IFC Says Making Extractive Industries Work for Local Communities is Key for Development and Business Success in Latin America
Lima, November 6, 2006 — The International Finance Corporation, the private sector arm of the World Bank Group, said on Thursday that oil, gas, and mining projects can help to reduce poverty in Latin America if the projects open up economic opportunities for local communities and if revenues are spent wisely.
Extractive industries are an important driver of development in many regions of the world with the sector accounting for more than 30 percent of exports or government revenues in over 40 countries. In Peru, mining alone accounts for about half of all exports and as much as 7 percent of government revenues.
In order to put this money to good use, it is often necessary to improve management and budget practices at both the national and local levels. In addition, projects need to open up business opportunities for local people.
“Enabling local communities and small and medium-sized companies to do business with the resource project and other firms is absolutely critical,” said Rashad Kaldany, Director of the IFC/World Bank Oil, Gas, Mining and Chemicals Department, at a conference hosted by IFC in Lima, Peru. “It is then that extractive industry projects become sustainable and generate lasting benefits.”
IFC finances private sector investments in developing countries, helps client companies to improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. For instance, IFC helps local governments in Cajamarca to enhance their capacity to manage mining revenues, while also building local civil society ability to monitor government spending.
IFC’s experience has shown that it is in businesses’ interest to ensure local people benefit and environmental damage is contained. Attention to social development and environmental preservation must be at the top of oil, gas, and mining companies’ agendas alongside economic considerations if they want to be successful in Latin America and elsewhere.
IFC in Latin America
IFC’s provides financing and technical assistance in Latin America and the Caribbean. Our products are:
· IFC’s Oil, Gas, Mining, and Chemicals Department catalyzes private investments by structuring innovative transactions and providing project finance, corporate loans, and equity/mezzanine support in the oil, gas, mining, and chemicals sector. IFC also provides enhancement products for capital market issuances.
· IFC’s financing for its own account can be complemented by third-party mobilization efforts from syndicated loan facilities under IFC’s B loan umbrella or capital market placements supported by dedicated IFC syndication specialists.
· IFC helps its clients to achieve their environmental and social goals, as well as to optimize project insurance management, through specialist expertise. We aim to implement policies and make investments that provide consumers with clean, affordable energy and chemical products that improve people’s lives, and foster the development of vibrant local industries that contribute to sustainable economic development and income growth.
· IFC’s Technical Assistance Facility for Latin America and the Caribbean, headquartered in in Lima assists local governments in improving the use of revenues from tax royalties from extractive industry operations.
· IFC’s Facility works with civil society in developing tools to monitor the use of tax revenues from extractive industries.
· The Facility also helps Medium and Small Enterprises (SMEs) to develop into credible and market-oriented suppliers that can respond to the demand of larger companies, strengthening local economies.
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit www.ifc.org.
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