S.A. San Miguel A.G.I.C.I.y.F (“San Miguel”) is a world leader in citrus production and exports, with US$207 million consolidated revenues, 1,200 permanent staff and 5,500 seasonal workers, and operations in Argentina, Uruguay and South Africa. In 2009, San Miguel produced 250,000 MT of lemon on its own 5,500 Ha of plantations, exported over 73,000 MT of fresh citrus to Europe and Asia, and processed 275,000 MT of lemons to produce concentrated frozen lemon juice, essential oil and dry peel.

The proposed investment is for a US$5 million A loan for IFC’s own account and US$20 million B loan.

5.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	5.0
Equity

* These investment figures are indicative

San Miguel owns and operates several plantations in the Tucuman, a region in the northern part of Argentina where the climatic conditions and the quality of the soils is ideal for citrus growing. The company’s packing and processing plants are located in San Miguel de Tucuman and Famaillá respectively.

The project would help to: (i) improve the debt structure of the Company by replacing financial debt maturing in the next two years with long term debt; (ii) assist the Company to continue its investment program in a frontier region in Argentina (province of Tucuman); (iii) support the final completion of an innovative waste water treatment designed to adress the specific and difficult effluent issue faced by San Miguel; (iv) provide economic benefits for Tucuman, a frontier region, and benefit local farmers, workers and affiliated enterprises; (v) maintain the financial flexibility of San Miguel in order to continue its South-South investments in Uruguay and South Africa.

(i) Providing Long term financing: Long term financing is a core ingredient to San Miguel's capital intensive industry. Citrus plantations, with a useful life of about 30 years, are capital intensive. Securing adequate financing in Argentina is very difficult, even for an exporter with a strong market share and sound track record. Through the project, IFC would provide San Miguel with long term financing, which is more adequate for the capital expenditures and expansion plans of the Company; (ii) EHS standards and implementation: As a by-product of its lemon crushing plant, San Miguel produces a difficult industrial waste, which is highly acidic and buffered. Under IFC's supervision, the Company has carried out pilot scale treatments on site to test the efficacy of alternative systems and to identify a cost-effective plan. An innovative technical solution was selected, which entails three phases of implementation: (a) physical treatment of the oil and water emulsions created during extraction along with reuse of recovered oil; followed by (b) anaerobic treatment with the production of combustible gas; and finally (c) aerobic treatment. San Miguel is currently implementing phase 2. IFC involvement in the proposed project would ensure timely completion of phase 3; (iii) Stamp of approval: San Miguel is locally traded on the Buenos Aires Stock Exchange. Having IFC as a relationship lender supports the company's stable image in the market.

A long-term IFC client, San Miguel has evolved its operations to comply with IFC’s E&S requirements and applicable WBG’s EHS Guidelines and to increase its sustainability in accordance with good industry’s standards such as GlobalGAP; and, is nearing completion of a complex industrial wastewater management system. San Miguel, with the imprimatur of its internationally recognized food safety certifications in raw materials production and in processing, achieved 2010 revenue of US$207 million.

Identified Applicable Performance Standards

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

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 6: Biodiversity Conservation and Sustainable Natural Resource Management

The following performance standards are not applicable for the stated reasons: PS5: Land Acquisition and Involuntary Resettlement - not applicable as the company is not proposing any land acquisition based under this corporate loan. Any updates or enhancements to production capacity will take place within the existing industrial plant footprint. No expansion is planned for orchards; production increases will come from replanting old orchards with a denser planting regimen; PS7: Indigenous Peoples – company operations are not conducted in areas that impact indigenous peoples; PS8: Cultural Heritage - not applicable. The operations are located either in industrial parks or other highly disturbed areas that have been used for farming and industrial purposes for many years. Orchards are long established and are not subject to expansion.

E&S Categorization Rationale

This investment is categorized as a B as there are no elements of the project with diverse, unprecedented or irreversible, negative social or environmental impacts. Company operations are well known to IFC since more than 12 years.