Costa Rica and Belize, the countries that reduced their external debt thanks to taking care of their nature

Two divers inspect a coral reef off the coast of the Turneffe Islands (Belize).Alamy Stock Photo

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The financial system has meant that, for many countries, adapting to climate change is a trap.

The islands of the Caribbean, for example, where hurricanes hit with increasing intensity, must be rebuilt almost every year.

To do so, they also need money that, if they don't have it in their pockets, they have to borrow.

This throws them into a vicious cycle of debt that makes it impossible for them to face a problem for which they are not directly responsible: small islands are the most vulnerable to climate change, but they are also among the countries that generate the least greenhouse gas emissions worldwide. world level.

On how to stop this cycle there are several proposals.

There has been talk of issuing catastrophe bonds similar to those issued after the covid-19 pandemic or loans with hurricane clauses.

However, a topic that has become a recurring topic at Climate Change Summits, such as COP27 that ended in November of this year, and about which several Latin American presidents have spoken, is the debt swap for climate action.

In other words, getting a country or organization to which money is owed to cancel or reduce it in exchange for the debtor country using that amount to finance global warming adaptation and mitigation projects.

But as Juan José Guzman Ayala, an economist and financial consultant, points out, these types of transactions are not new, only that previously they were not carried out for climate action, but for conservation.

“Fondo Acción de Colombia, which has existed for more than 20 years, obtained its resources from a debt swap,” he points out.

And in addition to the current president Gustavo Petro, who has taken advantage of several occasions to talk about this type of exchange, former president Iván Duque had also mentioned it during the Summit of the Americas called by Biden, he recalls.

This is how some debt-for-conservation swaps have worked in Latin America and the Caribbean.

Belize, settle a debt to save corals

On the island of Belize, located in the extreme northeast of Central America, various impacts of climate change converge: hurricanes, erosion, and rising sea levels are just a few.

In fact, according to the World Bank, among 167 countries, Belize is the eighth most at risk from climate change.

During the coronavirus pandemic, says Julie Robinson, TNC's Belize program director, the island's economy, based on tourism, collapsed.

Belize could not pay its debts, let alone ask for new ones to make their country more resistant to the next climatic events.

What was done, then, was that TNC helped to renegotiate Belize's external debt, of 556 million dollars and which represented a quarter of its total debt, agreeing that 55 cents would be paid for every dollar owed.

“It was an obligation that had been created more than 12 years ago and that Belize was never able to pay.

In fact, it was restructured three times,” says Robinson.

TNC paid the agreed percentage of the silver thanks to a loan with the Credit Suisse bank, but, in exchange, Belize must gradually put around the 180 million dollars that it saved with the debt restructuring in a bag destined for conservation of seas and corals.

In Robinson's eyes, the agreement, signed in November 2021, has been successful.

"Of the eight agreed milestones, in just one year Belize has already met three: the expansion of marine protected areas, the protection of public lands and the launch of the Marine Spatial Plan."

Costa Rica: two reliefs of more than 20 million dollars

Patricia Ramírez, part of the Costa Rica National System of Conservation Areas, has become a kind of living memory of the exchanges for nature that have been made between the United States and the Central American country.

The first, remember, was signed in 2007 and worked as follows.

Costa Rica had a debt of 26 million dollars with the United States International Cooperation Agency (USAID) that was bought by the Treasury Department of that same country.

“The North Americans had a policy called

for the preservation of forests, which, among other things, allowed them to structure certain debts for that purpose,” she says.

Once Costa Rica's debt ceased to be with Usaid and passed into the hands of the United States Department of the Treasury, the latter allowed Costa Rica, instead of paying it, to put the money in a bag destined solely for conservation projects in areas of influence of protected areas.

In addition, the environmental organizations

(TNC) and Conservation International donated more resources to strengthen the resources of the bag.

In order for the silver not to run out quickly and last for 99 years, a percentage of that money went into a pocket to be paid and invested, so the projects can continue to be financed in the long term.

The second exchange worked exactly the same, except that the sum was 27 million dollars, it was signed in 2010 and the projects have been allocated to protected areas.

“The amount given to each project can range from 500,000 to a million dollars a year,” adds Pia Paaby, land conservation manager at Costa Rica Forever, an organization that currently allocates these resources to other NGOs, most of them local. .

“This has allowed us, in Costa Rica and through these swaps, to think about the connectivity of ecosystems and not about separate areas,” she says.

"In that they are not projects with an expiration date, but in protecting in the long term, in the future."

Enough for climate change?

That climate change inherits debt swaps from conservation is still an innovative idea.

Above all, as Guzmán points out, when with this crisis there is a whole movement over who is most responsible for climate change and, therefore, must pay for its impacts and adaptation.

"Debt swaps work with whatever theme you want, the important thing is that they are viable barters and that the country is willing," Paaby, from Costa Rica, also assures.

However, they would not be enough to solve the financial problem that the climate crisis brings.

“Debt swapping is just one tool in a much larger toolbox.

There are multiple strategies and we should address several to deal with climate change”, says Robinson.

“Even having a fund for loss and damage, as was achieved at COP27, will be insufficient, because we cannot forget other tools such as emissions reduction and renewable energy.

We must insist on that”, concludes the expert.