Debt-for-Nature Swaps: Economic Struggle Meets Ecological Progress

By alleviating economic stress and promoting ecological conservation, debt for nature swaps may be one of the true global environmental justice solutions of the modern day. However, social inequity concerns may reveal these deals to be less than desirable for people in developing countries.

Image by Andy Thies
Image by Andy Thies

Debt for nature swaps are agreements between two or more countries (and often an NGO) in which the debtor country is able to redirect its debt to building environmental conservation programs. Although the country still has a financial debt, the global economy no longer recognizes it. Debt relief may allow the debtor country to obtain higher purchasing power and, in theory, have the opportunity to develop long-term plans and funding policies.

Whether any or all of these benefits occur is another factor entirely.

When looking at where debt for nature swaps occur, a north-south divide becomes quickly apparent with a far greater concentration near and south of the Equator. Why do debt for nature swaps largely occur in these areas?

  1. Historical ties that led to the debt in these countries and ecological issues
  2. The current status and debts of developing countries
  3. Environmental wealth and biodiversity south of the Equator

Debt and Neo-Colonialism

As colonial powers grew, they needed to find a way to increase resources, so they turned towards the tropics. These new colonies extracted resources for these powers up until the late 20th century, when colonies began to gain their independence. But colonies still depended on colonial powers to supply them with manufactured goods. This led to continual degradation of the environment and an increasing debt to these industrialized nations.

Wealth that originally left the territory in the form of raw materials was now leaving the country in the form of payments to the World Bank for development. Today, most of these old colonies are developing countries, which depend on these natural resources for trade and wealth, yet are unable to escape the cycle of debt and environmental degradation.

Debt for nature swaps alleviate some of this burden. The country is able to begin conservation programs that it otherwise couldn’t budget and the debt is lightened. This is considered a win-win for both the creditor who would likely never see the debt fully collected and the debtor.

These debtor countries also tend to be not only a treasure trove of natural resources but also biodiversity which has become a major concern for conservationists.

How do we price nature?

Recently, it has become clear that nature indeed has a real economic value. Though some may believe that putting a price on nature degrades its intrinsic value, it has proven to be an effective strategy for persuading those who have the biggest impact on the environment.

Image by Andy Thies and Jesse Howe

Pavan Sukhdev, an environmental economist, gave a TED talk on how biodiversity came to be valued in the economic world and what that means for countries with a wealth of biodiversity.

In 2007, groups saw that if economists could make a convincing case for climate change, why not biodiversity?

Out of this came TEEB (The Economics of Ecosystems & Biodiversity), whose goal was to end the economic invisibility of nature. The study brought together experts and organizations to lay the foundation of a convincing argument to make biodiversity a priority.

And it did.

By 2008 TEEB found a loss of $3-4 trillion in natural capital. This was easily grasped by economists (with the recession in full swing) allowing for perspective on how much money was lost.

Biodiversity’s value is often framed in the form of potential. What could possibly be discovered from diverse areas, and what could possibly be lost if destroyed? For a start, 60% of medicines originate in rainforests and coral reefs. With more research slated to take place in these areas, the argument was well backed.

Who does this value belong to? The communities that tend to these areas are often given the responsibility of stewardship along with the natural capital.

Are these swaps working?

In 2014, Protected Planet announced that the world was on track to reach its 2020 target to expand protected areas. Whether through debt for nature swaps or self-funded conservation, nearly 15.4% of Earth’s surface is under protection with the goal of 17% by 2020. But, were all these parks working?

This is where the term “paper park” appears. Areas slated for protection are not always enforced. Only 3 out of every 10 protected areas are accessed for their management and out of those assessed only 24% had “sound management”.

Debt for nature swaps are not without criticism.

Map by Jesse Howe and Andy Thies

Many believe that the financial benefits are overstated and that these swaps mostly benefit conservationists rather than the debtor country. This can be for many reasons. Deals are made between and within creditor nations simply with the hope of benefiting the debtor country. Many go on as planned without hearing from those directly affected. This may even involve annexing current agricultural areas for park protection.

Critics believe that debt for nature swaps force the debtor countries hand, as the offer is often too good to pass up. Other critics believe that due to inflation, the deal is not as good as it seems. The amount of debt a debtor country has makes these swaps insignificant, meaning that these deals are largely beneficial for banks to get returns on a debt that would most likely go unpaid.

Though they are not without flaws, debt for nature swaps represent a huge potential to conserving ecological value while alleviating economic stress in countries. Environmentally, they can be beneficial for when real effort is put into enforcing conservation areas. However, to pretend that the “win-win” is truly equitable would be naïve. Solving developing countries’ debt problems, like any issue, is a multi-faceted issue, and no single program will end the issue. While the popularity of debt for nature swaps continues to grow, there is no general consensus on what the eventual impact of these projects will be and who will ultimately be the winners and losers.

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