Debt for Nature Swaps
|February 20, 2002||Posted by Staff under Progress Report, The Progress Report|
Good Idea? Bad Idea?
Debt for Nature Swaps
By Danielle Knight
Two conservative U.S. congressmen, trying to shake off their anti-green image, are sponsoring legislation which would forgive 400 million dollars of debt owed by developing countries if the money is used to save rain forests.
The Tropical Forest Conservation Bill, being pushed by republicans, Robert Portman and John Kasich – both of Ohio – would empower President Bill Clinton to reduce or ”forgive” debt owed to the United States by developing nations. In return, the nations concerned would establish tropical forest funds to be used for activities ranging from reforestation to water conservation.
The proposed legislation has drawn a warm response from such environmentalists as the World Wildlife Fund, Conservation International and Nature Conservancy.
”The bill underscores a turning point for tropical forest conservation,” says Peter Seligman chairman of Conservation International, one of the largest environmental groups based here. ”It points out there is no question that tropical forests are essential for sustaining life on earth.”
Other environmentalists and indigenous organisations, however, are not so entusiastic. Despite the benefits of protecting critical parts of the biophere, some critics say the proposed legislation will open up countries to unsustainable natural resource exploitation.
Others also worry that the bill, resembling the controversial ”debt for nature swap”, could undermine efforts of indigenous people to achieve self-determination.
The scheme began during the time President George Bush headed the U.S. administration as part of the ”Enterprise for the Americas Initiative.” It was intended to open up the economies of Latin American and Caribbean countries to trade, by reducing their debt obligations. For the past decade, numerous developing countries have been forgiven their interest payments in exchange for environmental initiatives.
Under debt-for-nature swaps, a nation’s debt is purchased by a third party at a substantial discount – or the debt is simply canceled. The proposed legislation expands this concept to include more countries and become more easily utilised.
Under the new Bill, money would be set aside in environmental trusts to manage and protect the tropical forests. Initially, the debt restructuring would be open to selected countries determined to have the most biologically-rich forests at greatest risk of destruction.
The international debt crisis that started in the late 1970s left many developing tropical nations unable to repay loans to foreign creditors. This often led countries to the rapid development of natural resources and the massive exploitation of forests and other raw materials with little thought of the environmental consequences, says Seligman.
”Tremendous economic pressure has devastated many of the world’s tropical rain forests,” he observes. ”This year alone, more than 30 million acres were lost. Meanwhile, these countries still haven’t been able to make a dent in their debts.”
Supporters of the legislation say they have learned from past experience and recognise that more local participation is needed in order for this type of debt for nature scheme to work. Under the proposed bill, national governments would create the boards that would review grant applications and distribute funds.
The bill mandates a mixed membership on those boards, including U.S. representatives and local nongovernmental organisations. The projects themselves would be carried out at the local level by local and indigenous peoples’ organisation but, even with these positive ”win-win” aspects, the legislation still has its green critics.
In order for a developing country to be eligible, they are required to be opening up their economies for free market investment. They must put in place reforms mandated by international development bank loans.
”This potentially may open up countries to exploitive development,” Carol Welch, a policy analyst with Friends of the Earth, told IPS. ”We support many aspects of the proposed bill, but we fear that this eligibility requirement could lead to the rapid exploitation of natural resources – including tropical forests.”
Some environmentalists also remain puzzled by why normally anti- green republicans are pushing this legislation. Because republicans do not usually back environmental initiatives and foreign aid programs, some critics view the action by Kasich and Portman merely as as a public relations exercise – in time for elections in November.
Both politicians have a poor environmental record, according to the Washington-based League of Conservation Voters, an environmental group that closely monitors politicians. This year, Kasich and Portman voted for weakening the Endangered Species Act and for various anti-environmental grazing policies. They also voted to place anti-green limitations on United Nations-designated world heritage sites in the U.S., biosphere reserves, and national parks, a League spokesman said.
”It was a little bit of a surprise to see Portman and Kasich on board with this issue,” said Will Singleton, a policy analysts at Conservation International. ”But Portman is very eager to find new ways of tackling old problems.”
Singleton says fiscally conservative republicans, like Portman and Kasich, seem to favour the bill because it mandates that their be no budgetary impact. The 400 million dollars that would be used to offset debt reduction would need to be cut from another area of the budget.
The first debt for nature swap took place in July 1987. Conservation International raised money to pay off 650,000 of Bolivian debt because the country was having difficulty paying its loans. The original lending institution, Citibank sold the debt to the environmental organisation for about 15 cents to the dollar. In return, Bolivia’s president agreed to set aside the value of the original debt to protect several million acres of tropical forest.
Since then debt for nature swaps have been arranged or explored in many developing countries including Ecuador, the Philippines, Zambia, Jamaica, Guatemala, Venezuela, Argentina, Honduras and Brazil. But during a 1991 conference in Brazil organised by the Brazilian Institute for Economic and Social Analysis (IBASE), participants took a strong stand against debt for nature swaps.
A statement summarizing the meeting said, ”such transactions are part of a more general strategy for converting debt, reaffirming the creditors’ political and economic domination over the debtors within a development model which commercialized life in all its aspects.”
from the InterPress Third World News Agency
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