Americas > Ecuador’s debt-for-nature swap still missing key policies, one year on, says NGO

Ecuador’s debt-for-nature swap still missing key policies, one year on, says NGO

Published 14:47 on May 14, 2024  /  Last updated at 14:47 on May 14, 2024  / Alejandra Padin-Dujon /  Americas, Biodiversity, International, Nature-based, South & Central, Voluntary

One year after Ecuador’s debt-for-nature swap — the world’s largest to date — there is still no evidence that the country has operating procedures in place to allocate funds or guide investment, according to a report released by a Latin American debt justice NGO this month.

One year after Ecuador’s debt-for-nature swap — the world’s largest to date — there is still no evidence that the country has operating procedures in place to allocate funds or guide investment, according to a Latin American debt justice NGO.

Using a qualitative analysis of existing policies and collating publicly available timelines of policy approvals, a report by the Latin American Network for Social and Economic Justice (LATINDADD), published this month, concludes that there is “no evidence to confirm that the [programme] has an organisational structure and financial resources adjusted to the necessary requirements to promote the different strategies aimed at achieving targeted impact”.

LATINDADD also observes a general lack of transparency surrounding the operationalisation of the pre-agreed marine conservation measures, even for publicly available information, which it claims is not adequately publicised on government websites.

The report therefore cautions that the programme may fail to adequately advance national policies and strategies to protect the Hermandad Marine Reserve.

POLICY GAPS

LATINDADD found that basic operating agreements with foreign NGOs, signed between the debt swap-mandated Conservation Fund and the Ecuadorian foreign affairs ministry, were not signed until seven months after the start of operations.

Moreover, despite failing to publish a publicly available approval procedure, the Governing Body of the Conservation Fund approved a mechanism for the allocation of funds at its eighth meeting, this past February. The mechanism reportedly does not include detailed operational regulations to govern resource allocation.

One year into the programme, LATINDADD did not find any investment guidelines in connection with the fund.

THE DEAL

The Hermandad Marine Reserve was created as one of the conditions of the nearly 60% haircut to $1.6 billion worth of sovereign debt reclaimed in a buyback supported by Credit Suisse, then reissued to investors.

The reissued ‘Galapagos Bond’ will yield substantially less than usual in interest, known as a ‘coupon rate’, for investors (5.6% versus 20% or so for most Ecuadorian sovereign bonds through to 2041) but is meant to be a safer bet due to de-risking measures that include an $85 million guarantee from the Inter-American Development Bank (IDB) and $656 mln of political risk insurance from the US International Development Finance Corp (DFC).

It has been observed in previous debt-for-nature swaps, as in the then-largest-ever 2021 Belize deal, that layering several kinds of de-risking to make debt palatable to investors can increase transaction costs for beneficiary countries and decrease overall savings for conservation.

By Alejandra Padin-Dujon – alejandra@carbon-pulse.com