Tag Archives: Nature Conservancy

Exchanging Nature for Crushing Debt

In 2020 tourism in Belized dried up, growth contracted sharply and public debt jumped from just under 100% GDO in 2019 to over 125%. That forced Belize,  into a debt restructuring…As part of the deal, concluded on November 5th, 2021 Belize bought back its only international bond, a $553m, at 55 cents on the dollar. It funded that with $364m of fresh money, arranged by The Nature Conservancy, an NGO, which is insured by the International Development Finance Corp, an American agency. The transaction is backed by the proceeds of a “blue bond” arranged by Credit Suisse, a bank. The payback is due over 19 years. It is called a blue bond because Belize has pledged to invest a large chunk of the savings into looking after the ocean. That includes funding a $23m endowment to support future marine-conservation projects and promising to protect 30% of its waters by 2026…

Debt-for-nature swaps are nothing new. Lenders have been offering highly indebted countries concessions in return for environmental commitments for decades. But these transactions have historically involved debt owed to rich countries, not commercial bondholders. As Lee Buchheit, a lawyer who specialises in sovereign-debt restructurings, points out, they were “negligible in size”. In total, the value of debt-for-climate and nature-swap agreements between 1985 and 2015 came to just $2.6bn, according to the United Nations Development Programme. Of the 39 debtor nations that benefited from the swaps, only 12 negotiated debts of over $30m. “It was really an exercise in public relations,” Mr Buchheit says….

Other poor countries are trying to move in the same direction. At the COP26 climate summit in Glasgow Ecuador’s president Guillermo Lasso proposed enlarging the country’s Galapagos nature reserve through a debt-for-nature swap…Yet no amount of creative dealmaking can distract from the grim truth: many emerging markets still suffer from crushing debts.

Excerpts from Debt-for Nature Swaps: Reef relief, Economist, Nov. 13, 2021

Coercive Greening: debt-for-sea

The Seychelles is an archipelago of 115 mostly tiny islands, whose collective area, at 460 sq km, is only about a third of London’s. But the country’s granite islands and coral atolls sit within an exclusive economic zone of 1.4m sq km. It is here, in the ocean, that conservationists are working on a new way for small countries to protect their marine environment.

The Seychelles’ economy relies on tourism and tuna. These depend on healthy seas. But paying for conservation is a challenge, says Didier Dogley, the environment minister. So last year the country struck a deal with The Nature Conservancy (TNC), an American NGO. It promised to protect 30% of its waters by 2020—half of this area will be off-limits to fishing. In return, TNC bought up $21.6m of debt owed by the Seychelles to the Paris Club of international creditors. It will allow the country to pay it back at a lower interest rate over a longer period.

The complex deal took four years to thrash out. Still, not everyone is happy. Some fishermen worry that their favourite spots will become no-go zones….The blue economy is a new idea, but like the green economy it is catching on. The World Bank is backing a planned $15m “blue bond” for the Seychelles, which will fund sustainable fisheries. TNC is planning its own blue bonds, which would underpin deals similar to the one it agreed with the Seychelles. “I can see doing a billion dollars of these deals in a decade,” says Rob Weary, TNC’s financial guru…Already Mauritius is looking to copy parts of the Seychelles deal. Madagascar, Mozambique, Tanzania and the Comoro Islands have also shown interest.

Excerpts from The Seychelles: Debt Relief for Dolphins, Economist, Sept. 9, 2017