IUF
Uniting Food, Farm and Hotel Workers World-Wide
Nestl� Must Drop All Compensation Claims Against Ethiopia
Posted to the IUF website 07-Jan-2003Share this article.
Creative minds at Nestl� headquarters are working overtime to minimize the public relations disaster arising from the company's pursuit of a USD 6 million compensation claim against the government of famine-stricken Ethiopia. Nestl� � with the World Bank acting as its enforcer � is demanding USD 6 million in compensation for the assets of a company nationalized by the former military regime in 1975. Nestl� bought the claim when it purchased the parent firm, the German Schweisfurth Group, in 1986. Ethiopia, the world's poorest country, has experienced severe and prolonged drought and an estimated 11-15 million people face starvation in the coming months. The money allegedly owed to Nestl� is roughly equivalent to one hour of the company's annual global turnover.
Stung by negative publicity, Nestl� has been scrambling to deflect criticism by emphasizing its commitment to "principle". On December 19, a company spokesman stated that it was "in the Ethiopian government's interest" to repay the claim: Nestl� was "flexible on the timing and the amount but we are not flexible about the principle." In an initial press release, the company declared its commitment "to invest the proceeds of the compensation negotiation in a long-term, viable investment in Ethiopia which will contribute to the economic development of the country."
When this approach flopped, the company ("now that we have had time to consider the issue more fully") came out with a new press release. Anxious to rectify "hasty communications and misperceptions about Nestl�", CEO Peter Brabeck declared that "We are not interested in taking money from the country of Ethiopia when it is in such a desperate state of human need." Nestl� now propose to devote the money from the settlement to relieving hunger in Ethiopia - once they have the cash in hand.
We find this an improvement, but still not good enough. Against a background of mass starvation, the only course for Nestl� is to renounce, immediately and unconditionally, their outrageous claim against the government of Ethiopia.
The problem is greater than the actions of one company. The "principle" Nestl� is seeking to defend � that poor countries must bow to the dictates of a "rules-based" system of investment which is stacked against poor commodity producers like Ethiopia � is not one which is shared by the vast majority of IUF members. Claims for compensation against a hungry nation whose economic output is less than the sums being demanded by transnational investors illustrate perfectly the unacceptable nature of the global corporate economy and the rules that currently govern it.
If Nestl� is serious about not taking money out of Ethiopia, it should set an example for the entire group of investors on whose behalf the World Bank is acting. It should show its seriousness by ..�not taking the money.