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