Newsgroups: bit.listserv.biosph-l
Date:         Wed, 22 Jul 1992 16:08:25 EDT
Reply-To:     kclark@AMETHYST.BUCKNELL.EDU
From:         kclark@AMETHYST.BUCKNELL.EDU
Subject:      debt for nature summary and conclusions
X-To:         biosph-l@ubvm.cc.buffalo.edu

    Dear Friends
        Earlier this summer I began research on debt for nature swaps and
the effectiveness of local Non-Government Organizations (NGOs).  My summary
and conclusions follow.  I invite criticism and comment.  I will also
gladly provided bibliography and references upon request.  Thanks to all
who've helped along the way.

        When one looks at the debt for nature swaps suggested originally in
l988 by Thomas E. Lovejoy,(then vice-president for science of the World
Wildlife Fund-US), it appears to be a marvelous "win-win" idea.  "But why
not use the [international] debt crisis--which seems to be nearing
financial gridlock--to help solve environmental problems?  For instance,
debtor nations willing to to protect natural resources could be made
eligible for discounts or crdits against their debts."  In his New York
Times Op-Ed challenge, Lovejoy found the benefits of such swaps to be
mutually rewarding.  "It would not require new infusions of hard currency,
would contribute to local economies, would improve the debtor's ability to
payoff the balance of its outstanding loans and, not least, it might give
creditor countries a measure of satisfaction."   A simple and novel
approach to a complex and burgeoning problem, right?   Perhaps, a bit too
simple.
        Critics of Debt for Nature swaps immediately saw these exchanges as
another "first -world strategy" to wrest control of forests, national
parks, and other fragile ecosystems in the less developed debtor nations.
However,  proponents of debt for nature swaps argue that this is not a
top-down model of North over South coercion for conservation.
Representatives I contacted at the Smithsonian Institute and Conservation
International  stressed the vital role of the local Non-Government
Organizations in most debt-for-nature swaps.  These are the grassroots
organizations who determine and administer the conservation projects within
the debtor countries.
It's not Big Brother setting the agenda and policy.  Rather, they maintain,
organizations like the Smithsonian are invited to participate in swaps that
are designed by local NGOs in accordance with the host government's
policies and agenda.
        Obviously, local NGOs are integral to the debt swap.  So,who are
these "grassrooters?" Who benefits from the swap?  Who controls the land
and conservation activities?  Are the swaps democratic?  What promise do
these debt conversions hold for the future? These are among the important
questions with many implications for additional study.
        In his new book The Nature of Development, Roger Stone describes
the growth of local NGOs as explosive.  From relatively few in l980, Stone
now counts dozens of environmental groups in developing nations.  He
estimates 30,000 NGOs currently in operation.  Despite a short history,
these groups have made an impact.  Barbara Postel writing in the World
Watch Reader labels local NGOs as "doers" and "achievers" winning
recognition around the world.  "UNEP has begun to recognize that community
based initiatives have higher success rates and more lasting impacts than
top-down projects..."  While a New York Times analysis of the recent Earth
Summit found the "grassrooters" as the most likely to put action behind
their environmental rhettoric.  "These dissident environmentalists doubt
that more money in the hands of their government  will solve environmental
problems as long as politicians are not held accountable by the people and
corruption erodes enforcement of laws protecting nature."  In the same
article two environmental leaders challenge the local NGOs to expand their
sphere of influence within their countries.  I see this as a dilemma of
trust for these local NGOs who often have little faith in the environmental
consciousness of their own government.
        The most critical paper challenging debt for nature swaps is
authored by Maria Soares. It's a summary of a l991 meeting of NGOs in
Brazil.  Among the issues Soares notes, "Conversion[of the debt] allows
creditors to dispose of their sickly bonds, receiving part of an uncertain
debt at the same time as creating possibilities for profit, whether by good
business deals, or by tax benefits and improved public image...The main aim
of these initiative is , without a doubt, to diversify and protect the
banks and businesses in their investments and other interests in the Third
World."
        Soares also finds the debt swaps un-democratic and inflationary.
She notes the debtor countries are forced to dedicate scarce local currency
toward isolated conservation projects with little or no popular
participation.  She adds that debt swapping exploits and endangers
bio-diversity itself.
"The mapping of gene banks may be one of the objectives hidden behind the
good intentions of the conservation  and research projects alloted to debt
conversion."  She cites a Costa Rican project where research activities are
funded by debt conversion and administered exclusively by foreign
scientists.
        Meanwhile, the recent InBio-Merck deal in Costa Rica would seem to
challenge Soares' contention that gene research is controled by foreigners.
 Leslie Roberts writes (Science  22 May 92) that the Merck deal with local
NGO, In Bio, provides samples of Costa Rican plants, insects, and microbes
are gathered and offered by In Bio and the University of Costa Rica.
Additional research and training within Costa Rica will be provided by
Merck during the 2 year lease period.  An upfront fee of one million
dollars and half of any future royalties paid Costa Rica will be used by In
Bio for conservation activities.
        As to Soares' charge that the debt swaps are un-democratic, we
might again look to Costa Rica and its considerable experience with debt
for nature swaps (an estimated 100 million dollars swapped to date).  Here,
Mario Boza, the CR National Parks Director describes his governments policy
as "clear" and "very natural" when organizing ecodevelopment efforts on
behalf of indigenous people, squatters, and other dislocated people.
Alvaro Umana, the CR minister of natural resources adopts a 'use it or
lose' approach to natural treasures, "It used to be that conservation meant
preservation [without the pressence of] man, that land should be kept in a
bubble.  But in Central America, that's not possible...Sustainable
development represents a new style."  Despite such expressed sympathy Roger
Stone found reports of gold miners evicted from one of Costa Rica's
National Parks by government force.
        Deforestation is occuring in Costa Rica at an alarming rate and a
new 275 million dollar initiative is proposed, much of the financing could
come from debt swapping.  Debt swapping is an "incredible scheme" according
to Boza.  He calls it "the most important tool to achieve conservation."
With such weighty endorsement and future plans for more debt swaps, local
NGOs are gearing up their efforts to attract swaps and lobbying their
governments to commit local currency or bonds for conversion. One
Smithsonian advisor likened the windfall of debt swapped money to local
NGOs  as their entry into the "big league."  Many of these groups were
struggling with tiny $5,000 dollar annual grants  and suddenly they have
access to millions of dollars.  It makes for competition among NGOs.
        When selecting a local NGO partner, the Smithsonian uses a criteria
of familiarity, proven track records, and what it deems to be
"established/working track records."  And while competition among local
NGOs might be on the rise, the Smithsonian feels such competing stimulates
efficiency, urgency, better responses and better stability.
        Many debt swaps are now engineered to use local currency bonds as
the equity in the swap. This reduces the inflationary aspects of
restricting large quantities of local cash to a specific conservation
project.  It also provide a self-pertpetuating internal source for
conservation funding and usuaully offers a 5-10 year play for the original
dollars.
        Most debt for nature swaps are miniscule in comparison to the
enormous debt obligated by these developing nations.  Costa Rica with 100
million dollars of swapped debt is the clear world leader , yet its
external debt of 3 billion dollars makes it one of the highest per capita
in the world.  In addition, tax credits to commercial banks holding these
debts are not a significant incentive. So why bother with debt for nature
swaps?  Their appeal seems to be part of a growing international
sensitivity to global environmental threats, particularly in forested
developing nations and the proven ability to put  a meaningful amount of
people and resources to work for conservation purposes.  A second
generation of debt for nature swaps involving the heavy players like the
World Bank , the U.S. Agency for International Development, and other
multilateral development institutions hold even greater potential.
However, I feel the local NGOs need to remain a part of these swaps as
planners, administrators, and (hopefully) as guardians of the interest of
the people.
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