With a monetary guarantee from the Inter-American Development Bank and insurance from a US government agency, Ecuador on Tuesday bought part of its debt and was able to save hundreds of millions of dollars that it will allocate to marine conservation in the Galapagos Islands.
The operation took place at a time when the Ecuadorian Assembly is considering whether to move forward with the impeachment and eventual removal of President Guillermo Lasso.
For the repurchase of some 1.6 billion dollars of the debt, the IDB offered 85 million in guarantee and the United States Development Finance Corporation (CFD) a political risk insurance of 656 million dollars, said the IDB.
This is the largest debt-for-nature conversion in the world, according to the IDB, which also supported the South American country with institutional strengthening policies for environmental management. Furthermore, it would be the first time that a multilateral institution combines guarantees with risk insurance to mobilize resources from different sources to protect the environment.
“It is an example of how the region is not only tackling global challenges but also being part of the solution,” said IDB president, Brazilian economist Ilan Goldfajn.
In total, the country saved some 1.1 billion dollars with the repurchase of its debt, according to a statement from the Ecuadorian presidency.
The IDB said that of that total, the funds allocated to ecological conservation were 323 million dollars. If the capitalization is counted over about 18 years, the figure exceeds $450 million, according to the Washington-based agency.
These resources will be used to create a special fund that will finance long-term conservation activities in two reserves on the Galapagos Islands: the Hermandad Marine Reserve, created in 2022, and the Galapagos Marine Reserve.
Read our special: Floating swarm, the uncertain future of the Galapagos Islands
In addition to its natural assets, the area is key to sectors such as tourism and artisanal fishing, and therefore the impact of conservation is also socioeconomic, said Gregory Watson, a specialist in biodiversity, climate change and sustainability at the IDB in a virtual conversation with a small group of journalists.
Created in 1959, the IDB is one of the main sources of financing for development in Latin America and the Caribbean. The DFC is an agency of the US federal government that invests in projects primarily in low- and middle-income countries.
Ecuador’s public debt is about 63,731 million dollars, which means 56.01% of the Gross Domestic Product. The government has slowed down the pace of borrowing and has lowered the fiscal deficit from an initial figure of around 7,000 million dollars to around 1,700 million in 2022.
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