Ecuador Embraces Debt-for-Nature Swap to Conserve Amazon

Ecuador plans to use a debt-for-nature swap to alleviate its debt burden and finance conservation efforts in the Amazon rainforest. The deal involves buying back bonds and issuing new ones through Amazon Conservation DAC. It follows a similar strategy previously applied to the Galapagos Islands.

Ecuador is negotiating a novel financial strategy aimed at preserving the Amazon rainforest while managing its national debt. The proposed debt-for-nature swap involves the purchase of existing bonds by Amazon Conservation DAC, a special purpose vehicle interested in conservation.

The initiative, facilitated by BofA Securities, will see up to $1 billion of new bonds issued with funds repurposed for ecological conservation efforts. U.S. International Development Finance Corporation and the Inter-American Development Bank are backing the effort with political-risk insurance and credit guarantees for interest payments.

This move aligns with a global shift where countries like the Bahamas and Barbados utilize similar strategies to invest in climate initiatives while handling economic challenges intensified by the COVID-19 pandemic and local unrest.

(With inputs from agencies.)