Debt relief for nature conservation: In order to get its economy back on its feet, which had been completely weakened by Covid-19, Belize, a small tourist state in Central America, resorted to an innovative process.
“We had lost almost 14% of our GDP” and with huge unemployment there was no longer enough money to “run” the country, Prime Minister John Briceno told AFP. Not to mention paying off his debts.
The proposal by the NGO The Nature Conservancy to lend this country of 400,000 people funds to repay its creditors was like a lifeline.
The condition? This part of the savings achieved will be used to protect the marine environment.
This so-called “debt-for-nature” swap is considered an innovative financial instrument to protect ecosystems from climate change and overexploitation – even if critics point out that it is anything but a miracle solution.
“Win win”
In November 2021, the American NGO purchased Belize’s commercial debt valued at $553 million by negotiating a 45% discount.
This debt was converted into a $364 million loan, freeing up $180 million over 20 years to protect the marine environment.
Belize’s coast is home to the largest barrier reef in the Northern Hemisphere – a valuable habitat for endangered species such as manatees, turtles and crocodiles.
But warming oceans caused by climate change, overfishing and coastal development threaten to destroy this delicate ecosystem.
“It was a win-win situation for us,” says the Belizean Prime Minister.
Barbados, Gabon, Ecuador
The Nature Conservancy has since reached similar agreements with Barbados and Gabon. Ecuador received a reduction of around $1 billion in its foreign debt and in return committed to providing $450 million to protect the Galapagos Islands.
An initiative that was first conceived in the 1980s, but which is now spreading significantly, emphasizes Slav Gatchev, who is responsible for the NGO’s so-called sustainable debt.
“A third of the debt of low- and middle-income countries is damaged,” which very often means that these countries’ investments in environmental protection fall by the wayside, he tells AFP.
According to him, “debt nature” exchanges offer the possibility of refinancing up to $1,000 billion in debt, which in return could generate $250 billion for climate projects.
Altruistic?
For researcher Andre Standing from the Coalition for Fair Fishing Agreements, the Belize example was only possible because the country was on the verge of insolvency. According to him, the creditors’ gesture was therefore hardly altruistic.
Such agreements still do not contribute to solving the debt crisis in developing countries.
“That’s true, but that’s not the intention,” counters Esteban Brenes from the World Wide Fund for Nature (WWF), who also wants to negotiate new debt conversions.
“We will take on some of the debt and use some of the revenue for a better purpose, but we will not solve the inherent problem in any way,” he says.
Another problem is that these countries make ambitious commitments without necessarily following through, even though many of them are legally binding.
Belize’s prime minister brushes aside this theory, ensuring that the high-profile agreement has largely raised the environmental awareness of his country, which is already much more sensitive to mangrove dredging.
The debt restructuring is “a very good start,” he emphasizes, and calls on the industrialized countries to put their hands in their wallets.
These countries “destroyed their ecosystem to develop skyscrapers, big cars and luxury real estate,” the guide asserts. “Now that we want the same thing, you tell us we can’t afford to destroy what you destroyed,” he said.