What is the debt-for-nature swap?

The debt-for-nature swap is a system launched by the World Wide Fund for Nature (WWF) in 1984 with the aim of encourage nature conservation activities in developing countries. It basically consists of the forgiveness of part of a country's external debt, or financing at a lower price, in exchange for environmental conservation initiatives.

It is a fact that the greatest biodiversity on the planet It is located in developing countries and, at the same time, it is these countries that suffer the greatest financial pressure due to indebtedness. At the beginning of the 1980s, in the midst of the debt crisis in Latin America, Thomas Lovejoy, from the WWF, proposed the debt-for-nature swap system as an opportunity to deal with two problems: indebtedness and the environmental effects derivatives.

Although the system was launched in 1984, it was not until 1987 that it was signed the first debt-for-nature swap deal. In that year, the Bolivian government signed an agreement with Conservation International. This organization acquired 650 thousand dollars of Bolivian debt at a price of 100 thousand dollars. In exchange, the Bolivian government promised to give the Maximum legal protection for the Beni Biosphere Reversecreate three new adjacent protection zones and contribute 250 thousand dollars for conservation actions in the Beni reserve.

How does it work?

The process of swapping debt for nature can be divided into two main types:

  • commercial swaps
  • Bilateral or multilateral swap

The commercial swap (financial swap) consists of a non-governmental organization (NGO) buying debt securities of a country in the secondary markets, generally through banks and financial entities. Later, the NGO returns the debt securities to the debtor country in exchange for environmental conservation policies or the provision of resources for the NGO to carry out these actions.

Among the NGOs that have used commercial swaps in favor of nature, we can mention Conservation International, The Nature Conservancy or the World Wide Fund for Nature.

On the other hand, nature-friendly swaps can also be made directly between two or more governments, somewhat rarer than commercial swaps. In these bilateral or multilateral agreements, the creditor countries forgive part of the debt to a debtor country in exchange for this country carrying out certain environmental commitments.

An example of a bilateral swap for nature occurred when the United States government forgave part of the debt to Jamaica in exchange for financing environmental conservation projects. The agreement was carried out under the Enterprise for the Americas Initiative and led to the creation, in 1993, of the Environmental Foundation of Jamaica.

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