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Debt for Nature

Debt for Nature was developed by Dr. Thomas Lovejoy in 1987 during his work with the

World Wildlife Fund.1 Environmental groups would purchase shaky foreign debt on the

secondary market at the market rate, which would be considerably discounted, and then convert

this debt at its face value into the local currency to purchase biologically sensitive tracts of land

in the debtor nation for purposes of environmental protection.2 Most of the world’s largest

rainforests are located in poor states such as Brazil, Indonesia, Malaysia, and Madagascar.3 “The

first swap that happened was in 1987 between the Bolivian government and Conservation

International.”

There are three main parties involved with a Debt for Nature swap: an international

conservation organization, a domestic conversation organization, and a developing countries

government. Some of the participants in the Debt for Nature swaps have been Madagascar,

Zambia, Bolivia, Costa Rica, the Dominican Republic, Poland, Nigeria, the Philippines, Brazil,

Panama, and Cameroon. The three most active international organizations, which are all based in

the U.S., are Conservation International, The Nature Conservancy, and the World Wildlife Fund. 4

The steps needed don’t vary much from state to state. The conservation organizations provide a

proposal to the developing countries government, seeking an agreement. Once an agreement has

been reached, they have the World Bank convert the state’s debt into the local currency. The

currency is converted into bonds, which go into an environmental trust. The funds in this trust

are used to fund conversation projects. The US came up with the Tropical Forest Conservation
1
Brijesh Thapa, "The relationship between debt-for-nature swaps and protected area tourism: a plausible strategy for
developing countries."
2
"Thomas Lovejoy -." Wikipedia, the free encyclopedia. 30 April 2009
3
International Relations 8th, Pearson Longman, 2009, pg 396
4
Debt-for-Nature Swaps: A Critical Approach, Andrew Kessel, Fall 2006

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Act of 1998, which would authorize $400 million over three years to finance debt-for-nature

swaps. The program could offer debt relief to certain developing countries, provided these

countries agree to establish special funds in their own currencies for conservation programs.5

The biggest thing once the agreements been reached is then their enforcement. The UN

has the United Nations Environment Programme for Environmental Development. Their purpose

is to provide leadership and encourage partnership in caring for the environment by inspiring,

informing, and enabling nations and peoples to improve their quality of life without

compromising that of future generations.6 They are not an enforcement body, which means there

is no international body enforcing the terms of the agreement. No one is there to ensure the

developing states will keep their end of the agreement made. And even if there was, once the

debt has been paid, the developing country can cut down the rainforests and not have to pay back

the conservation organization that paid a portion of their debt.7

The decision to enter into these types of agreements cannot be easy, even one seriously

committed to environmental issues. There is a danger that the government could appear to be

surrendering its sovereignty and prerogatives to foreigners, even though the conservation

organization could have a local affiliate and be staffed with a large population of locals. As a

result, many governments may enter into these agreements only under the pressure of large debt

burdens. Once the debt is cleared, there is some incentive to lapse on the agreement, at least on

the part of the later governments that may come to power, in part, on the argument that

sovereignty has been compromised.8 Even though a state can have great debt, weighing the

opinions of losing sovereignty or keeping its citizens in poverty can be a hard choice. Both

5
Ridenour, David. "Tropical Forest Bill to Fund Environmental Causes." The Relief Report (1998).
6
"About UNEP: The Organization." United Nations Environment Programme (UNEP) - Home page .
7
Parrilla International, Grant Lowrance, Director of Western Hemisphere Operations. "Debt for Nature." E-mail
interview. 28 Apr. 2009.
8
Canotuas, Eva. 15. How Has a Debt-for-Nature Swap Worked in Practive?: Bolivia.

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 J. W.||Gov’t 35||May 1, 2009

choices if reduced to their simplest form can appear to be the same to the state. When you are in

poverty you rely on the Government to provide (theoretically); while when you have a larger

state paying off your debt you are almost (at least you feel) obliged to them. The fear in addition

to loss of sovereignty is that it could turn into colonialism or an agenda for the larger state to

push on a developing country.

The payoff for states that have their debt cancelled is they can help better their citizens’

quality of life, while helping to improve their economy. The sovereignty of the developing

county is not threatened. Debt-for-nature swaps are voluntary and creditors cannot accumulate

assets of that county. And as an additional assurance, aid is often tied to objectives. There are

ways developing countries can address their own sovereignty by using local non-governmental

organizations, ensure central bank involvement, and assure that resources remain in the debtor

country. 9

Those for Debt for Nature say that it sets aside rainforests and jungles to protect them

from being harvested.10 While it also provides a long-term source of funding for conservation

programs. In Ecuador, the budget for park and research projects doubled after two Debt for

Nature agreements in 1987 and 1989. On the local scale, many people will benefit from

increased employment through nature-based tourism (a few examples, park workers, guides, bus

drivers, handcrafters and artists, airport workers, waiters, hotel managers). 11

For those against Debt for Nature they say there is no real enforcement. The rainforests

provide the world with hardwoods, which are needed for building material. Since the rainforests

are a renewable resource, there is no parallel effort to educate the local people on how to reforest

9
"Debt-for-Nature Swaps." Google. 30 Apr. 2009
10
"Debt for Nature." E-mail interview. 28 Apr. 2009.
11
Kessel, Andrew. "Debt-for-Nature Swaps: A Critical Approach."

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 J. W.||Gov’t 35||May 1, 2009

the land. The conservation organizations are just throwing money at a problem and think by

doing that it will fix the problem. If we are to cut down the rainforest, we have to replant.

With education, the rainforests will grow which means we can cut down more trees for

buildings, which means even more replanting. The money conservation organizations are using

could be used more efficiently elsewhere, like creating fresh drinking water.12 The Tropical

Forest Conservation Act of 1998 places few limits on the use of these funds, stipulating only that

they go to "non-governmental environmental, conservation, and indigenous people’s

organizations of, or active in, the beneficiary state." The inclusion of the words "active in" is

significant in that these words provide a loophole through which U.S.-based environmental

organizations could obtain funding. Past experience with the Enterprise for the Americas

Initiative (EAI), would be used to support all kinds of environmental activism. Jamaica's "Earth

Day 1994" and Bolivia's "Children's Ecological Action Program" were both funded through the

EAI.13 One practical problem that environmentalists worry about is the degree of environmental

protection that is actually achieved in these agreements.14 The concept is a great idea to ensure

our natural resources are maintained, but the ideas have to be thought-out beyond the drawing

board. It is a start in the right direction.

12
"Debt for Nature." E-mail interview.
13
Ridenour, David. "Tropical Forest Bill to Fund Environmental Causes."
14
Kessel, Andrew. "Debt-for-Nature Swaps: A Critical Approach."

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Bibliography

"About UNEP: The Organization." -- United Nations Environment Programme (UNEP) - Home
page --. 30 Apr. 2009 <http://www.unep.org>.

Canotuas, Eva. 15. How Has a Debt-for-Nature Swap Worked in Practive?: Bolivia.
Http://www.humboldt.edu/~ee3/intl310/smith_bolivia.pdf. 30 Apr. 2009.

"Debt-for-Nature Swaps." Google. 30 Apr. 2009

<http://209.85.173.132/search?q=cache:3FAVfnCs4sMJ:www.k-
state.edu/economics/nafwayne/debtfornaturepresentation.ppt+%22debt+for+nature%22+
site:.edu&cd=4&hl=en&ct=clnk&gl=us>.

Golstein, Joshua S., and Jon C. Pevehouse. International Relations. 8th ed. New York: Pearson,
2009.

Kessel, Andrew. "Debt-for-Nature Swaps: A Critical Approach." Thesis. Macalester College, Fall
2006. 30 Apr. 2009
<http://www.macalester.edu/geography/faculty/moseley/courses/geog488comparative/cap
stone/f06/kessel.pdf>.

Parrilla International, Grant Lowrance, Director of Western Hemisphere Operations. "Debt for
Nature." E-mail interview. 28 Apr. 2009.

Ridenour, David. "Tropical Forest Bill to Fund Environmental Causes." The Relief Report
(1998). Http://www.nationalcenter.org/RR65.html. 12 June 1998. 30 Apr. 2009.

Thapa, Brijesh 2000. "The relationship between debt-for-nature swaps and protected area
tourism: a plausible strategy for developing countries." In: McCool, Stephen F.; Cole,
David N.; Borrie, William T.; OÂ?Loughlin, Jennifer, comps. 2000. Wilderness science
in a time of change conferenceÂ?Volume 2: Wilderness within the context of larger
systems; 1999 May 23Â?27; Missoula, MT. Proceedings RMRS-P-15-VOL-2. Ogden,
UT: U.S. Department of Agriculture, Forest Service, Rocky Mountain Research Station.
p. 268-272.

"Thomas Lovejoy -." Wikipedia, the free encyclopedia. 30 Apr. 2009

<http://en.wikipedia.org/wiki/Thomas_Lovejoy>.