S.A. supports regional cattle fairs and expositions and is an active member of regional milk productivity committees that monitor milk production and advise farmers in use or avoidance of certain bulls to enhance genetic herd improvements, animal health and production. Gloria, S.A producers’ expansion and growth are limited by non-existent financing for such entities. IFC and Gloria, S.A. are investigating the feasibility of creating a microcredit facility utilizing Gloria’s technical and business acumen to facilitate growth-oriented investments for milk producers.

11. Labor retrenchment. To better serve the Lima area and expanded operations in Huachipa, Gloria S.A. instituted a program of workforce reduction in the Arequipa plant in December 1998. Workforce reduction complied with Peruvian Labor legislation and included negotiations with the labor union representing the Arequipa plant workers. The company provided early retirement packages based on years of service. The retrenchment process was completed successfully.

Based on its review of available information regarding potential environmental and social impacts and proposed mitigation measures, IFC concludes that the proposed project is being designed to meet Peruvian government regulatory requirements, as well as World Bank policies, environmental, social, health and safety guidelines. IFC will monitor compliance with Peruvian regulations and World Bank policies and guidelines during the life of the project. Gloria S.A. will submit annual environmental monitoring reports. IFC will evaluate these monitoring reports and Gloria S.A.’s proposed remedial measures as needed to maintain compliance. Additionally, IFC will conduct periodic site reviews during project supervision.

Conclusion & Monitoring

Based on its review of available information regarding potential environmental and social impacts and proposed mitigation measures, IFC concludes that the proposed project is being designed to meet Peruvian government regulatory requirements, as well as World Bank policies, environmental, social, health and safety guidelines.

IFC will monitor compliance with Peruvian regulations and World Bank policies and guidelines during the life of the project. Gloria S.A. will submit annual environmental monitoring reports. IFC will evaluate these monitoring reports and Gloria S.A.’s proposed remedial measures as needed to maintain compliance. Additionally, IFC will conduct periodic site reviews during project supervision.

IFC will evaluate the project''s compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: [(i) the status of implementation of all measures contained in the Environmental Corrective Action Plan (CAP) and (ii)] ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of quantitative sampling and measuring programs. Periodic site supervision visits to evaluate ongoing performance and implementaiton of planned programs will also be conducted.

Environmental and Social Documentation

File Name	Actions
Grupo Gloria Corrective Action Plan rev4.pdf

This Environmental Review Summary (ERS) 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. Any documentation that is attached to this ERS has been prepared by the project sponsor or in conjunction with 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. The following ERS is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

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