Debt for Nature Swap Debt for Nature Swap

Debt Crisis Debt Crisis

During the 1980’s Latin America During the 1980’s Latin America experience debt crisis experience debt crisis

International Monetary Fund and World International Monetary Fund and World Bank came in and put major constraintsBank came in and put major constraints– Decrease government spendingDecrease government spending– Less imports/more exports Less imports/more exports – Eliminate subsides Eliminate subsides – Baker and Brady Plan in late eighties Baker and Brady Plan in late eighties – Etc. Etc.

Debt Crisis Debt Crisis

So then there is not surprise that So then there is not surprise that there is a positive correlation there is a positive correlation between the debt crisis and between the debt crisis and environmental desegregation in environmental desegregation in developing countries. developing countries. – Wood exported to generate revenue as Wood exported to generate revenue as

well as the lands were used to cultivate well as the lands were used to cultivate crops crops

– Hurting tropical forest to generate Hurting tropical forest to generate revenuerevenue

Idea Idea Thomas Lovejoy of the World Wildlife Thomas Lovejoy of the World Wildlife

Fund proposed Fund proposed swapping debt for swapping debt for nature nature

Conservation organization could take Conservation organization could take some of this devalued debt by buying some of this devalued debt by buying or donating and trade it for tropical or donating and trade it for tropical rainforest protectionrainforest protection

Agencies such as World Wildlife Fund, Agencies such as World Wildlife Fund, Conservation International, Nature Conservation International, Nature ConservatoryConservatory

Three party debt- for- nature swapThree party debt- for- nature swap

Conservation group purchases hard Conservation group purchases hard currency debt owned to commercial banks currency debt owned to commercial banks on the secondary marketon the secondary market

Then renegotiates the debt obligation with Then renegotiates the debt obligation with the debtor country the debtor country

Debt then generally sold back to the Debt then generally sold back to the debtor county for more than it was debtor county for more than it was purchased for by the NGO (non-purchased for by the NGO (non-governmental org) yet less than what it governmental org) yet less than what it was on the secondary marketwas on the secondary market

Three party debt-for-nature swapThree party debt-for-nature swap

Proceeds generated from the Proceeds generated from the renegotiated debt to be repaid in renegotiated debt to be repaid in local currency local currency

Then put into a fund that allocates Then put into a fund that allocates grants to local environmental groups, grants to local environmental groups, and debtor government and debtor government

A mechanism of exchange in which a certain A mechanism of exchange in which a certain amount of the debtor’s foreign debt is amount of the debtor’s foreign debt is canceled or forgiven in return for local canceled or forgiven in return for local currency from the debtor government to currency from the debtor government to invest in a domestic environmental invest in a domestic environmental protection project. protection project.

More that $40 million has been invested in More that $40 million has been invested in these programsthese programs

First swap was between Bolivia and First swap was between Bolivia and Conservation International which was a Conservation International which was a cancellation of $650,00 Bolivian debt in cancellation of $650,00 Bolivian debt in exchange for $100,000 in local currencyexchange for $100,000 in local currency

Contributions Contributions

World Wildlife fund: $370,000World Wildlife fund: $370,000 The Nature Conservancy: $370,000 The Nature Conservancy: $370,000 Conservation International: $370,000 Conservation International: $370,000 U.S. Government under the Tropical U.S. Government under the Tropical

Forest Conservation Act: $5.5 millionForest Conservation Act: $5.5 million

Amount of debt cancelled: $14.3 Amount of debt cancelled: $14.3 million over 16yearsmillion over 16years

Downfalls Downfalls

Not many banks and organizations that Not many banks and organizations that want to or can take on this type of want to or can take on this type of responsibility responsibility

Dictators can exploit forest as a tool to Dictators can exploit forest as a tool to gain moneygain money

Not a real option to alleviating debt for Not a real option to alleviating debt for Latin America. Costa Rica most successful Latin America. Costa Rica most successful country only managed to eliminate about country only managed to eliminate about 5% of all debt 5% of all debt

Wont stop all tropical deforestation Wont stop all tropical deforestation

Upside Upside Saving rainforest will Saving rainforest will

help stop global help stop global warming, dramatic warming, dramatic changes in the local changes in the local climate, rise in climate, rise in temperature, temperature, decrease in rainfall decrease in rainfall

Save forest that Save forest that which is home to 50% which is home to 50% of all plant and of all plant and animal species animal species

Brings environmental Brings environmental awareness awareness

The end The end