LETTER FROM AMERICA: Learn lessons from Nestle U-turn on Ethiopian debt

Nestle's embarrassing U-turn over its Ethiopian debt repayment demands provide valuable PR lessons for rival multinationals, writes US commentator Paul Holmes

Just because you can doesn't mean you should. Yes, food giant Nestle was within its legal rights to demand the repayment of £3.7m from the government of Ethiopia. The money was compensation for losses it suffered after a previous Ethiopian government nationalised back in 1975.

But you have to question the company's timing, attempting to extract money - enough to feed a million people for a month, according to the charity Oxfam - from the world's poorest state at a time when it is facing the worst famine in 20 years.

And when Nestle positioned its insistence on payment in full - the Ethiopian government had offered just under £1m - as a 'matter of principle', surely someone somewhere has lost sight of the human element in the equation.

According to a Nestle spokesman: 'In the interest of continued flows of foreign direct investment which is critical for developing countries, it is highly desirable that conflicts are resolved according to international law and in a spirit of fairness.'

In the same spirit of fairness, it should be noted that Nestle, after stinging criticism in the European media and demonstrations outside its UK HQ, announced shortly before Christmas that it would donate any money it received as a settlement into famine relief.

Perhaps mindful of the fact that many consumers remember Nestle's aggressive marketing of infant formula in developing countries, CEO Peter Brabeck told angry customers: 'We are not interested in taking money from Ethiopia when it is in such a desperate state of human need.'

But now it appears that Ethiopia faces an additional £310m in claims from creditors, many of them either wealthy individuals or smaller firms, less concerned about bad PR and less vulnerable to the threat of boycott.

Surely some mechanism must be found through which Ethiopia's debt can be forgiven, preferably one that also provides compensation to those who really need it. At a time when opposition to globalisation gains strength and support by portraying western capitalism as heartless and exploitative, why provide such compelling evidence that those charges are true?

If major corporations are truly interested in investing in the future and in convincing the rest of the world that people sometimes do come before profits, they may never get a better opportunity.

Who knows what the payoff will be if we convince the world that the bottom line is not the only value that matters to big business.

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