For debt-saddled developing countries, and NGOs and donors who want to protect their ecologically important areas, the idea of restructuring national debt to generate conservation dollars has an understandable appeal.
The Nature Conservancy recently scored such a win with the announcement of two huge new marine protected areas in the Republic of Seychelles, resulting from what’s believed to be the first such debt swap specifically for marine conservation.
Debt-for-nature deals have been around since the 1980s, and while environmental NGOs have embraced the concept, they’ve also drawn criticism and yielded mixed results. Still, TNC and the wealthy donors (including the Leonardo DiCaprio Foundation) who made the Seychelles deal possible are optimistic about the impact it will have, and are working to replicate it in other island nations.
The $21 million deal was actually brokered back in 2016, and has several more years of execution to go, but the Seychelles government recently made news by unveiling protected areas collectively about the size of Great Britain in its previously, mostly unprotected waters. An archipelago in the Indian Ocean, the country will restrict activity in these areas as a first step toward a larger conservation plan for its biodiverse waters.
The debt swap itself is clever, but more than a little confusing, so I’ll keep it simple (there’s a handy slideshow here that explains it in more detail).
In short, the Seychelles government owes a lot of money to other nations following a debt crisis in the late 2000s. The Nature Conservancy raised about $15 million in investment, and $5 million in grants to pay off some of that debt to a group of European creditors, at a discount. The government then can repay the debt at a very low interest rate, some of which goes back to TNC’s lenders, and the rest toward conservation.
Part of the deal is that Seychelles commits to eventual protection of 30 percent of its waters (previously it was just 0.04 percent). Money the government saves via refinancing will go toward a combination of ongoing marine protection programs and an endowment for future projects.
The rationale, here, is that Seychelles relies a lot on tourism and fishing, and needs to protect its waters to secure the future of those industries. But it owes so much money, it can’t afford it. The swap uses private wealth—grants and low-interest loans—to make a chunk of its debt easier to manage, if the money it frees up goes toward conservation. Got all that?
The $5 million in grants include $1 million from the Leonardo DiCaprio Foundation, as well as funds from the Waitt Foundation, Oak Foundation, China Global Conservation Fund, Jeremy and Hannelore Grantham, and the Turnbull Burnstein Family Charitable Fund.
The conservation benefit is potentially huge, as climate change and overfishing are threatening coral reefs and marine wildlife in the area, including thousands of giant tortoises, sharks, dolphins, and endangered dugongs. There are some hangups, the Guardian reports, including a skeptical fishing industry, an incoming military base, and concerns that oil exploration will weasel its way in. Many of the details still need to be negotiated.
The TNC reports that they did three years of public consultation with citizens, government, business, and scientists, and Seychelles leadership celebrated it as “ambitious” and a “paradigm shift.” But these deals can be tough, and in the past, have had mixed results in the execution.
The idea of the debt-for-nature swap started in the late 1980s, and became popular in the 1990s as a way to curb deforestation, averaging five new deals a year before slowing down in the 2000s. They’ve also come under fire for a range of reasons.
There are concerns that they don’t relieve enough debt for a positive economic effect, and that it’s not enough money to carry out conservation goals without sufficient additional support from donors and government. Their success hinges on whether the plan is well-aligned with the country’s policy, systems, and local residents, as opposed to coming mainly from the outside NGO. Such deals have also raised questions about what control nations retain during the initiatives, with past swaps drawing labels of “eco-imperialism” or “eco-colonialism.” There’s an argument that the conditional nature of debt-for-nature swaps may be morally questionable or even impermissible.
The large role a U.S.-based NGO and its donors can play in a country’s economy with such deals is indeed striking, and raises some of the same concerns we see in other forms of global conservation, of their compatibility with democracy and sovereignty, or more generally, national ownership over conservation goals.
But TNC is highly optimistic, and is currently exploring similar deals in other island nations, telling the Guardian it anticipates a $60 million debt swap with Grenada this year and swaps with other nations in the Caribbean, anticipating as much as $1 billion in future deals.