Do Swedish ECAs support exports at the expense of human rights?
Executive Summary
Through its export credit agencies (ECAs) EKN and SEK, the Swedish state insures and finances Swedish companies' export. These operations are extensive. The Swedish ECAs have in their portfolios the responsibility for hundreds of billions of Swedish kronor, and in 2012 alone EKN guaranteed transactions of a value of 49 billion SEK in 123 countries.
In two previous reports, Amnesty International and Diakonia examined and followed up the extent to which EKN and SEK take account of human rights in their credit assessments. Although the follow-up report from 2012 showed that steps had been taken in the right direction such as greater transparency, new procedures and new policy documents, we can note in our third report that large gaps still exist.
In their policy instruments for the ECAs the government refers to the highest applicable international standards that exist when it comes to business and human rights: the UN Framework and Guiding Principles and the OECD Guidelines for Multinational Enterprises, but only in the ownership policyto SEK does the government require the UN Principles be observed. In its instruktions to EKN, the government only requires that EKN inform its customers of the UN Framework and Principles.
In addition, our report shows that both EKN and SEK in practice apply the International Finance Corporation performance standards, which do not live up to the UN Framework and Guiding Principles. Sweden's Policy for Global Development (PGD), which entails that all policies should promote human rights and equitable and sustainable development, is not mentioned in the State's ownership policy for SEK, but only in the instruktion to EKN. The PGD is not mentioned in either the EKN and SEK's own policies.
Examples: Eldorado and Suzanos mills
To assess whether the new policy documents and procedures are sufficient to ensure that state supported export activitites do not affect human rights negatively, we examined two of the deals EKN and SEK prepared and approved in 2012. They are classified as potentially high risk (category A) and are exports for the two large pulp mills in Brazil: Eldorado in the central part of the country and Suzano in the northeast.
Both mills are part of the massive expansion of the pulp and paper industry in Brazil. They employ more than 20,000 people for everything from the construction process to work on the hundreds of thousands of hectars of eucalyptus plantations that supply the mills with raw material. Previous experience with similar projects, both in Brazil and in other countries, show that there are serious risks with respect to the violations of human rights, specifically with respect to working conditions and poor people's access to land.
The continued lack of transparency makes it impossible to conduct a full assessment, but on the basis of the information we received from EKN and SEK we have determined that the project management of both the working conditions and land issues has been inadequate. None of the projects meet the requirements of international standards set for companies to identify and take action to protect vulnerable groups. For example, no trade unions have been consulted during the impact assessment. EKN has imposed requirements in contracts with companies to try to overcome these shortcomings, the results of which are not accessible for review.
Recommendations
1. In line with its international obligations Sweden must through legislative and/or updated instructions and ownership directives ensure that the guarantees and loans given to business exports do not cause or contribute to human rights violations. Sweden must apply the United Nations Framework and Guiding Principles fully in their export promotion by clarifying what is required of the ECA's impact assessments, so that it meets the requirements of due diligence set in the Guiding Principles.
2. Increased transparency and revised privacy directive
Transparency and access to information is essential for people to be able to participate in decision-making processes that may affect their rights, and in order to hold companies and governments accountable. Therefore, transparency around state supported export activities must increase dramatically. SEK must immediately be made to comply with the OECD recommendations on publication of project information for high-risk transactions. The government must review the institutions' openness principles and if necessary amend the legislation.
3. Ensure that PGD is fully applied to state supported export activity
The state must update its governance policy and make clear that ECAs activities are covered by the PGD. The Ministry for Foreign Affairs and the Ministry of Finance must develop a guidance document that clarifies what implications the PGU goals and perspectives have for the ECAs. Furthermore, EKN and SEK must develop their own policies in relation to the PGD, thus enabling project specific evaluations. An independent mechanism should be set up to evaluate the implementation of PGD for consistency and efficiency.
4. The regulations concerning arms exports must be improved.
The export of miliatry equipment is by far the largest and most controversial business that has ever been funded and supported by the SEK and EKN. Such transactions must be subject to public scrutiny. Transparency is of utmost importance so that these exports can be assessed from a rights' perspective and in line with Sweden's PGD.