TREATIES AND OTHER INTERNATIONAL ACTS SERIES 04-819.1 

________________________________________________________________________ 

FINANCE 

Conservation 

 Agreement Between the 

UNITED STATES OF AMERICA 

and PANAMA 

Signed at Panama City August 19, 2004 

 with 

Attachments 
 NOTE BY THE DEPARTMENT OF STATE 

 Pursuant to Public Law 89—497, approved July 8, 1966 

(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued 

under the authority of the Secretary of State shall be competent 

 evidence . . . of the treaties, international agreements other than 

treaties, and proclamations by the President of such treaties and 

international agreements other than treaties, as the case may be, 

therein contained, in all the courts of law and equity and of maritime 

jurisdiction, and in all the tribunals and public offices of the 

United States, and of the several States, without any further proof 

or authentication thereof.” 
PANAMA 

Finance: Conservation 

 Agreement signed at Panama City August 19, 2004; 

 Entered into force August 19, 2004. 

 With attachments. 
Execution Copy

AGREEMENT BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE REPUBLIC OF PANAMA

REGARDING A DEBT-FOR-NATURE SWAP

(DARIEN NATIONAL PARK)

The Government of the United States of America and the Government of the Republic of

Panama,

Seeking to facilitate the conservation, protection, restoration, and sustainable use and

management of tropical forests in Panama, which provide a wide range of benefits to humankind,

Noting that rapid rates of tropical deforestation and forest degradation continue to be

serious problems in many regions of the world,

Recognizing that the alleviation of external debt in the context of broader economic

reforms can reduce economic pressures on countries and result in increased protection for

tropical forests,

Further recognizing the Government of the Republic of Panama's strong record in

implementing market-based economic reforms including sustained efforts to liberalize its

investment regime,

Wishing to ensure that resources freed from debt will be used for the conservation of

tropical forests,

Further recognizing The Nature Conservancy's interest in tropical forest protection in

Panama, and the success of non-governmental organizations in Panama in conserving and

managing tropical forest land in Panama,

Wishing to build on the success of the debt-for-nature swap transaction undertaken by the

Parties in September 2003 with respect to conservation in the Chagres National Park, and

In furtherance of the goals of the U.S. Tropical Forest Conservation Act of 1998, Public

Law No. 105-214, as amended, and the Foreign Operations, Export Financing, and Related

Programs Appropriations Act, as contained in Public Law No. 108-7 (2003).

Have agreed on this 19 day of August, 2004 and contract as follows:

ARTICLE I

DEFINITIONS

Defined Terms. The capitalized terms contained and used in this Agreement shall have

the respective meanings ascribed to them in this Section 1.1 and elsewhere in this

Agreement. If a capitalized term is not defined in this Agreement and it is defined in the

DC: 1501010-1
Swap Fee Contractual Agreement, then it shall have the meaning ascribed to it in the

Swap Fee Contractual Agreement.

(a) "525 T041 August 2004 Payment" means the amount due on August 25, 2004

from, and paid by or on behalf of, GOP to USAID with respect to Loan 525 T041 under

the Outstanding Obligations.

(b) "525 VO43 August 2004 Payment" means the amount due on August 28, 2004

from, and paid by or on behalf of, GOP to USAID with respect to Loan 525 VO43 under

the Outstanding Obligations.

(c) "Agreement" means this Agreement between the Government of the United States

of America and the Government of the Republic of Panama Regarding a Debt-for-Nature

Swap, as it may be amended from time to time.

(d) "Business Day" means any day on which the Federal Reserve Bank of New York

and GOP are both open for business.

(e) "Closing" has the meaning set forth in Section 2.3.

(f) "Closing Date" has the meaning set forth in Section 2.3

(g) "Debt Reduction Payment" means the transfer of six million five hundred

thousand U.S. dollars (U.S.$ 6,500,000) by USG from the Debt Restructuring Account to

the USAID Account.

(h) "Debt Restructuring Account" means the "Debt Restructuring Program Account"

at the U.S. Department of the Treasury.

(i) "Escrow Account" has the meaning set forth in Section 6.2.

(j) "Excess Amount r means an amount that would equal the difference between the

525 T041 August 2004 Payment and the amount due on August 25, 2004 under the New

Obligation as described in Schedule A.1. 

(k) "Excess Amount means an amount that would equal the difference between

the 525 VO43 August 2004 Payment and the amount due on August 28, 2004 under the

New Obligation as described in Schedule A.1.

(1) "Forest Conservation Agreement" means the Forest Conservation Agreement to

be entered into among TNC, GOP, the Fund Administrator and the Trustee with respect

to the Forest Land, as amended from time to time.

(m) "Forest Land" means (a) that portion of the Darien National Park (Parque

Nacional Darien) and its environs described in Exhibit 1.1 of the Forest Conservation

Agreement which will be conserved, maintained and restored with funds provided

pursuant to this Agreement and the Trust Agreement, and (b) any other tropical forest

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land in Panama approved for conservation, maintenance and restoration by the

unanimous vote of the Permanent Voting Members of the Oversight Committee.

(n) "Fund Administrator" means, initially, Natura, or any subsequent organization

agreed upon by the Oversight Committee.

(o) "GOP" means the Government of the Republic of Panama, acting primarily

through the Ministry of Finance.

(p) "Natura" means FundaciOn Natura, a non-profit organization, legally constituted

on March 21, 1991 under the laws of the Republic of Panama.

(q) "New Obligation" means GOP's new undertakings pursuant to this Agreement

that shall replace the Outstanding Obligations and obligate GOP (i) to make the payments

to USAID in accordance with Schedule A.1 and the terms and conditions set forth herein

and in accordance with USAID's loan management guidelines, and (ii) to make the

payments to the Trustee in the amounts set forth in Schedule A.2.

(r) "Outstanding Obligations" means Loans 525T041 and 525VO43 under the

agreements entitled "Loan and Grant Agreement between the Government of Panama and

the Government of the United States of America Acting through the Agency for

International Development for Economic Stabilization," dated November 13, 1974 and

November 19, 1975, respectively, that obligate GOP to repay principal and interest on

debt whose outstanding aggregate principal amounts to nine million four hundred twentyeight thousand, two hundred and seventeen U.S. Dollars ($9,428,217), as of August 1,

2004.

(s) "Oversight Committee" means the oversight committee formed and operated

pursuant to the Forest Conservation Agreement.

(t) "Party" means either the USG or GOP, and "Parties" means, collectively, the

USG and GOP.

(u) "Payment Due Date" has the meaning set forth in Section 6.1.

(v) "Permanent Voting Members" has the meaning set forth in the Forest

Conservation Agreement.

(w) "Swap Fee Contractual Agreement" means that certain Swap Fee Contractual

Agreement between the USG and TNC, dated as of the date hereof.

(x) "TFCA" means the U.S. Tropical Forest Conservation Act of 1998, Public Law

No. 105-214, as amended.

(y) "TNC" means The Nature Conservancy, a nonprofit corporation organized under

the laws of the District of Columbia in the United States of America, and any of its

successors.

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(z) "Tropical Forest Conservation Trust" means the trust created pursuant to the Trust

Agreement and the Trust Law of the Republic of Panama (Ley No. 1 del 5 de enero de

1984), as it may be amended from time to time.

(aa) "Trust Agreement" means the irrevocable Trust Agreement created by GOP as

trustor, USG and TNC, as principal donors, and a corporation licensed to perform

services as a trustee under the laws of Panama, as initial trustee, dated as of the Closing

Date, as it may be amended from time to time.

(bb) "Trustee" means, initially, the entity serving as trustee under the Trust Agreement

as of the Closing Date, or another Panamanian corporation licensed to perform services

as a trustee under the laws of Panama and subsequently designated by the Oversight

Committee pursuant to Section 7.1 of the Forest Conservation Agreement, or any

successor to any of the foregoing.

(cc) "USAID" means the U.S. Agency for International Development.

(dd) "USAID Account" means the Debt Restructuring Liquidating Account #11X4137

at the U.S. Agency for International Development in the name of "Controller, Office of

Financial Management, Agency for International Development", ALC # 72000001, on

the books of the Federal Reserve Bank of New York.

(ee) "U.S. Dollar" means the legal tender of the United States of America.

(ft) "USG" means the Government of the United States of America, acting primarily

through the U.S. Department of the Treasury.

ARTICLE II

CLOSING

2.1. Obligations of the USG. Pursuant to the terms and subject to the conditions hereof, at the

Closing USG shall (a) make the Debt Reduction Payment, thereby prepaying a portion of

the amounts due and unpaid under the Outstanding Obligations, and concurrently

canceling all remaining amounts due and unpaid thereunder, and (b) substitute the New

Obligation for the Outstanding Obligations.

2.2. Obligations of GOP. Pursuant to the terms and subject to the conditions hereof, at the

Closing GOP shall (a) substitute the New Obligation for the Outstanding Obligations, and

(b) unless otherwise provided in Section 5.4 below, make the first payment due to the

Trustee in accordance with the terms of the Forest Conservation Agreement.

2.3. Closing. The consummation of the transactions contemplated in this Article II shall take

place simultaneously in a single act (the "Closing") on (a) August 25, 2004, or (b) such

other Business Day as may be agreed by the Parties and INC in writing (the "Closin g

Dae).

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ARTICLE DI

PAYMENT OF NEW OBLIGATIONS

3.1. Payments of Principal and Interest. GOP shall (a) make payments of principal and

interest to USAID in U.S. Dollars in accordance with Schedule A.1 and in accordance

with the payment conditions and default provisions of the Outstanding Obligations, but

without regard to any prepayment provisions contained therein, and (b) make payments

in U.S. Dollars to the Trustee in accordance with Schedule A.2. All payments made to

USAID shall be deposited in the USAID Account by wire transfer in accordance with the

wire transfer instructions set forth in Schedule B.

3.2. Overdue Payments. Interest shall accrue, at an interest rate of three percent (3.00%) per

annum, on any overdue and unpaid installment of either principal or interest payable to

USAID under the New Obligation for the period from and including the applicable

payment due date to but excluding the date the overdue amount is paid in full. GOP shall

make any such overdue payments in U.S. Dollars in accordance with the payment

instructions set forth in Section 3.1 and in accordance with the payment conditions and

default provisions of the Outstanding Obligations.

3.3. No Assignment. GOP shall not assign, delegate or otherwise transfer any obligations

under the New Obligation or this Agreement to any third party without the prior written

consent of USG.

ARTICLE IV

CONDITIONS TO CLOSING

4.1. Conditions Precedent of the USG. The obligation of the USG hereunder to make the

Debt Reduction Payment at the Closing shall be subject to the fulfillment or waiver on or

prior to the Closing Date of the following conditions, each of which shall be performed to

the satisfaction of the USG:

(a) Swap Fee Contractual Agreement. TNC shall have executed and delivered the

Swap Fee Contractual Agreement, such agreement shall be in full force and effect as of

the Closing Date, and TNC shall have duly performed and complied in all material

respects with all agreements, covenants and conditions required to be performed or

complied with by it under the Swap Fee Contractual Agreement as of the Closing Date;

(b) Forest Conservation Agreement. The Forest Conservation Agreement shall have

been executed and delivered by the parties thereto and the transactions contemplated

thereunder shall have been consummated prior to, or concurrently with, the Closing, or

the conditions to closing set forth in the Forest Conservation Agreement shall have been

satisfied or waived;

(c) Trust Agreement. The Trust Agreement shall have been executed and delivered

by the parties thereto and the transactions contemplated thereunder shall have been

consummated prior to, or concurrently with, the Closing, or the conditions to closing set

forth in the Trust Agreement shall have been satisfied or waived;

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(d) Wire Transfer Instructions. In the event the Closing occurs after August 25, 2004,

USAID will have received from Trustee wire transfer instructions with respect to the

refund of the Excess Amount I and Excess Amount II, as applicable (which wire transfer

instructions shall include (i) name of bank and address, (ii) attention, (iii) ABA number

of Trustee's bank, and (iv) any other information that may be requested by USAID);

(e) 525 T041 August 2004 Payment. In the event the Closing occurs after August 25,

2004, GOP shall have paid in full the 525 T041 August 2004 Payment;

(f) 525 VO43 August 2004 Payment. In the event the Closing occurs after August 28,

2004, GOP shall have paid in full the 525 VO43 August 2004 Payment; and

(g) Other Documents. The USG shall have received from GOP such further

documents, opinions and/or certificates as the USG shall reasonably request.

ARTICLE V

ADDITIONAL COVENANTS OF THE PARTIES

5.1. Imposition of Taxes. GOP agrees to take no action, including the imposition of any

taxes, levies, fees or other charges, that could reasonably be expected to interfere with or

reduce any of the payments required to be made by GOP pursuant to the Forest

Conservation Agreement. A breach of this provision will constitute a material breach of

this Agreement by GOP.

5.2. Consultation. GOP agrees to consult with the USG and TNC before undertaking any

action that could reasonably be expected to affect the activities of Fund Administrator or

the Tropical Forest Conservation Trust.

5.3. Financial Reports. GOP agrees to forward to the USG, within thirty (30) days of receipt,

all annual activity reports, financial audits and other reports from the Fund Administrator

required by the Forest Conservation Agreement relating to the use of payments received

pursuant to the Forest Conservation Agreement. USG acknowledges that reports

received from the Trustee or the Fund Administrator will fulfill GOP's requirement of

providing those reports to USG.

5.4. Payment Adjustments Required by Changes to the Closing Date.

(a) If the Closing occurs after August 25, 2004 but on or prior to August 28, 2004,

then USG shall transfer the Excess Amount Ito the Trustee on the later of (i) the date that

is fourteen (14) Business Days after the Closing Date, and (ii) the date that USAID has

received the 525 T041 August 2004 Payment.

(b) If the Closing occurs after August 28, 2004, then, in lieu of the payment specified

in Section 5.4(a) above, USG shall transfer the Excess Amount I and the Excess Amount

II to the Trustee on the later of (i) the date that is fourteen (14) Business Days after the

Closing Date, and (ii) the date that USAID has received (y) the 525 T041 August 2004

Payment, and (z) the 525 VO43 August 2004 Payment.]

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(c) The Parties acknowledge and agree that the payments made by USG to the

Trustee, if any, pursuant to this Section 5.4 shall be deemed to be payments made by

GOP to the Trustee, in accordance with Schedule A.2.

(d) The Parties acknowledge and agree that, if Closing occurs after August 25, 2004,

payment by GOP of the 525 T041 August 2004 Payment, and, if applicable, the 525

VO43 August 2004 Payment shall be deemed to be in full and complete satisfaction of the

payments then due and payable to USAID under the New Obligation as described in

Schedule A.1 (for the August 25, 2004 and, if applicable, August 28, 2004 payments) and

payments then due and payable to the Trustee under the New Obligation as described in

Schedule A.2 (for the August 25, 2004 and, if applicable, August 28, 2004 payments).

(e) USG's calculation of the payments due under this Section 5.4 shall be final and

binding in the absence of manifest error.

ARTICLE VI

FAILURE TO MAKE PAYMENTS TO THE TRUSTEE

6.1. Payment Default. In the event GOP does not make full payment of any installment in

accordance with Schedule A.2 of the New Obligation to the Trustee when due under this

Agreement (each such due date, a "Payment Due Date"), GOP shall immediately

commence discussions with USG to resolve such payment default (and in no event shall

such discussions be commenced later than seven (7) Business Days after the respective

Payment Due Date). GOP and USG agree to use their best efforts to find a mutually

acceptable resolution.

6.2. Remedies of USG. In the event the GOP and USG are unable to agree to a mutually

acceptable solution to the payment default within sixty (60) days following the applicable

Payment Due Date, the following procedures shall apply:

(a) USG shall require the GOP to pay immediately in U.S. Dollars any overdue or

unpaid installment of either principal or interest payment in accordance with Schedule

A.2 of the New Obligation to the Trustee for distribution in accordance with the Forest

Conservation Agreement; and

(b) USG may, in its sole discretion, declare all, or any part of, future payments under

Schedule A.2 of the New Obligation due and payable immediately in U.S. Dollars, in

which case, such amounts shall be paid to the Trustee for distribution in accordance with

the Forest Conservation Agreement; and

(c) If Oversight Committee determines, in a resolution approved by a majority of its

members, that the Trustee is unable to carry out its responsibilities under the Trust

Agreement, amounts due to the Trustee shall be deposited into an escrow account

designated by USG (the "Escrow Account"). Funds in the Escrow Account shall be

distributed at the direction of the Oversight Committee for use in carrying out the

purposes of the TFCA in accordance with the Forest Conservation Agreement.

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ARTICLE VII

CONSULTATION

Upon the written request of either Party, the Parties shall consult concerning the

implementation or interpretation of this Agreement. These consultations shall take place within

thirty (30) days after a request for consultations is received from the other Party.

ARTICLE VIII

AMENDMENT AND NOTIFICATION

8.1. Amendment: Waiver. This Agreement may be amended with the written consent of both

Parties. No provision of this Agreement may be waived orally, but only by a written

instrument signed by the Party against whom enforcement of such waiver is sought. A

failure or delay in exercising any right, power or privilege in respect of this Agreement

shall not be presumed to operate as a waiver, and a single or partial exercise of any right,

power or privilege shall not be presumed to preclude any subsequent or further exercise,

of that right, power or privilege or the exercise of any other right, power or privilege.

8.2. Notice. All notifications, consents, requests, approvals, reports and other

communications provided for under the Agreement shall be in writing and delivered as

follows:

(a) To the USG:

Deputy Assistant Secretary for International

Debt and Trade Finance Policy

U.S. Department of the Treasury

1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20220 U.S.A.

(202) 622-0154 (telephone)

202-622-9212 (facsimile)

(b) To GOP:

Ministry of Economy & Finance

Directorate of Public Credit

Via Espaila, Edif. Ogawa, 4th Floor

Panama, Rep. of Panama

(507) 269-4992 (telephone)

(507) 223-1405 (facsimile)

opmp®Bloomberg.net

Attn: Aracelly Mendez

Director of Public Credit

8.3. Counterparts. This Agreement (and each amendment, modification and waiver in respect

of it) may be executed and delivered in counterparts, each of which shall be deemed an

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4 

original and all of which, taken together, shall constitute one instrument. This Agreement

shall not be effective unless and until signed by each Party hereto.

ARTICLE IX

ENTRY INTO FORCE AND TERMINATION

9.1. Termination. This Agreement shall terminate (a) on September 30, 2004 if the Closing

shall not have occurred before that date, or (b) if the Closing has occurred, upon the

payment by GOP of all amounts due under the Forest Conservation Agreement. In

addition, a Party hereto may terminate this Agreement upon the termination of the Forest

Conservation Agreement, Swap Fee Agreement or Trust Agreement; provided that the

Party terminating this Agreement is not in default under the Forest Conservation

Agreement, Swap Fee Agreement or Trust Agreement.

9.2. Entry Into Force. This Agreement shall enter into force immediately upon signature by

the Parties. Each Party's signature below evidences that all necessary domestic legal

requirements for entry into force of the Agreement have been fulfilled under the

respective Party's laws on the date of signature.

ARTICLE X

OTHER PROVISIONS

10.1. Schedules. The following schedules are part of this Agreement:

Schedule A.1 Payment Schedule to USAID under New Obligation

Schedule A.2 Payment Schedule to the Trustee

Schedule B Wire Transfer Instructions

End of text, signature page follows]
IN WITNESS WHEREOF the undersigned, being duly authorized by their respective

Government, have executed and delivered this Agreement.

DONE at PanamI City, in duplicate in the English language, this II day of August,

2004.

FOR THE GOVERNMENT OF THE

UNITED STATES OF AMERICA: REPUBLIC OF PANAMA:

FOR THE GOVERNMENT OF THE

Name: Linda E. Watt

Title: Ambassador of the United States

of America for the Government of

the United States of America

COUNTERSIGNED BY:

Name: Alvin Weeden Gamboa

Title: Controller General Republic of PanamA
SCHEDULE A.1

SCHEDULE OF PAYMENTS TO USAID UNDER NEW OBLIGATION

USAID 525 T041 USAID 525 VO43

Date Scheduled

Principal

Scheduled

Interest

Date Scheduled

Principal

Scheduled

Interest

8/25/2004 US$11,555.43 US$4,478.48 8/28/2004 0 0

2/25/2005 US$11,728.71 US$4,305.12 2/28/2005 0 0

8/25/2005 US$11,904.65 US$4,129.18 8/28/2005 0 0

2/25/2006 US$12,083.26 US$3,950.65 2/28/2006 0 0

8/25/2006 US$12,264.53 US$3,769.38 8/28/2006 0 0

2/25/2007 US$12,448.46 US$3,585.45 2/28/2007 0 0

8/25/2007 US$12,635.22 US$3,398.69 8/28/2007 0 0

2/25/2008 US$12,824.72 US$3,209.19 2/28/2008 0 0

8/25/2008 US$13,017.05 US$3,016.78 8/28/2008 0 0

2/25/2009 US$13,212.36 US$2,821.55 2/28/2009 0 0

8/25/2009 US$13,410.50 US$2,623.33 8/28/2009 0 0

2/25/2010 US$13,611.70 US$2,422.20 2/28/2010 0 0

8/25/2010 US$13,815.90 US$2,218.01 8/28/2010 0 0

2/25/2011 US$14,023.07 US$2,010.76 2/28/2011 0 0

8/25/2011 US$14,233.48 US$1,800.43 8/28/2011 0 0

2/25/2012 US$14,446.95 US$1,586.96 2/28/2012 0 0

8/25/2012 US$14,663.65 US$1,370.26 8/28/2012 0 0

2/25/2013 US$14,883.58 US$1,150.25 2/28/2013 0 0

8/25/2013 US$15,106.82 US$927.01 8/28/2013 0 0

2/25/2014 US$15,333.45 US$700.38 2/28/2014 0 0

8/25/2014 US$15,563.46 US$470.45 8/28/2014 0 0

2/25/2015 US$15,796.95 US$236.96 2/28/2015 0 0

8/28/2015 0 0

2/28/2016 0 0

8/28/2016 0 0

TOTAL US$298,563.90 $54,181.47 TOTAL $0 $0

* * *
SCHEDULE A.2

Schedule of Payments to Trustee under the New Obligation

Payment Date Payment Amount

Closing Date US$459,128.09

2/28/2005 US$459,127.17

8/28/2005 US$459,128.17

2/28/2006 US$459,129.09

8/28/2006 US$459,129.09

2/28/2007 US$459,128.09

8/28/2007 US$459,129.09

2/28/2008 US$459,128.09

8/28/2008 US$459,128.17

2/28/2009 US$459,129.09

8/28/2009 US$459,127.17

2/28/2010 US$459,128.10

8/28/2010 US$459,129.09

2/28/2011 US$459,127.17

8/28/2011 US$459,128.09

2/28/2012 US$459,129.09

8/28/2012 US$459,129.09

2/28/2013 US$459,127.17

8/28/2013 US$459,128.17

2/28/2014 US$459,128.17

8/28/2014 US$459,129.09

2/28/2015 US$459,129.09

8/28/2015 US$276,496.00

2/28/2016 US$276,497.00

8/28/2016 US$276,496.00

TOTAL $10,930,312.63

•
SCHEDULE B

Wire Transfer Instructions

US Dollar wire transfers to USAID must be made from a foreign central bank to a U.S. bank

which is "on-line" with the Federal Reserve. The Federal Reserve only deals with foreign

central banks. The receiving U.S. bank must have an on-line connection with the Federal

Reserve.

2. The information supplied on the wire transfer must include:

a. USAID ABA No. = 021030004.

b. Federal Reserve Foreign Dept.

Type Code =15 = Payments from Foreign Central Banks

Type Code = 10 = Payments from Commercial Banks

c. ABA (Account) No. of sender.

d. US Dollar Amount

e. USAID Agency Location Code (ALC) = 72000001

f. Detail concerning purpose of payment

3. Questions: Federal Reserve/New York (212) 720-5840.