Ecuador gets cheap debt write-off with promise to protect Galapagos's nature
Published on 10/05/2023, 4:47pm
Ecuador will get $12 million a year to spend protecting the wildlife and habitats of the Galapagos islands, in the largest “debt for nature” deal yet
A giant tortoise is seen on a road at Santa Cruz island at Galapagos National Park in 2013 (Reuters/Jorge Silva)
By Reuters and Joe Lo
Ecuador sealed the world’s largest “debt-for-nature” swap on record on Tuesday, selling a new “blue bond” that will funnel at least $12 million a year into conservation of the Galapagos Islands, one of the world’s most precious ecosystems.
Having bought back roughly $1.6 billion of the country’s debt at a near 60% discount late last week with the help of Credit Suisse, Ecuadorean Foreign Minister Gustavo Manrique Miranda said biodiversity was now a valuable “currency”.
Protecting nature often also benefits the climate as carbon sinks like forests and seabeds are protected. Debt-for-climate swaps are also growing in popularity. Tuesday’s $656 million “Galapagos Bond,” as it has been dubbed, will run until 2041 and gave investors that bought it a 5.6% “coupon” or interest rate, its bankers said.
Ecuador sovereign bonds currently yield from 17% to 26%, but the new bond has an $85 million ‘credit guarantee’ from the Inter-American Development Bank and $656 million of political risk insurance from the U.S. International Development Finance Corp (DFC), effectively making it less risky.
Debt-for-nature swaps have proved successful in Belize, Barbados and the Seychelles in recent years, but Ecuador’s deal is by far the largest to date, cutting the country’s debt by over $1 billion once the $450 million of total conservation spending is taken into account.
More:
https://www.climatechangenews.com/2023/05/10/ecuador-gets-cheap-debt-write-off-with-promise-to-protect-galapagoss-nature/
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