Environmental organization proposes ‘swap’ of government foreign debt in exchange for expanding Galapagos maritime protection

In August 2020, the Manabí CM-12 Missile Corvette with the helicopter and the San Cristóbal coastguard boat patrols the area where the Chinese fishing fleets are located, near the Galapagos Islands. Photo: Archivo / EL COMERCIO

February 24, 2021 11:51 am
Sara Ortiz (I)

The proposal is under analysis within the Government. The initiative is promoted by the Ocean Finance Company (OFC) and Robert Weary, consultant for The Nature Conservancy, an international organization that promotes conservation. His idea is to raise $600 million and use it to buy foreign debt: 1 billion in 2030 bonds , which are currently discounted by 40 cents on every dollar.

In return, the government must expand the Galapagos marine reserve. It would go from 133,000 square kilometers to a marine area of ​​between 380,000, up to 518,000 kilometers.

The operation is based on a model called “conversion of debt for nature.” [Such a swap] was used in Ecuador in 1987 when Roque Sevilla proposed a swap of USD 10 million foreign debt to finance conservation activities in national parks. In 1989, the World Wide Fund for Nature (WWF), together with The Nature Conservancy and the Missouri Botanical Garden, acquired USD 9 million in debt at a price of USD 1 million; the Ecuadorian government had to deliver the equivalent in national currency to Fundación Natura.

“It’s an opportunity for Ecuador to protect and reduce the debt; but it necessary to sit down and negotiate with the fishing sector,” said Sevilla. OFC’s proposal was sent to the President Lenin Moreno on 2 February 2021 by Max Bello, the Chilean conservation activist.

“We are in the initial phase….we have been clear that what we seek is for the benefit of nature , fishermen and the local community.”

Map of the maritime protection zone in Galapagos. Image El Comercio

Weary, from The Nature Conservancy, assures that the economic benefit of the State is USD 635 million. “These [economic benefits] include: USD 120 million of immediate debt relief , through its direct cancellation, or USD 103 million in interest savings, due to a lower interest rate than that paid for the restructured debt; USD 412 million of redirected debt to be invested in the country ( [and in the] Galapagos specifically).”

According to the activist, another benefit is that “under the terms of the 2030 commercial bonds (or any other bond for that matter) the Government of Ecuador cannot buy back its own debt at a discount. “Only a third party can [buy Ecuador’s debt], hence enabling the proposed agreement to create a positive cash flow for the government and for conservation.”

The document says that the State must agree on the terms of the exchange and OFC would execute the purchase of the debt. Fausto Ortiz , who analyzed the proposal, says that the initiative is not very attractive. He explains that the USD 600 million bought by the organization would become a new debt of fixed value. Initially the State would have a benefit of USD 400 million.

But, according to Ortiz, the country would have to find additional financing to cover the annual contribution that [Ecuador] must make for 20 years to a Trust Fund for Conservation that is being created. That value would be about USD 286 million in total. With this, the net benefit for the State is just under 120 million.

“If the price of the debt in bonds rises tomorrow, the State will have done a great deal. But if instead of revalued, the price of debt continues to fall, as indeed it is expected to happen, it will have lost the opportunity to buy the bonds more cheaply in the future.”

Secondly, according to Ortiz, 2030 bonds, which were renegotiated recently, today have a rate of cheap interest rate. “It would be another thing if the proposal aims to swap Chinese debt, which is expensive and short-term .”

Bello said that it is not ruled out that the purchase of debt is for other types of obligations . “Nothing is set in stone. The important thing is to find a mechanism and [open the] dialogue.”

And he added: “We have been very clear that it is the Government who owns this (fund).. hopefully we can see the best tools for the benefit of all the involved parties, including the fishing industry of Ecuador.”

For the president of the National Chamber of Fisheries, Bruno Leone , the expansion of the maritime protection zone around Galapagos would imply a “terrible” damage for the industry.

He said that currently, fishing in the strip in which [additional] conservation t is proposed represents 25% of the total production, which is 280,000 tons of tuna per year. He also questioned the creation of the conservation fund that, according to the proposal, would be managed from the US. “Now we want outsiders to manage our territorial sea,” Leone pointed out.

Among those who support the idea is the Más Galapagos collective, which brings together 156 national and foreign organizations. This group proposes that within the expanded conservation area, a space be provided for the fishing fleet. On this point, Bello says “marine protected areas generate more biomass and more diversity; the fishing industry would benefit from [the expanded reserve].”

The area around Galapagos has become an important reserve of marine life which attracts the Asian fishing fleet each year. In 2020, more than 300 ships were in international waters near the limit of the reserve, where they are able to operate.

Eliecer Cruz, from Más Galapagos, assures that the current protection zone has helped preserve 95% of the sea ​​lions and 99.6% of the fur seal, but [protections for] migratory species the coverage is low.

For example, 21% of albatrosses are protected, but with extension of the area this would increase to 91%. The hammerhead shark is now 40% protected, but with the proposal it would go up to 90%. Among the endangered species that would benefit the most are the whale shark and the leatherback turtle.

These species are 27% and 21% protected and the plan is for them to rise to 77% and 70% respectively. The situation of the leatherback turtle is especially sensitive as its population has decreased by 95% in the last three generations (75 years).

Este contenido ha sido publicado originalmente por Diario EL COMERCIO en la siguiente dirección: https://www.elcomercio.com/actualidad/organizacion-canje-deuda-proteccion-galapagos.html.

Informing and sharing news on marine life, flora, fauna and conservation in the Galápagos Islands since 2017
© SOS Galápagos, 2021

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s