Palm Oil and Extreme Violence in Honduras: The Inexorable Rise and Dubious Reform of Grupo Dinant

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Planet or Profit

As one of the fastest growing global commodities, palm oil has recently earned a reputation as a major contributor to tropical deforestation and, therefore, to climate change as well.

About 50 million metric tons of palm oil is produced per year – more than double the amount produced a decade ago – and this growth appears likely to continue for the foreseeable future. Because oil palm trees, native to West Africa, require the same conditions as tropical rainforests, nearly every drop of palm oil that hits the global market comes at the expense of natural forests that have been, or will be, burned, bulldozed and replaced with plantations.

With deforestation garnering headlines due to forests’ crucial role in regulating the climate, global commodity producers, from Nestle and Unilever in Europe, to Cargill in the United States to Wilmar International in Indonesia, are recognizing the need to provide products that are “deforestation-free.” Other corporate-led initiatives like the public-private Tropical Forest Alliance that promises to reduce the deforestation associated with palm oil, soy, beef, paper and pulp, and the recent New York Declaration on Forests signed at the UN Climate Summit in New York, suggest that saving the world’s forests is now squarely on the corporate sustainability agenda.

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But what is being left behind is the other significant impact of palm oil and other agro-industrial commodities – namely human rights. Commitments to protect forests and conservation areas can, if well implemented, address environmental concerns by delimiting the areas of land available for conversion to palm oil. But natural resource exploitation is inextricably linked to human exploitation, and such commitments do little to address this.

A case in point is Grupo Dinant, a Honduran palm oil company that declared last month that it has been awarded international environmental certifications for its achievements in environmental management and occupational health and safety. Dinant has also been making overtures toward joining the Roundtable on Sustainable Palm Oil (RSPO), including hosting the RSPO’s 4th Latin American conference in Honduras in 2013. But, Dinant, which produces about 60 percent of the palm oil in Honduras, is at the center of what has been called “the most serious situation in terms of violence against peasants in Central America in the last 15 years.”

Owned by Miguel Facussé, one of the wealthiest men in Honduras, Dinant has been associated with the killings of over 100 peasant farmers, and appears to be involved in a virtual terror campaign to ensure control of a large swath of land in the Lower Aguan Valley near the Caribbean coast of Honduras.

While credible human rights groups like Human Rights Watch denounce the killings and note that “virtually none of the crimes are properly investigated, let alone solved,” Dinant continues to enjoy financing from the World Bank’s International Finance Corporation, support from the United Nations Clean Development Mechanism, and brand relationships with multinational consumer goods companies such as Mazola Oils.

The Aguán Valley and the Introduction of Palm Oil

The Bajo Aguán Valley, one of the most fertile regions in Honduras, has long been a center of agrarian conflict. In her book Grabbing Power: The New Struggles for Land, Food and Democracy in Northern Honduras, researcher Tanya Kerssen reaches back to the 1950s to show how a struggle between farmers’ associations and multinationals Standard Fruit and United Fruit Company set the scene for the land concentration that reigns today. Decades of peasant struggle led to a brief period in the 1970s when the government distributed land to smallholder farmers from other parts of the country, who then formed cooperatives to bring crops to market. The embattled region became briefly known as the “capital of land reform” – but these reforms have long since been rolled back, in part due to the country’s need to pay back its foreign debt.

In the 1980s, a combination of loans from the InterAmerican Development Bank (IDB) and bilateral aid allowed the Honduran government to construct a road network in the Aguan, as well as three palm oil processing plants and a modern port. Hoping to pay down its large debts to the IDB, the state-controlled mills bought palm from peasant cooperatives at rock-bottom prices, in return promising peasants eventual control over the processing plants. In the early ’90s, an “agrarian modernization law” was passed with support from the World Bank and the US Agency for International Development that again stimulated large land purchases and made the Aguan Valley the national poster child for re-concentration of land.

Land Re-concentration, Rise of Grupo Dinant

Over the next several decades, cooperatives and smallholders were coerced into selling their land to powerful landlords, often through intimidation and manipulation, from bribes of peasant leaders to threats and outright violence – tactics that continue to reign in the region to this day. Peasant farmers in the Aguan again found themselves as day laborers on large plantations, working hard for little pay. In a few years in the early ’90s, more than three-quarters of the land in the Aguan Valley was re-concentrated into the hands of a few Honduran oligarchs. One of these landlords was Miguel Facussé.

Among the wealthiest men in Honduras – and now the richest – Facussé established a series of food commodity businesses, culminating in 2005 with Grupo Dinant. Dinant produces cooking oil, snacks, and other food products, as well as biofuels. To do this, the company took a $30 million loan from the World Bank’s International Finance Corporation and a $7 million loan from the InterAmerican Investment Corporation (IIC). Trade liberalization also enriched Facussé: Both Unilever and Proctor & Gamble gained important footholds in Central America by acquiring distribution networks and brands owned by Facussé. The profits and the status conferred on Dinant through such purchases enabled more land purchases in the Aguan Valley, furthering the concentration of land.

In 2001, farmers in the region organized as the Unified Peasants Movement of the Aguán Valley (MUCA), with the aim of reclaiming their land rights through the courts. With legal routes exhausted, in 2006 they began land occupations. In June 2009, they occupied one of the palm oil processing plants of Exportadora del Atlántico, part of Grupo Dinant, provoking then-President Manuel Zelaya to promise to investigate the land rights issue. However, Zelaya was removed in a coup later that month.

The Killing Years

While violence had long been present in the region, the months following the coup saw a dramatic increase in killings. As of October 2010, a year after the coup, 36 small-scale farmers had been killed. None of these cases were resolved or brought to court, but as a result of the escalating violence and murders, the government militarized the area. During this time, Dinant became implicated in the murder of dozens of peasants.

In 2011, FIAN, an international NGO working for food rights, produced a report on human rights violations in Bajo Aguán, documenting “evidence of the involvement of private security forces hired by Dinant and other companies owned by Miguel Facussé in human rights abuses and, in particular, in the murder of peasants in Bajo Aguán.”

The government was eventually forced to convene both MUCA and the company to negotiate a deal in June 2011. The government agreed to distribute some 30,000 acres to the farmers, including 12,000 acres where oil palm has been planted by Exportadora del Atlántico – not by giving the land back, but by selling it at market prices. The company agreed to the proposal, but later announced it wanted to renegotiate it. In protest, other peasant groups began land occupations, exposing themselves to violent evictions by state security forces.

A 2012 public hearing on the human rights situation in the peasant communities of the lower Aguán concluded that the agrarian conflict there is the “most serious situation in terms of violence against peasants in Central America in the last 15 years.” By April 2013, at least 89 peasant farmers had been killed in the Aguan Valley.

Precise numbers are difficult to verify however; to quote Human Rights Watch, “Honduras is notorious for ineffective investigations.” Former Attorney General Luis Alberto Rubi told the Honduran congress in 2013 that 80 percent of homicides go unpunished; of 73 killings recognized by the government to be linked to land conflicts, seven have been brought to trial, and none has resulted in conviction. Human Rights Watch affirms that government security forces themselves have committed human rights violations including arbitrary detentions and torture.

The Role of International Financiers

In 2008, the International Finance Corporation (IFC) of the World Bank approved a $30 million loan to Dinant, to be delivered in two tranches of $15 million each. When the June 2009 military coup ousted the democratically elected president and violence in the Aguán Valley escalated, the IFC put disbursement on hold, but the first tranche was eventually distributed.

In its assessment of the potential concerns under IFC’s Policy on Social and Environmental Sustainability, the IFC noted that “a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, design criteria, local regulations and industry certification schemes. Land acquisition is on a willing buyer-willing seller basis, and there is no involuntary displacement of any people.”

This proved to be far from the case, as the IFC could have easily foreseen.

The Inter-American Development Bank approved a loan for $7 million in June 2009, but never signed the agreement with the company and never paid anything out. A spokesman for the IADB said at that time, “In the case of Dinant, there was a significant shift in a number of matters surrounding the project that led us to reconsider. The political turmoil Honduras experienced in 2009 was one of the aspects affecting this decision. Other considerations included . . . a controversy over real estate ownership.”

Following the coup, Dinant became implicated in the murder of dozens of peasants. Killings have continued with complete impunity, the region around the plantations has been heavily militarized, and long-standing peasant communities have been violently evicted.

When FIAN’s 2011 report was brought to the German development bank DEG, the bank confirmed FIAN’s findings and canceled a $20 million loan to Dinant, “with a view to the evolving agrarian conflict in the Bajo Aguán region.” French company EDF Trading also cancelled a contract to buy carbon credits from Dinant, indicating that it was “taking the situation in Honduras very seriously.”

By contrast, the World Bank’s International Finance Corporation has been stubbornly defensive about its $30 million relationship with Dinant. IFC claimed in 2008 that: “Dinant understands the importance of having good relationships with their neighboring communities and are quite proactive in this regard.”

In April, 2010, the IFC requested that Dinant hire an international security consultant to assess its security program and to provide training for the company’s security forces. The IFC said that the consultant would “work with Dinant to develop a Corporate Security Policy and Code of Ethics based on the UN Voluntary Principles for Business and Human Rights.”

Given the impunity that reigns in the region, reform of Dinant’s security force would prove to be a challenge. Human Rights Watch investigated 29 killings in the Aguan Valley and reports that 13 of the 29 killings, and one disappearance, suggest the possible involvement of private guards. The same report notes that Honduras has more than 700 registered private security firms, and numerous unregistered firms; the UN working group on the use of mercenaries reports that private security guards outnumber police in Honduras by a ratio of 5 to 1.

In December of 2013, an independent audit by the CAO Ombudsman of the IFC, a semi-independent body charged with overseeing the environmental and social safeguards applied to IFC loans, issued a stinging critique of the IFC for having failed to follow its own requirements.

“According to civil society source,” the CAO investigation states, “there were at least 102 killings of people affiliated with the peasant movement in the Bajo Aguán between January 2010 and May 2013, with specific allegations being made linking 40 of these to Dinant properties, Dinant security guards or its third-party security contractor. Allegations in relation to the killing of at least nine Dinant security personnel by affiliates of the peasant movement have also been made.”

Still, the IFC rejected several of the CAO findings. Despite a list of demands sent to the World Bank by 70 civil society groups, the World Bank has yet to withdraw funding from the project. Instead, the IFC put in place an “enhanced action plan,” which requires Dinant to adopt voluntary security protocols and to “engage stakeholders” in order “to better understand the issues currently impacting communities and to bring strategic focus and overall coordination to Dinant’s existing corporate social responsibility programs, such as funding for school teachers, clinics, and conservation programs.” Nothing in the plan considers turning over land to local communities, and there is no mention of sanctions, or loan withdrawal for failure to comply.

The IFC’s refusal to disengage is especially troubling in light of the World Bank’s recent safeguards review, which seeks to weaken the bank’s environmental and social safeguards and to shift responsibility toward borrowing governments themselves. In October, 2014, over 100 civil society groups denounced the World Bank’s efforts, but no concrete response has been forthcoming.

Flex Crops and Consumer Campaigns

The rise of Corporacion Dinant as a leading palm oil producer in Central America is inseparable from its history as part of a long, violent and ongoing backlash against agrarian reform in Honduras. But it is also indicative of the ways in which a lucrative agro-industrial crop like palm oil, in a context of entrenched corruption and an authoritarian regime, lends itself to land grabbing and agrarian violence.

Palm oil production relies on cheap labor and large expanses of land to turn a profit. In order to be economically viable, nearly 10,000 acres of land are required to feed a single palm oil mill. But the economy of scale that palm oil demands to reap a profit is generally true across commodities – while palm oil is the particular villain in the case of Grupo Dinant, the problem is not the crop, but the agro-industrial model; decades ago with Standard Fruit, Honduras was the archetype of the banana republic; today with Dinant it’s an oil palm republic. Researchers have recently introduced the term “flex-crops” for crops that can be used for food, feed, fuel or industrial materia, and which lend themselves to land grabbing due to growing demand and the land area required to grow them.

Thanks to years of campaigning by environmental and human rights groups, the palm oil sector is undergoing what may be a sea-change: Palm oil producers and traders like Wilmar International, Golden Agri-Resources, and Unilever are adopting voluntary policies to improve their practices; consumer-facing companies including Colgate-Palmolive, General Mills, Kellogg’s and Procter & Gamble have strengthened their palm oil sourcing policies.

But the pressure to make these companies change comes from consumer companies who fear the brand damage that comes from sourcing palm oil that threatens orangutans and Sumatran tigers, and from financiers who have certain, albeit minimal, standards to uphold.

Anecdotal sources suggest that most of Dinant’s palm oil is exported to Mexico where it is bought by Grupo Bimbo – the commodity food conglomerate largely responsible for a vast increase in Mexican consumption of palm oil in junk foods. A campaign targeting Grupo Bimbo could gain some ground, but given the massive crisis of instability and conflict in Mexico, it seems unlikely. Dinant holds the license to use the Mazola trademark in Central America, but it is unclear whether the North American Mazola brand has any legal ties to Dinant that make it susceptible to consumer pressure.

Dinant is financed largely by a Honduran bank also backed by the IFC, and no US and EU financiers appear to hold shares in the company. As long as the IFC refuses to withdraw its financing and to push the company toward reforms that are unlikely to address the root problem, Dinant will maintain some credibility and will continue to produce some of the world’s bloodiest palm oil.