“The EIB has financed a Club Med hotel! In Morocco!” I remember that I thought of it as a silly joke when I first heard the news earlier this year. “I know where I’m going on holiday”, I contemplated, continuing in a silly vein. Yet silliness became a reality shortly after. The EIB was very serious about its investment in the Moroccan tourist sector. And since we were on a fact finding mission in Morocco we decided to make a short stop off in Club Med Yasmina on Morocco’s north coast, the beneficiary of a €14 million EIB loan.

I had never been in a Club Med village – jargon for resort – before but, as my brain makes countless associations any time of the day, I could somehow imagine what was ahead of me. Apart from ‘decadence’, ‘neo-colonialism’, ‘a cheap holiday in other people’s misery’, I may have also thought of some positive economic consequences resulting from this resort. However, for one thing Club Med and ‘sustainable development’ was not a linkage that materialised in front of my eyes after a couple of days there.

The EIB defends the financing of this project for three principal reasons: 1) A Club Med hotel fits within the government’s priorities to develop the tourist sector; 2) Since Club Med is a private company it is fully in line with objectives of FEMIP – the facility under which the EIB operates in the Mediterranean countries – to support private sector development and public-private partnerships, and; 3) Club Med will contribute to another part of the FEMIP mandate, the Millennium Development Goals, by alleviating poverty. This will result, the EIB argues, through securing and creating direct and indirect employment.[1]

Attempts by the EIB to act in line with its mandate and to align its operations with a particular government’s priority are surely positive, but only a minimum condition. Negative impacts have to be taken into consideration as well, and most importantly the question of additionality remains problematic.

Noxious growth

The tourist sector is one of the major drivers of GDP growth in Morocco[2], making the development of tourism a top priority for the government. This development, however, brings with it a serious impact. WWF has previously warned that “The Mediterranean is under threat due to the inappropriate practice and development associated with mass tourism. With current development models based on quantity, the projected growth of tourism development in the region will continue to damage landscapes, cause soil erosion, put pressure on endangered species, further strain available water resources, increase waste and pollution discharges into the sea and lead to cultural disruption.”[3]

For these reasons the government’s policy is under attack by certain Moroccan civil society organisations like AESVT[4], who told us that “Cabo Negro (the tourist area where the Club Med hotel is located) is an example of an ecosystem that has disappeared because of investments in large scale tourism. These are not the investments we want”.

“Everything is focused on the ‘sea, sun and beach’ type of tourism – ecologically the most vulnerable parts, while more sustainable types of tourism remain under exploited”, adds Nabil Lahcen, professor at the nearby University of Martil and a specialist in this issue.

Club Med is not very popular among local people. While the management has made considerable efforts to limit the use of water to an absolute minimum[5], local groups believe the actual use and maintaining of the village still amounts to a heavy burden on the environment.

What’s more, Club Med’s model of tourism, based on mass consumption (all inclusive), with a completely isolated village and aimed at rich Europeans but unaffordable for the Moroccan middle class, causes resentment. Nabil Lahcen told us: “I don’t consider Cabo Negro a part of our land. It is only accessible to an exclusive group of people from abroad who have no interest in this country or the people who live here.”

Which private sector?

The fact that FEMIP aims to reinforce the private sector is not a valid justification for this particular project. Moreover, I thought one of the reasons why the Lisbon Treaty explicitly mentions that the EIB has to deliver sustainable development in all of its lending outside the EU was precisely to avoid this kind of ‘furthering of EU interests’ that preferences the European private sector over the locally embedded one.

Club Med undeniably contributes to local employment and generates economic activity locally[6]. However, the concrete impact is hard to measure as we lack more detailed figures. From documents the EIB shared with us we only know that 77% of the staff is Moroccan. I saw some of them gardening, cleaning rooms or serving us, but do they also occupy management jobs? What percentage of the hotel’s revenue is reinvested or goes to wages? What percentage flows back to the shareholders or the directors, and what percentage finds its way off shore to Club Med subsidiaries in the Cayman Islands, Delaware or elsewhere[7]? We don’t know the answers and, I fear, the EIB might not know them either. Implementing clear criteria and evaluating projects remains a problematic gap in EIB’s operations.

Adding what?

Another question that remains unanswered is, as mentioned above, that of additionality – this is a common guiding principle for international financial institutions such as the EIB. This implies that the EIB should use its resources to arrange loans only for projects that, although financially and socially viable, have associated risks that make them unappealing to more commercial lenders – in other words, to make worthy projects happen that otherwise would not happen. Considering the limited scope of the project on the one hand, and the considerable financial means at the disposal of a large international actor like Club Med on the other hand, it’s hard to see why Club Med wouldn’t be able to raise the money for the expansion of its site on the markets.

If, let’s say, Coca-Cola wants to open a new factory respecting the highest standards, offering decent jobs and even depending on local commodities for the production process, would it be up to the EIB to support this with beneficial loans? Or should the EIB rather opt to invest this money in local companies producing local products but with difficult access to capital, and thus tell Coca-Cola it has enough opportunities to finance the factory itself?

Similarly a lot of small scale eco-tourism projects pop-up in equilibrium with society and the environment, probably generating more employment and economic activity per euro spent and without shareholders, foreign owners or tax havens pruning away profits. Yet it is Club Med which the EIB associates with sustainable development. This kind of reasoning may make one wonder whether the EIB is actually a suitable institution for delivering on sustainable development.

By Berber Verpoest, Counter Balance

Additional Facts[8]:

Promoter: Club Mediterranee S.A. is a French corporation which was founded in 1950 and today operates 76 villages in 26 countries around the world. It employs around 14,000 people and recorded 1.2m customers in 2010, with an annual turnover of €1.4 billion in that year. Club Med shares have been listed on the Paris stock exchange since 1966. Club Med became famous as the inventor of the “all inclusive” formula.

Borrower: Société Immobilière de la Mer (SIM) is an investment fund exclusively devoted to own and lease the hotel facilities operated by Club Med in Morocco. SIM is a subsidiary of Caisse de Dépôt et de Gestion (CDG) of Morocco.

Guarantor: Caisse de Dépôt et de Gestion (CDG) provides a first demand guarantee over the EIB loan to its subsidiary, SIM. As one of the first financial groups in the country, CDG is a Moroccan public institution operating under a strict government mandate since its foundation in 1959.

On 18/03/2011 the EIB approved a €14 million loan for the modernisation, upgrading and expansion of the existing, Club Med village Yasmina, on the northern coast of Morocco, close to the city of Tetouan. The Village is located in the middle of Cabo Negro, an area exclusively dedicated to large scale tourism.

The objective of the project (total estimated cost of €28 million) is to increase the number of beds from 621 to 916 and to extend the open period from 100 to 154 days a year. The promoter is Club Med, with the borrower making the village available to the promoter under an operating lease-type structure.

The hotel employs 250 Moroccan nationals, which represent 77% out of the total of 325 employees. The extension of the open period will increase employment by 135% in terms of Full Time Equivalents. The EIB expects a similar number of jobs, with the same extended season multiplier to be created or secured mainly in the local economy.

[1] ‘Proposal from the Management Committee to the Board of Directors’, document made available to us by the communications department of the EIB on 25 November 2011
[2] Services (including tourism) account for 51% of GDP in Morocco according to the CIA: https://www.cia.gov/library/publications/the-world-factbook/geos/mo.html
[3] WWF, 2001, Tourism threats in the Mediterranean. Unpublished background information. http://www.monachus-guardian.org/library/wwftou01.pdf
[4] ‘l’Associations des Enseignants de la Vie et de la Terre au Maroc’ is a local NGO concerned with sustainable development and eco-tourism. http://www.aesvt-maroc.org/
[5] All waste water is filtered and re-used, according to the EIB
[6] According to the EIB “More than 90% of supplies that are necessary to operate Club Med Moroccan villages come from Moroccan suppliers”
[7] We found registered subsidiaries of Club Med in the Cayman Islands and Delaware although Club Med doesn’t operate any other activities in those countries.
[8] This information is based on EIB sources either made available to us upon request by the Banks’ communications department or available on the EIB’s website.

[*] This paper accompanies a campaign video made by Counter Balance to question the EIB financing for Club Med Yasmina as a way to promote sustainable development. The paper is based on a fact finding mission to the project, documents made available by the EIB and conversation with local civil society organization. Its aim is to explain more thoroughly why we oppose this project and to provide additional background information.

The video is available here: