Posted: Monday, October 16, 2023. 7:43 am CST.
By Horace Palacio: Belize, once heavily impacted by the COVID-19 pandemic’s effects on its economy, has found a ray of hope through a unique financial agreement. Drawing from a report by Barron’s, when the pandemic swept through, Belize’s economy was severely strained, particularly affecting its fisheries, farmers, and tourism sectors.
“We lost approximately 14 percent of GDP,” remarked Prime Minister John Briceno in a conversation with AFP. With nearly a third of the nation’s workforce unemployed, the country was struggling, not only to sustain its day-to-day operations but also to manage its overwhelming debt.
However, hope emerged when The Nature Conservancy (TNC) proposed a groundbreaking arrangement. They offered to lend Belize the funds required to settle its creditors on the condition that a portion of the savings was funneled into marine conservation. These “debt-for-nature-swaps” are gaining traction as an inventive financial instrument for environmental preservation. Yet, some skeptics argue that their effectiveness may be exaggerated.
This arrangement, finalized in November 2021, witnessed TNC repurchasing a $553 million “superbond” that represented Belize’s entire commercial debt, securing a discount of 45%. This debt was transformed into a $364 million “blue bond”, organized by Credit Suisse, earmarking $180 million for marine conservation across two decades.
Briceno acknowledged this arrangement’s benefits, emphasizing how it notably trimmed Belize’s debt-to-GDP ratio by over 10%. Belize, home to the northern hemisphere’s largest barrier reef, plays a pivotal role in preserving biodiversity, but threats from climate change, overfishing, and urbanization loom large.
As per this deal, Belize consented to enlarge protection to 30% of its territorial waters, allocating $4.2 million each year for marine conservation.
The success of this initiative prompted TNC to forge similar agreements with countries like Barbados and Gabon. In May, Ecuador clinched the largest swap, reducing its debt by about $1.1 billion, benefitting the Galapagos Islands, facilitated by the Pew Bertarelli Ocean Legacy Project.
Although the concept of debt-for-nature swaps isn’t novel, they have evolved in scale, highlighted Slav Gatchev of TNC. He emphasized the distress of outstanding commercial debt in lower and middle-income nations, restricting governments from nature investments.
However, Andre Standing, a researcher, questioned the genuine altruism behind these deals, suggesting that such initiatives might only provide a superficial remedy to a deeper debt crisis. Esteban Brenes of the WWF echoed these sentiments, explaining that these swaps are not the ultimate solution but a step in a positive direction.
Concerns about countries not fulfilling their environmental commitments also arise. Yet, Gatchev reassures that these obligations are legally enforceable, with potential penalties for non-compliance.
Briceno remains optimistic, stating that the agreement has boosted environmental awareness among Belizeans. However, he believes that more support from developed nations is necessary for a sustainable future.
“Developed countries destroyed their environment for development… Now we want the same, and you’re telling us ‘we can’t afford you to destroy what we have destroyed’ — then pay us,” Briceno firmly concluded.
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