24051 - Laredo Exp

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Environmental & Social Review Summary

Project Number

24051

Company Name

Agroindustrial Laredo S.A.A.

Date ESRS Disclosed

Sep 21, 2006

Country

Peru

Region

Latin America and the Caribbean

Last Updated Date

Apr 5, 2017

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Nov 8, 2006
Signed : Nov 22, 2006
Invested : May 23, 2007

Sector

Sugar and Confectionery

Industry

Agribusiness and Forestry

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

Empresa Agroindustrial Laredo S. A. A. (Laredo or the company) is one of the most competitive and fourth largest sugar producer in Peru. The project entails providing a corporate loan to Laredo to finance its capital expenditure program, which includes:

- the cultivation and planting of sugar cane on sand dunes, and
- the expansion of the company’s milling and refining capacity.

The project will allow Laredo to increase its sugar production and improve its productivity.

Overview of IFC's Scope of Review

The environmental impacts associated with sugar manufacturing can be fairly significant due to the nature of the operation:

- a large area of influence,
- considerable use of natural resources, and
- significant air and water emissions.

This environmental appraisal included the assessment of the Laredo existing mill and their plantations in Chiclin, and Arena Dulce. The following potential environmental, health and safety and social impacts of the projects were analyzed:

- Company’s management of its environmental, health and safety performance;
- Occupational health & safety and terms of employment;
- Resource use and waste production;
- Quality and sustainability of potable water supply;
- Control air emissions;
- Wastewater management;
- Ambient air quality and noise impacts on nearby receptors;
- Integrated pest management programs;
- Emergency preparedness and control;
- Management of solid and hazardous materials and wastes;
- Community relationships and community development, and use of security forces;
- Land acquisition;
- Cultural heritage and support its preservation.

E & S Project Categorization and Applicable Standard

Performance standards that are expected to be applicable for this investment may therefore include:

- PS 1: Social and Environmental Assessment and Management Systems,
- PS 2: Labor and Working Conditions,
- PS 3: Pollution Prevention and Abatement,
- PS 4: Community Health, Safety and Security,
- PS 5: Land Acquisition and Involuntary Resettlement,
- PS 6: Biodiversity Conservation and Sustainable Natural Resource Management,
- PS8: Cultural Heritage.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because it may create a limited number of specific environmental and social impacts that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria.

All corrective actions are listed in the attached Corrective Action Plan (CAP).

Environmental and Social Mitigation Measures

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow.

- Environmental & Social Management Systems:

Laredo operates their mill and plantations in a manner consistent with the requirements of Peruvian laws and regulations, and IFC performance standards. Laredo operations follow good manufacturing sector practices and are a benchmark for the sugar sector in Peru. Laredo has developed an environmental management program (PAMA) which includes a series of corrective actions and a preventive action plan. The environmental & social management is based on the requirements set by the national authority and IFC requirements. For the new development in Arena Dulce, Laredo will use the same management system framework based on IFC requirements. Laredo has done an assessment of the environmental & social impacts of the Arena Dulce Project. The client has internal capacity and has developed procedures to analyze the impacts and risks of the project.

- Labor and Working Conditions:

Human resources policies and practices follow, and in many areas exceed, national legal requirements and the IFC performance standard. Terms of employment and working conditions are in accordance with collective agreements and national labor law. The grievance mechanism needs to be reviewed to ensure transparency. Laredo ensures that child labor and forced labor is not used directly or through contractors. The client buys approximately 40% of their sugar cane from suppliers in the region. Although the region and the sector is not known to hire children or use forced labor, the company is not proactively asking their suppliers not to use child and forced labor. In order to improve their performance, Laredo will, in accordance with the CAP, include some provisions in their Human Resources Policy, review the Grievance Mechanism and their suppliers’ performance.

- Occupational Health and Safety:

Laredo has a good occupational health & safety system implemented in their mill and plantations. The company is proactive in preventing accidents, injury, and disease by minimizing the causes of hazards through a hazards assessment (evaluacion de riesgos laborales). The client has clear procedures and constantly monitors compliance. In order to improve their performance in health & safety in the plantations, Laredo will, in accordance with the CAP, reinforce training.

- Pollution Prevention and Abatement:

Cleaner Production Audit:

In December 2003, ERM did a Cleaner Production audit at Laredo. The recommendations were focused on sugar recovery and energy efficiency. Laredo analyzed the feasibility and appropriateness of the corrective actions to their process and decided to implement some of them.

CAP:

All corrective actions identified during appraisal of the previous IFC investment were completed by December 2003. This has been validated by the government authority and during appraisal.

Air emissions:

With the installation of the new boiler in 2005 the air emission level has improved and meets IFC standards. Burning of cane at harvest is the major air quality issue in Laredo. Laredo controls and manages the burning of the field closely to reduce inconveniences to the nearby community, avoid any accidents or spreading of the flames.

Energy use:

Steam and energy used is generated in a new 104MW boiler installed in 2005. It is working at approximately 75% of installed capacity. The fuel used is the bagasse generated at the mill.

Effluents:

Laredo continuous to work in order to improve the quality of their effluents. The effluents are segregated into 3 streams: domestic water which goes to a septic tank; cane wash water and process water which go to a pond system for treatment. The results after the treatment system are the following: 225 L/s of effluent, with an average BOD5 = 309 mg/L, DQO = 595 mg/L, and TSS = 203 mg/L. Effluent from the ponds are used for irrigation of the sugar cane fields. Effluent application rate is estimated to be about 10 m3/ha/day, which accounts for approximately 25% of the agricultural water requirement. Discharge of effluent to surface water or groundwater is understood to be improbable. Laredo will, in accordance with the CAP continuously improve the quality of their effluent and, monitor and report quality of groundwater.

Solid Waste:

Solid waste is managed in an appropriate manner and almost 70% is recycled and the rest is sold to third parties.

Hazardous Materials:

Laredo has implemented procedures for storage, handling, and disposal of hazardous materials and products.

Greenhouse Gas Emissions:

Currently Laredo has a 104 MW boiler, which supplies 100% of the mill’s energy consumption (88% utilization) at the present time. An additional 40 MW of power generation capacity will be added in 2007 to bring the total power consumption to 144 MW. Laredo has faced out the use of oil and uses 100% bagasse as fuel for their boiler. Laredo will, in accordance with the CAP, annually monitor and report direct emissions of GHG’s.

Pesticide use and Management:

Pests are controlled and monitored constantly in order to report to the government authority. All products used are certified and accepted by the authority DIGESA (Direccion general de salud ambiental) and SENASA (Servicio Nacional de Sanidad Agraria).

Specific points for Arena Dulce:

Laredo is constructing a water treatment system in order to treat the intake water coming from Chavimochic to be used in the drip irrigation system.

- Land Acquisition:

Laredo acquired land in Arena Dulce in January 2002. The land has been part of the Chavimochic Special Project since the completion of the second stage of the project in 1998. Laredo went through a detailed land acquisition process managed by CEPRI (institution of the Peruvian government). Laredo presented an economic proposal to CEPRI and was awarded 3,746 hectares of land at public auction. The amount of water assigned and permitted for Arena Dulce through the contract with Chavimochic is 10,000 m3 per hectare per year. The price for irrigation water per m3 consumed, is determined by the project administration.

- Water Availability and Sustainability:

Laredo uses water from different sources including rivers, wells, treated effluent from the mill, and water from the Chavimochic irrigation project. Laredo has 7,547 hectares of plantations in the valleys of Moche, Viru, Chicama and the Chavimochic Special Project . The total amount of water consumed is 106,566,140 m3 per year, mostly from the Chavimochic irrigation project. In average, Laredo uses 14,120 m3/ha per year.

From the information provided by Laredo and management of the Chavimochic project, Laredo’s operations are not threatening the sustainability of the water supply in the area. Laredo has permits from the government authorities for all their wells, monitors every month the level of the groundwater and is implementing corrective measures to recycle water in the production process. However, the water load rate at the mill is higher than our best practice level of 0.9m3 per ton of sugar cane processed. Laredo will, in accordance with the CAP, assess alternatives to reduce the water usage per ton of sugar cane processed at the mill and water usage at plantations. The broader issue of water sustainability in the area needs to be assessed and planned in a regional context in coordination with all stakeholders.

- Cultural Heritage:

The region where the mill and the plantations are located is known to have numerous cultural sites. The Peruvian national institute for culture (INC) monitors the area and any type of development needs to have a license from the INC. Due to the fact that Arena Dulce is located in an area where cultural heritage might be found, Laredo will, in accordance with the CAP, implement a Chance Finds Procedure.

Stakeholder Engagement

The company has a formal communication and engagement strategy with Laredo, the nearby community. The relationship is managed by the human resources department and any grievances or complaints from affected communities are handled by them. Approximately 75% of the people working at the mill are from the adjacent town of Laredo. Any new developments at the mill or the plantations are communicated to the affected community through monthly newsletters.

Client Documentation

File Name	Actions
CAP - Final.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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Environmental & Social Review Summary

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Environmental and Social Mitigation Measures

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