Case MLR Forestal: FPIC put in practice – building trust and strengthening collaboration through a land transfer process

“I am very impressed with MLR Forestal’s achievements. The company’s continuous and robust engagement with Indigenous communities has fostered a high level of trust, ensuring Free, Prior, and Informed Consent and a sustainable relationship, says Harold Gordillo, Environmental and Social Adviser at Finnfund.

On May 5, 2023, MLR Forestal, an agroforestry company operating in northeastern Nicaragua, finalised an ambitious and unprecedented project to transfer to the Mayangna Indigenous communities of the Mayangna Sauni Arungka (Matumbak) Territory 113.84 hectares of land with 44.28 hectareas productive of cocoa and teak. The transfer was done through a Free, Prior, and Informed consent (FPIC) process, guided by the communication protocols developed by the Matumbak community, the Nicaragua’s regulatory framework, and international best practices.

The land transfer process, which has spanned several years, did not originate from scratch. The successful process was based on long-term good cooperation.

“MLR Forestal, even before the territorial recognition, has maintained good relations with Matumbak, relations that gradually strengthened, which contributed to a successful land transfer process to this Indigenous territory,” says Luis López, Director of Sustainable Development at MLR Forestal.

FPIC aims to empower Indigenous peoples

FPIC is an international framework, that aims to empower Indigenous peoples to grant or withhold consent to investment, development, divestment, and any other proposal or program that may affect their rights to access their lands, territories, resources, and livelihoods. This framework provides the basis for ensuring that Indigenous peoples participate in decision-making through bottom-up, participatory processes.

The Mayangna Sauni Arungka Territory, known as Matumbak, is one of the nine Indigenous Territories in the Autonomous Region of the North Caribbean Coast of Nicaragua. Following the enactment of Law 445 and as part of the demarcation and titling process for Indigenous territories along Nicaragua’s Caribbean Coast, Matumbak was granted a territorial extension of more than 48,000.00 hectares. The recognition of this entire territorial extension was a significant achievement for this Indigenous population.

Within the framework of this territorial recognition, Finca Miranda was included within the communal property area of ​​Matumbak Territory, making MLR Forestal a “(bona fide) third party on communal land” as defined by Law 445, whose possession rights were also recognised by Matumbak to MLR in 2017.

Positive relationships and mutual trust as a basis

In the years following the territory’s titling, the Indigenous Territorial Government of Matumbak (GTI-Matumbak) and MLR began to establish a relationship, with MLR focusing on supporting three of the territory’s Mayangna communities located near Finca Miranda. Although it began as an informal relationship centered around in-kind support, the relationship was formalised in 2017 when GTI-Matumbak and MLR signed their first of many mutual cooperation agreement.

“From there, MLR has consistently maintained and fostered good relations with Matumbak, and through joint efforts, the company and the indigenous communities have continuously made a meaningful impact on health, education, environmental sustainability, and the management of natural disasters such as hurricanes and global pandemics,” Luis López explains.

For example, the company became a key ally to the Matumbak during the COVID-19 pandemic and the two consecutive hurricanes striking Nicaragua in late 2022, providing them with vital supplies, protective equipment, and, above all, preventive and critical information in their native language.

MLR committed to supporting the communities during and beyond the transition

In 2021, MLR, after evaluating its options under the law regarding a transfer of Finca Miranda and considering the potential costs and benefits for the communities and for MLR’s ongoing operations, MLR determined that it would propose to transfer possession of Finca Miranda to the communities of Matumbak. This proposal commenced as a preliminary suggestion to Matumbak, and gradually evolved into a well-developed concept.

The process was fully supported by Finnfund, MLR’s financier since 2019, who provided both technical support and guidance to apply FPIC and IFC Performance Standards.

“The idea of ​​transferring the land to Matumbak arose from weighing several factors. Among these was that the company was seeking to consolidate its operations in Siuna and not in Bonanza, where Finca Miranda is located. Since this farm is located within an Indigenous territory, and MLR has a long-standing tradition of good relations with the community, it made sense to transfer to the Matumbak community,” says López.  

“Therefore, if Matumbak took over direct management of the farm, the territory would stand to gain the most. Obviously, it was an idea that had to be well developed because, given the existing relationship with Matumbak, MLR wanted to develop a process that was not only fully consensual with the community, but also included MLR’s support during the transition and even after the transfer, to help ensure that the benefit was real and fully realised,” he continues.

Applying international best practices

According to national legislation guidance, namely Law 445, and international best practice, such as IFC performance standards, the company worked with national and international experts to develop a draft protocol for the transfer. This was based on and followed the Matumbak’s own FPIC Bio-Protocol, which provides a biography of their community, a clear explanation of their governance norms and how an FPIC process must be conducted for matters affecting their territory.

MLR also engaged Landesa, a US-based organisation, to advise and ensure that their process aligned with international standards and best practices, and worked with a local expert, a collaboration that still continues. Landesa visited the region, discussed with the community members, and participated also in their assemblies. Landesa has also continued to conduct yearly reviews to monitor the further development of the land transfer.

“As an impact financier, we are always looking at the effects of our investment on local communities and wider society. For companies in the forestry and agriculture sectors, inherently located in rural areas, long-term commitments, a strong focus on land use, and particularly a good relationship with local communities is vital for business sustainability.”

Peter Chappell, Investment Manager, Finnfund

Target: sustainable income and wellbeing for the region

Ultimately, the aim was not only to transfer the land titles but also to strengthen the relationship further and provide the communities with tools and means to continue to operate the agroforestry plantation for their own benefit as a source of sustainable income. The collaboration continues.

“As an impact financier, we are always looking at the effects of our investment on local communities and wider society. For companies in the forestry and agriculture sectors, inherently located in rural areas, long-term commitments, a strong focus on land use, and particularly a good relationship with local communities is vital for business sustainability,” says Peter Chappell, Investment Manager at Finnfund.

In addition to supporting the development of commercial operations and sustainability, the collaboration  includes financing an innovative biodiversity project to restore degraded forest land and conserve existing riparian forests with significant biodiversity potential in Siuna, close to the Bosawas Biosphere Reserve Buffer Zone. With the support of Finnfund, MLR has also conducted anonymous surveys among community members to gather feedback, and to gain knowledge about the life quality and living standards.

Robust consultation and other lessons learned

In their assessment of the process, Landesa emphasises the importance of a robust consultation and consent process. Careful planning and implementation may take time, but  pays off in strengthened trust and collaboration that benefits all parties.

The transfer or return of land from companies to rural communities – sometimes also referred to as land divestment or land relinquishment – is an emerging trend in various regions around the globe, driven by a range of factors such as increasing awareness of land rights, changes in companies’ land requirements, social justice concerns, and changing government policies.

Although, in general, the return can usually benefit a community, the process can include a number of challenges and risks to both companies and communities, such as unclear processes, resistance from investors or local interests, and environmental degradation.

“My colleagues and I have been honoured to participate in some of the official meetings, which have highlighted the mutual respect and open communication between the community and MLR. Additionally, a visit to Finca Miranda revealed the area’s very good conditions, maintained by the communities with the continuous support and technical guidance from MLR,” says Harold Gordillo at Finnfund.

“We hope this process will guide and benefit other companies  as a positive example of a land relinquishment process that follows international best practices and correctly applies an FPIC methodology, ultimately benefitting all key stakeholders, and generating sustainable local growth, biodiversity conservation, and transfer of knowledge ,” he concludes.

"We hope this process will guide and benefit other companies as a positive example of a land relinquishment process that follows international best practices and correctly applies an FPIC methodology, ultimately benefitting all key stakeholders, and generating sustainable local growth, biodiversity conservation, and transfer of knowledge."

Harold Gordillo, Environmental and Social Adviser, Finnfund

Julkaistu 23.1.2024