In a series of innovative sustainability and finance operations, Ecuador converts debt into nature. The country will allocate 460 million dollars for the Amazon rainforest.
After a financial restructuring in 2023 that enabled the allocation of 450 million dollars for the conservation of the Galápagos, the local Government announced a similar process for the Amazon region.
Ecuador converts debt into nature: how the process works
Ecuador made a new debt conversion to secure around 460 million dollars that, this time, will go to the Amazon Biocorridor Program, a management model they aim to implement in the Ecuadorian Amazon.
They aim not only to conserve their terrestrial and freshwater ecosystems, but also to meet the basic needs of the people living there.
The debt conversion, in which the Government of Ecuador, the International Development Finance Corporation of the United States (DFC), the Inter-American Development Bank (BID), and Bank of America participated, repurchased a debt of 1530 million dollars that Ecuador had.
But with better conditions and guarantees. This allows the country to free up around 800 million dollars in fiscal savings by 2035, which they will no longer have to pay. Approximately 400 million dollars will be allocated to sustainable management of the Amazon region.
Additionally, as explained by Daniel Ballesta Quintana, Global Director of Sustainable Debt at The Nature Conservancy (TNC), the organization that facilitated the process, a portion of the savings will go to an endowment fund.
It is expected that this fund will generate a return of 60 million dollars over 17 years, which is the duration of the project. Thus, “the total conservation resources expected to be unlocked will amount to approximately 460 million dollars in total.”
Although TNC had already supported five debt conversions worldwide, this is the first time they have done it with freshwater and terrestrial ecosystems; previously, all were related to the sea.
The idea, as stated by Galo Medina, Director of TNC’s Ecuador Program, is to have several NGOs, local leaders, and indigenous communities execute the projects in the territory.
Some of the objectives already under consideration include improving the management of 4.6 million hectares of existing protected areas, protecting 1.8 million additional hectares of forests and wetlands, and safeguarding 18,000 kilometers of rivers in the Amazon region.
How do these debt swaps work
Debt swaps, as they are also known, have been used since the 80s and 90s to forgive, readjust, or repurchase debts for financially strained countries with high biodiversity under the condition that the saved or unpaid money is invested in conservation.
Only the six debt conversions advised by TNC could generate approximately 1000 million dollars for this purpose.
Globally, it is estimated that more than 145 debt conversions have taken place in 30 countries over the last four decades. Latin America and the Caribbean have become regions willing to investigate and explore them.
In addition to the conversion for the Galápagos and the Amazon, it is expected that the country will announce another one of these initiatives by 2025.
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