Conservation news

United Cacao responds to bid to remove company from London Stock Exchange

  • United Cacao is affiliated with several industrial agriculture projects in Peru, including cacao and palm oil plantations.
  • Conservation and indigenous organizations issued a letter to the London Stock Exchange in early May, alleging United Cacao’s illegal activities in Peru break the market’s rules and it should be removed from trading.
  • In a response statement, United Cacao contends its activities are legal despite accusations of land grabbing by local communities and strong evidence of illegal clearing of primary forest.

Last week, dozens of indigenous and nongovernmental organizations issued a letter to the London Stock Exchange (LSE) and UK market regulators urging them to remove UK commodity company United Cacao from trading. They cited numerous legal issues that they say violate the rules of the Alternative Investment Market, the branch of the LSE on which United Cacao is listed.

United Cacao has responded, refuting some of the allegations in a short statement published May 5 on the LSE website. It asserts that its environmental reporting documentation that assesses a project’s impact on the land and local communities, commonly called a PAMA, had been initially approved in 2013 by “the relevant authorities,” and that the company is awaiting final approval.

“The Company operates in full compliance with all applicable Peruvian and environmental laws relating to planning, land use, development, operation and plantation standards,” the statement reads. “It operates on freehold land zoned for agricultural purposes by the relevant government authorities of Loreto, Peru.”

United Cacao’s statement seems to be referencing its huge cacao plantation in Peru’s northern state of Loreto, which it is developing through its subsidiary, Cacao del Peru Norte. Touted by United Cacao as “sustainable,” research indicates much of the nearly 2,500-hectare plantation was carved out of primary rainforest (which the company refutes). However, this land may be technically zoned for agriculture, due to a “small hole in our laws,” said José Alvarez, director general of biodiversity with the Ministry of the Environment, in a previous interview with Mongabay. This “hole” is a legal classification of agricultural land based on soil and climate conditions, and it doesn’t directly consider land cover, be it fallow fields of dense forest.

Under this ambiguity, Loreto’s regional court ruled in favor of United Cacao in April 2015, allowing them to continue plantation development. United Cacao asserts Peru’s Federal Supreme Court later upheld this ruling — but a report by the Environmental Investigation Agency (EIA) says the case is ongoing. Furthermore, EIA alleges the company’s failure to disclose this information is in violation of the rules of the Alternative Investment Market (AIM), the branch of the LSE under which United Cacao is listed.

“This omission appears to violate AIM Rule 11, which states that ‘[a]n AIM company must issue notification without delay of any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the price of its AIM securities’,” the report states.

Peru has other laws that protect standing forests from conversion – particularly primary forest. And through these, the Peruvian government had previously issued a stop work order at the federal level to Cacao del Peru Norte in December 2014. Interviews with local residents conducted by EIA and Mongabay indicated that plantation development continued illegally despite the order. An analysis by the Asociación para la Conservación de la Cuenca Amazónica (ACCA) and submitted to the Ministry of Agriculture also detected plantation activity between December 21, 2014, and March 3, 2015.

A monkey frog (Phyllomedusa bicolor), one of the many denizens of Peru’s rainforests. Photo by Rhett A. Butler.

United Cacao and its CEO, Dennis Melka, have long contended that its plantation is not being cleared from primary forest. In an unconfirmed interview with DirectorsTalk Interviews, a finance and investor site that purports to hold question-and-answer sessions with “leading CEO’s and Directors on the London Stock Exchange,” Melka was asked once again if development of his company’s cacao plantation is taking place in primary forest.

“Absolutely not and let me give you a very simple reason, it is illegal in Peru for the government to allocate land title to anybody if that land is primary rainforest, it’s simply not possible, title and primary rainforest are mutually exclusive in the Peruvian legal definition,” said Melka in the May 6 interview. “So, absolutely not, this is titled agricultural land and in no way has been in the past through the titling process to be determined as primary rainforest so simply not possible, no chance at all.”

However, Melka’s contentions appear to contrast with the available data. Independent analysis of the forest cover displaced for plantation development strongly indicates most of the area supported dense, primary rainforest before Cacao del Peru Norte came on the scene. Researchers with the Monitoring of the Andean Amazon Project looked at satellite imagery dating back to 1985 and concluded that no major deforestation events took place before 2013 when plantation clearing began. Through their study they concluded that nearly 98 percent of the site was covered in primary forest. Data from Greenpeace, World Resources Institute, the University of Maryland, and Transparent World show much of the plantation is situated in an Intact Forest Landscape, which is a particularly large, continuous, undisturbed tract of primary forest.

Satellite imagery from Google Earth shows the United Cacao plantation dwarfs the nearby town of Tamshiyacu.
Most of the plantation took shape in 2013 and 2014, with extensions added in 2015 and 2016. Global Forest Watch shows an uptick in deforestation activity happened in February of this year.

United Cacao also supports oil palm plantations in the country’s midsection that, like its cacao project, have attracted controversy. In September 2015, the government issued a stop work order to Plantaciones de Pucallpa, a United Cacao subsidiary overseeing one of the plantations, until it could prove the land was suited for agricultural purposes. However, local residents have reportedly said development still continued after the injunction. The Roundtable on Sustainable Palm Oil also recently ordered the company to cease activity on the plantation, citing claims made by local communities that allege development is happening on their ancestral land without their consent, and is displacing primary forest.

Editor’s note: this story was amended to include mention of the ongoing nature of the Supreme Court case as discussed in a report by the Environmental Investigation Agency.