Largest debt-for-Nature conversion to benefit Ecuador's Galapagos Islands
by AFP Staff Writers
Quito (AFP) May 9, 2023
Ecuador has converted $1.6 billion of commercial debt into a loan that will direct vast resources to Galapagos Islands conservation in the largest-ever transaction of its kind, the government and partners announced Tuesday.

The deal, converting its debt into a $656 million loan financed by a Credit Suisse-structured "Galapagos Marine Bond" for the same amount, cut the South American country's debt obligations by about $1.1 billion.

It would also generate more than $450 million for marine conservation in the Galapagos marine reserve and UN heritage site over the next 20 years.

"Current debt worth approximately $1.63 billion has been exchanged for a new debt of $656 million," Ecuador's Economy Minister Pablo Arosemena told reporters in Quito.

According to the Pew Bertarelli Ocean Legacy Project, which helped set up the deal, this is "the world's largest debt refinancing for ocean conservation to date."

It added in a statement that the newly-found money will help address pressures from climate change and overfishing that threaten the Galapagos ecosystem and communities that depend on it.

The US International Development Finance Corporation and Inter-American Development Bank (IDB) provided political risk insurance and loan guarantees for the debt swap.

The deal "is an example of how the region is not only tackling global challenges, but is also being part of the solution -- pioneering innovative approaches and instruments that can be replicated and scaled globally," said IDB president Ilan Goldfajn.

Located nearly 1,000 kilometers (600 miles) off Ecuador's coast, the Galapagos Islands are home to flora and fauna found nowhere else in the world.

British naturalist Charles Darwin visited in 1835 and developed his theory of evolution based on his findings.

Ecuador will repay the new loan over 18 years, said the Pew Bertarelli project statement.

The country also committed to providing about $17 million annually for conservation, including $5.4 million towards a permanent endowment.

"In 2040, when those payments from Ecuador conclude, the endowment assets, estimated to total about $227 million from the accumulated payments and stable investments, should be sufficient to continue financing conservation activities at the same level in perpetuity," the statement said.

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