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The Ecuadorian government has announced a new strategy to exchange part of its national debt in favour of conservation for the Galápagos Islands in what will be the world’s biggest ‘blue bond’ swap.
The approach will see $1.6 billion of Ecuador’s existing commercial debt converted into a $656 million loan financed through a bond issued by Credit Suisse. It is thought the deal will reduce Ecuador’s debt by more than $1 billion in borrowing costs, and generate more than $450 million in conservation resources for the Galápagos islands over the next 20 years.
Gustavo Manrique Miranda, Minister of Foreign Affairs, said: ‘These funds will promote climate resilience and support the sustainable fishery, thus taking a crucial step toward a financial transition where diplomacy, conservation, and finance walk together headed toward the path of general well-being.
‘The Ecuadorian people have a close bond with the ocean,’ added Miranda. ‘We understand its value and we treasure nature because of what it gives to our people and our economy.’
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Since 1987, at least 16 countries – including Belize, Brazil, Costa Rica and the Republic of Seychelles – have completed almost 50 debt conversions for nature, which has seen approximately $200 million in reduced, restructured, or converted national debt, which has, in turn, generated about $167 million for conservation activities.
Ecuador’s new debt conversion total and the expected benefits from the Credit Suisse deal, however, are greater than all previous transactions combined – in addition to repaying the new loan for about 18 years, Ecuador will also provide about $17 million annually for conservation—about $12 million for activities and about $5.4 million to seed a permanent endowment.
By the time Ecuador has finished repayments on the loan in 2040, the estimated total of approximately $227 million in endowment assets from the accumulated payments and investments is expected to be enough to continue financing conservation activities for the long-term future.
The Galápagos Islands are part of one of the world’s most important marine ecosystems, home to a wide range of species, many of which are endemic to the region. Although the Galápagos Marine Reserve, established in 1998 protects more than 133,000 sq km of ocean surrounding the islands, the waters outside the MPA have been targeted by massive industrial fishing fleets.
In 2022, the Ecuadorian president, Guillermo Lasso, signed protections for a further 60,000 sq km of ocean between the Galápagos Islands, Costa Rica and Malpelo, including the 30,000 sq km Hermandad Marine Reserve fully protected area to help safeguard a migratory corridor used by sharks, whales, turtles, manta rays, and other pelagic species.
It is hoped the new Credit Suisse deal will allow Ecuador to engage in further efforts to protect the vitally important region from mass illegal fishing, which will in turn help to sustain the local economy and communities that depend on the Galápagos Islands’ abundance of wildlife for survival.
‘The world’s biggest ocean-friendly debt swap is coming together in Ecuador to protect its unique natural resources,’ said Pablo Arosemena Marriott, Ecuador’s Minister of Economy and Finance. ‘This strategy decreases public debt, boosts fiscal stability, and creates opportunities to address basic needs like healthcare and education.
‘With this historical debt swap we are building trust worldwide, among investors and lenders,’ added Marriott. ‘This could allow us to have more room to generate employment and boost the economy in the future.’
Jose Antonio Davalos, Ecuador’s Minister of the Environment, Water and Ecological Transition, said that the debt-for-nature swap is a historic moment that marks a turning point in the country’s environmental and economic development.
‘Thanks to the commitment of the Government of Ecuador, conservation is not a topic related to one ministry only,’ he said. ‘It becomes a global, coordinated, and cooperative action of all of us who live on the blue planet.’
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