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This Environmental Review Summary is prepared and distributed in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision.
Any documentation which is attached to this Environmental Review Summary has been prepared by the sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Environmental Review Summary
Project number 11265
Project namePriceSmart Jamaica
CountryJamaica
SectorRetail (Including Supermarkets, Grocery Stores, etc.)
DepartmentGbl Ind, Manufact, Agribus & Services
Company namePriceSmart, Inc.
Environmental categoryB
Date ERS disclosedDecember 21, 2001
StatusCompleted
Previous EventsInvested: May 7, 2002
Signed: April 12, 2002
Approved: April 10, 2002

Project description
PriceSmart, Inc. (PSMT the company) is a retail enterprise established in 1997 and modeled after the first membership merchandising chain in the United States, Price Club. PSMT is a volume-driven merchandise and service provider, delivering quality, value, and low prices to the rapidly emerging consumer class in Central America, the Caribbean, and Asia through an effective and efficient pipeline that leverages economies of scale in aggressive buying, low-cost distribution, and streamlined operations. The company has grown at an average rate of 115% over the last 3 years.

PSMT’s expansion program in Jamaica involves the construction and operation of two membership-shopping warehouses in Kingston and Montego Bay. The 50,000 sq. ft warehouses will follow the successful concept adopted by PSMT in its expansion in Central America, other Caribbean islands, and more recently the Philippines. The stores will be located in highly visible, easily accessible positions, and in densely populated areas to appeal to middle income consumers. They will sell a variety of food and consumer goods with an emphasis on quality, low prices and efficient operations. The warehouses will typically carry a much smaller product range compared to supermarkets and will include apparel, food services, bakery, photo centers, tire centers, etc. Approximately 50% of sales will be derived from products sourced from the local market. The target customers will be consumers and small businesses. The shopping format will include an annual membership fee of approximately US$25 with expected annual purchases averaging US$1,250 per member.

Environmental Category B disclosure requirements
IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors.

The Summary of Project Information (SPI) provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

To view the Summary of Project Information(SPI) for this project, click here


Environmental and social issues
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because 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 or design criteria. The review of this project consisted of appraising environmental and social information submitted by the project sponsor. The following potential environmental, health and safety, and social impacts of the project were analyzed:
    § site selection and acquisition;
    § local impacts;
    § liquid and solid waste treatment;
    § source and adequacy of water supply;
    § power supply;
    § use of appropriate refrigerants;
    § building design and construction;
    § employment practices and worker health and safety;
    § fire safety and emergency preparedness; and
    § product sourcing.

Proposed mitigation for environmental and social issues
The sponsor has presented plans to address these issues and potential impacts to ensure that the proposed project will, upon implementation of the specific measures agreed, comply with applicable host country laws and regulations and World Bank/IFC requirements. The information about how these potential impacts will be addressed by the sponsor is summarized in the paragraphs that follow.

1. Site selection and acquisition. PSMT plans to construct a membership-shopping warehouse in Kingston and another in Montego Bay. The site for the Kingston warehouse will be purchased from Consolidated Bakery, Inc. Price Smart has reached an agreement to purchase the site. The company has also examined possible sites in Montego Bay, but has not secured one yet.

The Kingston site is located on Red Hills Road, approximately 1.5 kilometers from the principal intersection of Dunrobin Avenue and Red Hills Road. Immediately across from the site, on the opposite side of Red Hills Road, is a commercial development, including a variety of small shops. Across Valentine Drive, to the south, is a middle class residential neighborhood. To the north of the site is a storm drainage canal. No sensitive areas are present in the immediate proximity of the site.

The land for the Kingston site will be purchased from Consolidated Bakery, Inc. In order to build the site, PSMT will demolish the administrative offices of Purity Bakery, an operation owned and managed by Consolidated Bakery, Inc. As a condition of the Purchase Agreement, PSMT will be required to provide funding to Consolidated Bakery, Inc. for the reconstruction of the demolished facilities in an area closer to Purity Bakery and outside the PSMT site.

PSMT has not secured a site in Montego Bay, but is committed to purchase or lease a site in a commercial area, after undertaking a formal site review, which will identify the necessary development actions, such as site clearance, access road construction and traffic management, pedestrian access, utility connections, water treatment or connections, parking and security. PSMT is also committed to undertake and provide IFC with details of all future land acquisitions and to comply with World Bank policies and guidelines. Although not anticipated, land acquisition requiring the involuntary resettlement of dwellings or businesses will be subject to the preparation of a Resettlement Action Plan to deal with such situation in compliance with IFC policies on involuntary resettlement.

2. Local Impacts. The main roads that will be utilized to access the Kingston site are Red Hills Road and Valentine Avenue. Red Hills Road is a major road in this area of Kingston. It has two-lanes in each direction for most of its length. As Red Hills Road serves as a principal connector to Dunrobin Ave. from the northwest neighborhoods, the traffic on this road is relatively heavy. The traffic varies according to commuting patterns and thus becomes more intense during certain morning and evening hours. The proposed site is on the “Go Home” side of the road, creating ease of entrance and exit. Valentine Avenue has one-lane in each direction and provides accesses to both the residential neighborhood and the commercial development to the south of the site. The site is not expected to have a significant negative impact on overall traffic density due to its proximity to major arterial roads. Price Smart will propose to the local authorities the installation of a traffic signal at the intersection of Red Hills Road and Valentine to assist in traffic control.

The “bulk buy” nature of PSMT business model means that most shoppers will arrive by car; however, public transportation will also be available; a scheduled bus route runs along Red Hills Road. PSMT will install a bus stop with direct access to the store in order to facilitate access for customers using public transportation.

3. Liquid and solid waste treatment. In the area where the Kingston store will be located, there is no municipal sewer system in place. PSMT will install an on-site wastewater treatment plant with the capacity to remove all solids and to allow an effluent discharge of Biological Organic Demand (BOD) not to exceed 15 mg/l. The treated effluent will be discharged to seepage pits on the site. Where determined to be necessary, grease traps will be installed on kitchen wastewater outlets. PSMT is committed to install and operate a wastewater treatment plant in the Montego Bay store or any other future store located in areas where public services are absent or performing inadequately.

The solid waste generated by PSMT will be treated as follows: (1) cardboard packaging will be segregated and pressed bound and will either be sold or given to local recycler providers; (2) other non-recyclable waste will be collected in special containers and removed by private and/or public carriers; (3) spoiled or not acceptable quality produce will be collected in enclosed containers and disposed of by private and/or public carriers; and (4) grease trap collections and meat trimmings will be collected by local companies to be used for rendering purposes.

4. Source and adequacy of potable water supply. The municipality is expected to supply potable water for the Kingston site. PSMT will determine if the quality of the water and the reliability of the service provided by the municipality meets PSMT standards. If this is not the case, the company will install a private well to supply its needs. Similar procedures will be followed in the Montego Bay site if the municipal water supply is unavailable, unreliable or of poor quality.

5. Power supply. The Jamaica Power System will supply electrical power for Price Smart operations. The company will have diesel powered back-up generators. The diesel storage tanks will have appropriate secondary containment areas.

6. Use of appropriate refrigerants. PSMT utilizes R-134a type refrigerants for the air conditioning systems and R-507 for the refrigeration systems. PSMT will not utilize any refrigerant containing CFC's products.

7. Building design and construction. PSMT has corporate design codes that must be followed by the Jamaican stores. Store design is a single story, steel and concrete structure. No asbestos containing materials have been, or will be used. Internal fit-out is basic steel racking. PSMT also has corporate construction guidelines, compliance with which forms part of the contract with successful contractors. The guidelines include worker safety, good neighbor initiatives and sanitation and hygiene requirements. PSMT project controllers will issue violation notices and related fines when non-compliance with construction guidelines is observed.

8. Employment practices and worker health and safety. PSMT has corporate procedures for recruitment, which will be used by PSMT Jamaica to produce country-specific handbooks and other materials for employees. Employee Handbooks from several countries in which PSMT operates were provided to IFC. They cover PSMT's corporate policies and objectives, employee rights and responsibilities, grievance and disciplinary procedures, safety procedures and benefits. Appropriate training and protective equipment is provided to employees working in food preparation areas or undertaking other activities with health and safety risks (e.g. heavy loads). PSMT employees and supervisors receive periodic workplace safety training. The training covers potential safety and health hazards and safe work practices and procedures to eliminate or minimize hazards. In addition, PSMT has developed a safety and accident prevention program as well as an emergency procedures and evacuation program.

9. Fire safety and emergency preparedness. PSMT’s fire safety and fighting system includes the installation of smoke detectors throughout the sales area and in key service areas of the stores. The smoke detectors will be connected through the control panel to a local monitoring system. Hose cabinets are provided with a 6,000-gallon water back up and fire pump to generate 30 ft hose stream.

10. Product sourcing. Approximately 50% of Price Smart stock will be sourced locally via wholesalers. In time, it is anticipated that direct relationships will be established with local suppliers, particularly for food produce. The stores will not be stocking hazardous materials such as gasoline or LPG. Purchasing procedures will include a review of suppliers' workplace conditions, including compliance to labor laws and prevention of harmful child labor.

Conclusion
Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environmental and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

Monitoring and compliance
IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: (i) current status of each store location (e.g. construction, operation), (ii) performance against key indicators at each location. Key indicators will include:
    § number of complaints received at each store (e.g. for littering, noise, traffic congestion) and how these have been resolved;
    § number of workplace accidents (to staff or customers) and the preventative measures put in place as a result;
    § waste management initiatives, such as increased re-use or recycling;
    § maintenance of good relations with employees, customers, suppliers, neighbors and the local authorities.
Periodic site supervision visits may also be conducted.


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