The cash-strapped Ethiopian government owes Nestle the money following Nestle's 1980s investment in a German company, which owned a stake in the Ethiopia Livestock Development Company, under a different regime to the present one.
Nestle is one of many companies claiming they are owed as much as $500m by the government of the sub-Saharan nation, while the Ethiopian government is warning that 11m people in the nation face starvation.
Initially, the Ethiopian government offered Nestle a payment of $1.5m, which the company turned down as "a matter of principle". However, the charity Oxfam discovered that the company was demanding the money and launched a viral campaign against Nestle -- already a favourite target of protesters because of its promotion of baby formula in third-world countries.
Despite mounting a PR offensive to minimise the damage to its reputation, Nestle has now backed down and agreed to take just the $1.5m, which it says it will immediately hand over to famine-relief efforts in Ethiopia.
The company had walked into a storm of media protest, with the PR team not aware of the fact that Nestle's lawyers were pursuing the claim. The initial response of the company was that it was a "matter of principle" that the government repay the money, and also that it would look better to foreign investors if the Ethiopian government honoured its debts.
However, after Oxfam's protest campaign, which spawned 33,000 emails prior to Christmas, and coverage in media such as Radio 4 and The Guardian, Nestle has rescinded.
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