IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

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. The review of this project included a physical visit to selected, representative swine and poultry rearing facilities, principal slaughter and animal processing operations in Santo Domingo and Bucay, and an evaluation of technical and environmental/social information submitted by the project sponsor. The following potential environment, health and safety and social impacts of the projects were analyzed. - Site selection, land acquisition, environmental reviews and permitting for facility expansions and acquisitions; - environmental management; - quality management - occupational health and safety management; - sustainability and quality of water supplies; - wastewater management; - air emissions; and - solid waste management.

The sponsor has presented plans to address these impacts to ensure that Pronaca will, upon implementation of the specific agreed measures, fully comply with environmental and social requirements, Ecuadorian laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. Information about how these potential impacts will be addressed by Pronaca is summarized in the paragraphs that follow. Further information is provided in the attached Corrective Action Plan (CAP). - Site selection, land acquisition, environmental reviews and permitting for facility expansions and acquisitions. At the Quito distribution facility the existing refrigerated and frozen goods storage facilities will be expanded on the existing industrial parcel. Similarly the new distribution operation in Guayaquil will enhance Pronaca’s ability to service its customer base. The Santo Domingo pork slaughtering operation is revising operations to improve processing flow and storage capacity using supplemental space on the existing parcel. Pronaca acquired the land for the Quito, Guayaquil, and Santo Domingo operations respectively more than 25, 10 and 16 years ago in a willing buyer/willing seller transaction. The parcel of land required for expansion of the Guyaquil distribution center was acquired as part of the recent Ecuadasa acquisition. To date Pronaca has obtained municipal permits for these expansions and is in the process of obtaining environmental permits in accordance with the requirements of environmental regulations promulgated in early 2003. Pronaca’s processed meat acquisition, Ecuadasa, will be audited carefully for shortcomings in required permits, and compliance with Ecuadorian environmental regulatory and IFC guideline requirements. A corrective action plan to rectify identified shortcomings, if any, will be developed and implemented. - Environmental management. Pronaca has an environmental policy, an environmental management committee (steering committee) and an environmental management department. These elements and the policy are strong building blocks to ensure that the company complies with IFC requirements, new Ecuadorian Environmental Management Law and associated regulations (promulgated in March 2003), and the municipal requirements for each community in which Pronaca operates. Typically, Pronaca forms an environmental committee with representatives of host communities to reach agreement for proposed solutions to potential problems and to minimize the environmental impact of each operation. For the Santo Domingo and Bucay plants there are frequent meetings with representatives of the local community to discuss community concerns, actions to resolve odors from the rendering plants and to discuss other environmental issues. Pronaca has commissioned environmental audits for all of its operating facilities to define gaps between current operations and new environmental regulatory requirements. Compliance gaps that are defined in comprehensive audit reports will be reviewed by the environmental management committee. Subsequently, any required corrective measures identified during the audits will be developed and implemented. - Quality management. Pronaca has achieved Hazard Analysis and Critical Control Point (HACCP) certification of food processing for all its slaughterhouse operations at Bucay (poultry), Santo Domingo (poultry and pork), Yaruqui (poultry), and Fritz (value added meat products) and Pifo (value added meat products). It is currently working to obtain this certification for the Santo Domingo and Bucay hatcheries and will continue to expand this certification to its other operations in the future. - Occupational health and safety management. Pronaca has established a corporate Industrial Safety Committee with responsibility to provide oversight of occupational health and safety in its operations. Detailed Safety and Industrial Hygiene rules, regulations and a code of conduct for Pronaca employees has been prepared and applied to existing operations. Further maturation of this system will take the form of consistently collecting and evaluating occupational safety and health statistics (e.g. lost time accidents, fatalities, etc.) and applying the lessons learned from analysis of the data to continuously improve existing programs and to reduce elucidated job hazards. - Sustainability and quality of water supplies. Ground water is used exclusively for rural operations and processing facilities. It is aerated in some cases to remove excess iron and then chlorinated for use in the HACCP certified operations. HACCP certification mandates a high level of scrutiny of water quality. Pronaca collects extensive data in monitoring activities and takes indicated follow-up actions whenever the monitoring system highlights a chemical, physical or biological exceedance in water quality. In such cases there is an immediate response in supplemental sample collection and system evaluation. The Santo Domingo facility is placing considerable stress on local water supply aquifers; and existing ground water wells have had to be extended to a deeper aquifer. The facility will augment water savings programs to reduce the demand on the resource. Additionally, Pronaca will investigate the feasibility of further treating (e.g. reverse osmosis) process effluent and using this water in applications that will not compromise product quality or HACCP certification (e.g. equipment washing, rendering, steam production, etc.). - Wastewater management. In the past year Pronaca has made significant progress toward bringing facilities into compliance with existing Ecuadorian regulatory requirements for wastewater management. Using clean production techniques Pronaca has significantly reduced facility water demands and process wastewater volumes and installed primary (physical-chemical) wastewater treatment. With the advent of revised Ecuadorian regulatory requirements, Pronaca must supplement existing systems to bring all facilities into compliance. Accordingly, Pronaca is implementing a major program to upgrade wastewater management at all of its facilities. IFC will provide assistance in this endeavor by funding an international consultant to visit Pronaca operations and to advise on viable and preferred secondary treatment alternatives for each facility. Using this input the sponsor will finalize its Environmental Improvements Investment Plan defining the approach for each facility and associated costs. On the pig farms, the capacity of existing facultative ponds is being evaluated to ensure that they can accommodate actual organic and hydraulic loads and to thereby reduce odors. In general poultry rearing operations generate little wastewater but specific issues at hatcheries (e.g. albumin management) are under evaluation and will be resolved as part of the wastewater management program. Process wastewater management at Santo Domingo (slaughter of 600 pigs/day and 4,000 birds/hour), at Bucay (6600 birds/hour), at Yaruqui (2400 birds/hour), and at Pifo (value added meat products) is the principal compliance issue. Recently installed primary wastewater treatment systems at the major operations were until recently adequate to meet Ecuadorian environmental requirements for discharge to surface waters. However, secondary treatment is now required to produce a final effluent that complies with new regulatory and IFC guideline limits. Other facilities that discharge to municipal systems (e.g. distribution centers in Quito and Guayaquil) must pre-treat process wastewater prior to sewerage discharge. Specific, planned projects to achieve this goal will be defined in the Environmental Improvements Investment Plan described in detail in the attached CAP. - Air emissions. Pronaca facilities consume electrical energy from the national grid for all operations. Standby generators, which operate typically <500 hours/year are used to provide power in the event of outages at most operations. Air emissions from existing facilities emanate from diesel fuel-fired boilers used for production of heat and process steam and rendering. Existing air emissions measurements at Santo Domingo, Bucay, Yaruqui, and Pifo and other operations are being collected to determine if particulate, NO2, and SO2 are in compliance with Ecuadorian regulatory and IFC guideline limits for air emissions. Quantitative data reports will be submitted to IFC in accordance with the attached CAP. - Solid waste management. Solid waste from poultry rearing is collected and used to prepare compost for agricultural fields. Water intensive practices in swine rearing will be phased out through the use of a deep bedding approach utilizing rice hulls on the floors of rearing sheds. Deep bedding ultimately yields a byproduct that is being used beneficially on agricultural fields as fertilizer and a soil amendment once it has been composted. Subsequently, the compost may be used for agriculture. The largest volume of solid waste emanates from animal slaughtering and processing. These wastes are rendered on site and recycled. Other organic wastes such as treatment plant sludge will be evaluated for incorporation into existing composting operations to ensure maximum use of operations byproducts. A new company-wide composting project for total organic solid waste management is currently under evaluation and will be implemented in accordance with the attached CAP.

The following supporting documents provide further details of environmental and/or social issues and the corrective measures and completion schedules require to achieve compliance. Corrective Action Plan (CAP) – attached.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

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: - the status of implementation of all ameliorative measures contained in the Corrective Action Plan (CAP) and - ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.