Nestle Drops $6M Demand From Ethiopia

Nestle claimed the $6 million was owed by Ethiopia since the former regime lead by Haile Mengistu nationalized a livestock company owned by a Nestle subsidiary.

Ethiopia, in the middle of a ravaging famine that threatens millions of lives, had offered $1.5 million to cover the debt based on the assessed value of the company in 1975, the time of the nationalization, at the current rate of exchange. But Nestle rejected that amount, pushing for the rate of exchange between the dollar and the Ethiopian birr in 1975.

The World Bank, which had been negotiating on behalf of the Ethiopian government, reportedly expressed surprise at the hard line taken by the multinational which owns Nestle. "This $1m in our opinion is justifiable. But this is not the point of view of Nestle. They are trying to get as much as they can," said a World Bank spokesman in a published report.

Nestle had just about wriggled free from years of bad publicity over its aggressive marketing of babymilk formula in the developing world. In addition to baby formula, Nestle owns Perrier water, Haagan Dazs ice cream, Nescafe, dozens of candy bars, breakfast cereals and it recently acquired a majority stake in U.S.-based Dreyer's Grand Ice Cream.

Oxfam, a British aid agency, had condemned Nestle's stance, saying there was no justification for diverting Ethiopian Government money to a multinational which made profits of about $3.9 billion in the first six months of last year.

"This is a company that has said publicly that one of the things it wants to do in the world is to help make poor people better off. This is a company that is trying to squeeze out of one of the poorest countries in the world $6 million," said Oxfam's director of policy in the UK, Justin Forsyth.

After reviewing the harsh publicity it was receiving, Nestles chief executive, Peter Brabeck, agreed to accept the $1.6 million Ethiopia had offered to settle the case, adding that the sum would be donated to famine relief along with any other money from the final deal.

"We are not interested in taking money from Ethiopia when it is in such a desperate state of human need," said Brabeck.

Ethiopia, with average gross domestic product per person of just $100 a year, faces the prospect of its most serious famine since 1984 after drought caused widespread crop failures earlier this year.

With Nestle's claim off the table, the government still faces claims by other multinationals including another UK-based conglomerate reportedly asking for more than $20 million. According to a report by the BBC, up to 40 governments and individuals are making claims against the Ethiopian Government for money lost during the communist regime.