DebtforNature Swaps - PowerPoint PPT Presentation

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DebtforNature Swaps

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An analysis of debt-for-nature swaps as a mechanism for ... LIC debt is unsustainable- Many LICs owe over $3.5 million for ... Deforestation and Debt ... – PowerPoint PPT presentation

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Title: DebtforNature Swaps


1
Debt-for-Nature Swaps
  • An analysis of debt-for-nature swaps as a
    mechanism for reducing environmental degradation
    in debtor countries

2
Introduction
  • Natural resources are critical to economic
    growth.
  • The poor suffer disproportionally from
    environmental degradation
  • I primarily looked at U.S. debt-for-nature swaps
  • U.S. is percieved as an environmental leader.
  • U.S. has been most involved in debt-for-nature
    swaps.

3
  • I focused on deforestation.
  • Most debt-for-nature swaps have addressed
    deforestation.
  • Deforestation is immediate and more easily
    monitored than some other kinds of environmental
    degradation.
  • Deforestation is an indicator of primary
    development (World Commission on Environment and
    Development).

4
LIC Crises
5
Deforestation
  • 53,000 square miles of forest were cleared each
    year during the 1980s pace has slowed but is
    still unsustainable (FAO).
  • Tropical rain forests are important
  • Biodiversity- medicine, keystone species,
    agriculture, recreation.
  • Agriculture- oxygen levels, erosion, soil
    impoverishment.
  • Global warming- could cause famine, disease,
    weather pattern changes, reduced agricultural
    productivity

6
  • Hinders social and economic structures of the
    people who live in and near the forests.
  • Destroys a valuable resource base.

7
Debt
  • Origin of the debt crisis.
  • LIC debt is unsustainable- Many LICs owe over
    3.5 million for each citizen, and compound
    interest raises the amount each year.

8
The Link between Deforestation and Debt
  • Other factors contribute to deforestation- cattle
    ranching, search for energy sources, population
    growth, etc.
  • Deforestation largely occurs to improve the
    balance-of-payment and reduce poverty.
  • SAPs limit environmental and social spending.

9
The Evolution of Debt-for-Nature Swaps
  • The debt-for-nature swap mechanism

10
U.S. Legislation
  • Global Environmental Protection Assistance Fund
  • Enterprise for the Americas Initiative
  • Tropical Forest Conservation Act

11
International Initiatives
  • International Tropical Timber Agreement
  • Tropical Forest Action Plan
  • Foreign countries have offered debt-for-nature
    swaps- Norway, the Paris Club, Germany, etc.
  • No movement from international lending
    institutions.

12
Case Studies
  • Bolivia
  • Ecuador
  • Costa Rica
  • Madagascar
  • Philippines
  • Poland

13
Examination of Arguments
14
Sovereignty
  • Concerns
  • Colonialism
  • Debt-for-equity swaps
  • Brazil
  • U.S. policy agendas

15
  • Sovereignty is not threatened
  • Debt-for-nature swaps are voluntary.
  • Creditors cannot accumulate assets.
  • Aid is often tied to objectives.

16
  • Ways to address sovereignty concerns
  • Use local NGOs
  • Ensure central bank involvement
  • Assure that resources remain in the debtor country

17
Inflation
  • Inflation is possible with large debt-for-nature
    swaps
  • Would decrease the value of the swap
  • Debt-for-nature swaps thus far have not triggered
    inflation.
  • Debtor countries usually have high inflation
    rates regardless of the existance of
    debt-for-nature swaps.
  • Risk of inflation undermines debt-for-nature
    swaps must engineer swap to prevent inflationary
    tenancies.

18
  • Potential solutions
  • EAI and TFCA require that the debtor country
    maintain the fund in US dollars.
  • Amount of swap should be limited

19
Overall debt levels
  • Debt-for-Nature swaps have never significantly
    lowered any countrys debt.
  • Debt-for-nature swaps were never intended to be a
    cure-all
  • Debt-for-nature swaps have snowballed
  • Reducing debt reduces future interest

20
Indiginous Peoples
  • Indiginous peoples base their livlihood on forest
    products.
  • Debt-for-nature swaps have historically excluded
    these people
  • Did not allow them to enter the forests.
  • Disallowed them to collect forest products and
    failed to provide them with other
    income-generating opportunities.

21
  • Potential Solutions
  • Include indiginous peoples as enforcers of the
    swap Philippines
  • Restrain from eviction
  • Use a portion of the funds to provide education
    on deforestation and educational and employment
    opportunties.

22
Debt Legitimacy
  • Some contend that because LIC debt was accrued
    illegitly, LIC citizens cannot be held
    responsible for paying said debts.
  • Ecological debts owed to LICs-
  • Most environmental destruction is caused by HICs.
  • Environmental degradation disproportionally
    affects LICs, leaving them responsible for paying
    debts and compensating for environmental damage
    they did not commit.
  • Ecological debt would be difficult to measure.

23
Hypocrisy
  • The United States has failed to participate in
    international environmental protection measures.
  • HICs were able to develop by freely exploiting
    their natural resources.
  • HICs, particularly the United States, are often
    the most heavily indebted countries.

24
Implementation and Enforcement Barriers
  • Funnel swaps are common
  • Expropriation
  • Not illegal according to international law
  • NGOs have some informal resources, but these are
    not foul-proof.
  • Need an international treaty to ensure that
    debt-for-nature swaps are not expropriated.

25
Diverting Attention
  • Debt-for-nature swaps dont address the root
    economic problems that cause debt accumulation
    and deforestation.
  • Debt-for-nature swaps are comparatively
    advantageous.

26
Conclusions and Recommendations
  • Organizers of debt-for-nature swaps must be
    attuned to the people with whom they are working.
  • Donor countries must integrate themselves more
    fully with the international community.
  • The swap concept should be expanded to other
    areas- debt-for-development and
    debt-for-education swaps, international lending
    organizations
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