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Reuters
Ecuador sealed the world’s largest “debt-for-nature” swap on record on Tuesday, selling a new “blue bond” that will funnel at least $US12 million a year into conservation of the Galapagos Islands, one of the world’s most precious ecosystems.
Having bought back roughly $US1.6 billion of the country’s debt at a near 60 per cent discount late last week with the help of Credit Suisse, Ecuadorean Foreign Minister Gustavo Manrique Miranda said biodiversity was now a valuable “currency”.
A giant tortoise is seen on a road at Santa Cruz island at Galapagos National Park, on 23rd August, 2013. PICTURE: Reuters/Jorge Silva
Tuesday’s $US656 million “Galapagos Bond,” as it has been dubbed, will run until 2041 and gave investors that bought it a 5.645 per cent “coupon” or interest rate, its bankers said.
Ecuador sovereign bonds currently yield from 17 per cent to 26 per cent, but the new bond has an $US85 million ‘credit guarantee’ from the Inter-American Development Bank and $US656 million of political risk insurance from the US 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 $US1 billion once the $US450 million of total conservation spending is taken into account.
The driver has been the remote Galapagos Islands, some 970 kilometres off Ecuador’s mainland coast, that inspired Charles Darwin’s Theory of Evolution.
Many species on the islands, including giant tortoises, marine iguanas and Darwin’s finches, are found nowhere else on earth so their conservation is seen as vital.
While Quito will pocket more than $US1 billion worth of savings from the buyback for other purposes, the key appeal has been the environmental benefits and the hope it will be a catalyst for other highly indebted but nature-rich countries.
Giuseppe Di Carlo, director of the Pew Bertarelli Ocean Legacy, one of the groups involved in the deal, said the $US12 million a year earmarked for conservation, plus another $US5 million a year being put into a fund that should last decades, were an “extraordinary win”.
There will be regular monitoring of the protection work and of “purse seine” and “longline” fishing vessels by a newly formed body, with Hawaii’s Papahānaumokuākea marine park seen as a potential template.
Conservation funding there now protects a 322-kilometre radius around the archipelago. It has helped revive local tuna and other fish stocks, but also increased catches further out where local fishing is still allowed.
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The hope is for similar results from a new 30,000-square kilometre reserve Ecuador set up last year between the Galapagos and Costa Rica’s maritime border used as a migratory corridor by sharks, whales, sea turtles and manta rays.
Scott Nathan, the chief executive of DFC, said people needed to “stay tuned” for similar deals in other countries and the Galapagos deal had been a long time coming.
It was first floated over three years ago. Final preparations occurred during a time of political turmoil, with Ecuador’s National Assembly seeking to impeach President Guillermo Lasso for alleged embezzlement, which Lasso denies.
The turbulence boosted economics of the deal, slashing prices of the original bonds, although it also faced troubles of lynchpin lender Credit Suisse, which required an emergency takeover in March by rival UBS.
