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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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Presentation Transcript
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
slide4
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
slide8
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
  • 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
  • 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
  • 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
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