Debt for Nature Swap - PowerPoint PPT Presentation

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Debt for Nature Swap

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  1. Debt for Nature Swap

  2. 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.

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. Contributions • 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

  9. Downfalls • 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

  10. Upside • 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

  11. The end