Chapter

Using International Finance to Further Conservation: The First 15 Years of Debt-for-Nature Swaps

William K. Reilly

in Sovereign Debt at the Crossroads

Published in print April 2006 | ISBN: 9780195168006
Published online May 2006 | e-ISBN: 9780199783458 | DOI: http://dx.doi.org/10.1093/0195168003.003.0010
 Using International Finance to Further Conservation: The First 15 Years of Debt-for-Nature Swaps

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This chapter examines debt-for-nature swaps and their potential for offsetting sovereign debt. Debt-for-nature swaps originated in the 1980s as a way of preserving natural areas in the developing world while at the same time reducing the external debt of the host country. The win-win nature of this type of transaction created many potential applications, and the US Congress and other national legislatures soon passed legislation enabling billions of dollars worth of swaps to take place. However, that potential was never realized. Legislative mandates were not funded, developing countries became suspicious of swaps as they believed they posed a threat to their sovereignty, and an improvement in debt markets reduced the attractiveness of swap economics. It is argued that although swaps are not a panacea for either debt reduction or environmental protection, they offer a concrete tool to promote both ends, and tremendous potential for swaps still exists.

Keywords: debt-for-nature swaps; government debts; sovereign debt; environmental protection; debt reduction

Chapter.  6575 words.  Illustrated.

Subjects: Economic Development and Growth

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