U.S. Forgives Multimillion-Dollar Debt to Aid Guatemala Forests

Kelly Hearn
for National Geographic News

October 10, 2006

In a "debt for nature" swap, the United States has agreed to forgive
about 20 percent of the 108 million dollars owed by Guatemala. In
exchange, the Central American country will invest 24.4 million dollars
to protect species-rich subtropical and tropical ecosystems.

The recently announced agreement is the largest of ten such deals the U.S. government has undertaken in recent years under the Tropical Forest Conservation Act of 1998.

Under the deal, the Guatemalan government is to fund conservation efforts with money it would have otherwise used to begin to pay back the tens of millions of dollars it has borrowed from the U.S. (Guatemala map and facts).

Loggers, tour companies, farmers, developers, and hunters have battered Guatemala's wildlands, conservationists say. They hope the swap will help protect coastal mangrove swamps, high-altitude cloud forests, and rain forests in Guatemala, a country about the size of Tennessee. (Related: new bird found in a Colombian cloud forest, which was protected under a debt-for-nature swap.

Targeted Areas

One targeted area is Guatemala's Maya Biosphere Reserve. This home to jaguars accounts for a tenth of the country's land area.

The deal will also fund programs in the zone containing the Sierra de las Minas Biosphere Reserve, home to quetzal birds, manatees, and hundreds of other animal species.

The Sierra Madre Volcanic Chain—a string of 37 volcanoes with slopes of broadleaf cloud forest, pine-oak, and tropical-pine forests—is another focal point.

The mountainous Cuchumatanes region, another conservation priority, contains dozens of species that exist nowhere else in the wild: more than 60 species of flora, 19 species of birds, and several amphibian species, according to the Nature Conservancy. The Arlington, Virginia-based nonprofit is involved in the debt-for-nature deal.

Picking Up the Tab

The U.S. government will use about 15 million dollars from the U.S. Treasury Department's budget to "buy" Guatemalan debt.

The Washington, D.C.-based nonprofit Conservation International and the Nature Conservancy are subsidizing the buyout by donating a million dollars apiece, according John Beavers, director for the Nature Conservancy in Guatemala.

The money, plus interest, will reduce Guatemala's debt obligation by 25.1 million dollars—equal to 20 percent of the nation's debt to the U.S. government, according to the U.S. Agency for International Development.

In turn, Guatemala will pay the equivalent of 24.4 million U.S. dollars over 15 years into an account to fund conservation proposals submitted by nonprofit groups and academic organizations.

An oversight committee composed of representatives of the major stakeholders will administer the program.

"It is the first time in history and on a global level that a debt of this size has been reduced for environmental ends," Sergio Enrique Véliz Rizzo, executive secretary of Guatemala's CONAP (National Council for Protected Areas), said in a statement.

To be eligible for a debt-for-nature swap under the U.S. Tropical Forest Conservation Act, a country must be democratically governed and not considered to be a supporter of terrorism. It must also back U.S antidrug efforts and subscribe to other political and economic conditions set by the U.S. government.

The Biggest but not the First

The U.S. has completed similar, smaller deals with Bangladesh, Belize, Colombia, El Salvador, Jamaica, Panama, Paraguay, Peru, and the Philippines.

Altogether, the swaps are expected to generate the equivalent of 125 million U.S. dollars over 10 to 25 years to protect tropical forests, according to a U.S. State Department document.

Peter Dogse is a program specialist at the United Nations Educational, Scientific, and Cultural Organization (UNESCO). He praised the Guatemala program, in part because of the benefits flowing to the Maya Biosphere Reserve, which is a member of UNESCO's World Network of Biosphere Reserves.
Dogse says that environmental groups are generally supportive of debt swaps. Some critics, though, take issue with the conditions placed on the deals by creditor governments.
"There are those who think that developed nations should just forgive debt because the developing countries know best how to use their scarce resources," he said.

At times, funds might be better spent on improving education or health care systems rather than on biodiversity programs, Dogse says. But many observers feel that well-negotiated debt swaps give developing countries access to international goodwill and additional financial resources, he added.

Still, some critics disagree with the concept of poor countries owing anything to developed countries. Debt-relief advocates employ a number of arguments: that a country's people should not suffer for debts run up by previous rulers; that industrialized countries are the real debtors, because their use of fossil fuels has sparked climate change that disproportionately harms poor countries; and so on.

Debt-for-nature swaps, critics say, may be beneficial, but they also tend to validate the idea of developing-world debt.

"There's no doubt that this money is better spent protecting Guatemala's environment than filling cash coffers in Washington," said Steve Kretzmann, an energy campaigner and director of the nonprofit Oil Change International.

"But the price of accepting the swap seems to be an acknowledgment that these debts are legitimate in the first place, which many would dispute."

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