Debt for nature swap
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Debt for Nature Swap . Debt Crisis . During the 1980’s Latin America experience debt crisis International Monetary Fund and World Bank came in and put major constraints Decrease government spending Less imports/more exports Eliminate subsides Baker and Brady Plan in late eighties Etc. .

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Debt crisis
Debt Crisis

  • During the 1980’s Latin America experience debt crisis

  • International Monetary Fund and World Bank came in and put major constraints

    • Decrease government spending

    • Less imports/more exports

    • Eliminate subsides

    • Baker and Brady Plan in late eighties

    • Etc.


Debt crisis1
Debt Crisis

  • So then there is not surprise that there is a positive correlation between the debt crisis and environmental desegregation in developing countries.

    • Wood exported to generate revenue as well as the lands were used to cultivate crops

    • Hurting tropical forest to generate revenue


Idea

  • Thomas Lovejoy of the World Wildlife Fund proposed swapping debt for nature

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

  • Agencies such as World Wildlife Fund, Conservation International, Nature Conservatory


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

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

  • Then renegotiates the debt obligation with the debtor country

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


Three party debt for nature swap1
Three party debt-for-nature swap

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

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


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

More that $40 million has been invested in these programs

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


Contributions
Contributions debtor’s foreign debt is canceled or forgiven in return for local currency from the debtor government to invest in a domestic environmental protection project.

  • World Wildlife fund: $370,000

  • The Nature Conservancy: $370,000

  • Conservation International: $370,000

  • U.S. Government under the Tropical Forest Conservation Act: $5.5 million

    Amount of debt cancelled: $14.3 million over 16years


Downfalls
Downfalls debtor’s foreign debt is canceled or forgiven in return for local currency from the debtor government to invest in a domestic environmental protection project.

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

  • Dictators can exploit forest as a tool to gain money

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

  • Wont stop all tropical deforestation


Upside
Upside debtor’s foreign debt is canceled or forgiven in return for local currency from the debtor government to invest in a domestic environmental protection project.

  • Saving rainforest will help stop global warming, dramatic changes in the local climate, rise in temperature, decrease in rainfall

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

  • Brings environmental awareness


The end
The end debtor’s foreign debt is canceled or forgiven in return for local currency from the debtor government to invest in a domestic environmental protection project.


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