Ecuador's debt-for-nature deal will allow for the protection of around 2,500 marine species, including 38 migratory species. Image: Unsplash / Pauline Steines
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- It is the largest debt-for-nature deal in history. $450 million of debt will be allocated to the Galapagos Life Fund, created to finance conservation projects.
- The debt deal will have a duration of 18.5 years, but has been structured to ensure the perpetual protection of the Galapagos marine ecosystems.
- Five factors were key for achieving this historic transaction: academia, collaboration, consensus, an innovative financing model, and government leadership.
Ecuador has taken an unprecedented step in Financial Diplomacy for Biodiversity Conservation by executing the largest transaction in human history: the debt-for-nature deal, specifically for the Galapagos Islands.
Ecuador exchanged approximately $1.63 billion of existing debt for a new loan of $656 million. This loan is backed by insurance from the Development Finance Corporation and a guarantee from the Inter-American Development Bank, with the structuring and technical advice provided by Credit Suisse for the financial implementation of the transaction.
Furthermore, global conservation experts such as the Ocean Finance Company and Pew Bertarelli Ocean Legacy played an important role in the proposal and monitoring of the overall transaction structure and in overseeing compliance with environmental and social commitments.
Thanks to this transaction, around $450 million, which were previously allocated to debt service payments, will be directed to the Galapagos Life Fund, a fund that will finance conservation projects in the Galapagos Marine Reserve and the Hermandad Marine Reserve, totaling 198,000 square kilometers of protected area. Additionally, it generates a debt savings of $1.121 billion.
How was this historic deal for nature achieved?
- The participation of academia: through research and science, the academia provided solid data and arguments to support the decision.
- Collaborative work: involving civil society, productive sectors, local governments, NGOs, the financial sector, as well as institutions in developing and developed countries.
- Consensus: Ecuador has the largest fishing fleet in the Eastern Tropical Pacific. Therefore, the fishing sector played a key role in this milestone. Ecuador proved maturity in terms of sustainability, conveying a powerful message on the importance of global fisheries sustainability.
- Perpetual financial resources for conservation: an innovative mechanism that was crucial for this international agreement in obtaining resources for biodiversity protection.
- Leadership: the determination and vision of Ecuador's President, Guillermo Lasso, were essential in achieving this milestone.
Ensuring the perpetual protection of marine ecosystems
The debt-for-nature deal will have a duration of 18.5 years. However, the operation is structured to secure the resources that guarantee the perpetual protection of the Galapagos marine ecosystems, while generating a positive impact on the country's financial sustainability. During the announcement, Ecuadorian Foreign Minister Gustavo Manrique stated that with this historic milestone, Ecuador positions itself to the world as a benchmark in using biodiversity as the new currency that the planet needs, thus leading the international race towards the blue economy transition.
The milestone in the international context
This milestone marks an important achievement in President Guillermo Lasso's government regarding the country's international commitments. During COP26 in Glasgow in November 2021, the creation of the Hermandad Reserve was announced. Then, in January 2022, the establishment of the Reserve was decreed. Now, this milestone completes this cycle with the debt deal to ensure the protection of these ecosystems.
In the same context of international commitments, the deal contributes to the fulfillment of the COP15 agreement in Montreal in December 2022, where Ecuador, along with 190 other countries, committed to protecting 30% of the planet's land and oceans by 2030. In Ecuador, since President Guillermo Lasso took office, protected areas in the country have increased by 42%, which represents an additional 7.7 million hectares compared to 2021, including the Hermandad Marine Reserve.
The debt-for-nature deal will allow for the protection of approximately 2,500 marine species, including 38 migratory species. In addition to conserving protected areas in the Galapagos Islands, it is expected that this initiative will generate a positive impact on sustainable development.”
How the Galapagos Life Fund will operate
On May 26th and 27th, the first meeting of the Board of Directors of the Galapagos Life Fund took place on Santa Cruz Island, where the initial resolutions for the fund's operations were approved. Various key actions were addressed for the preservation of these areas, including the scope of operations, project financing, monitoring and management, sustainable fishing, scientific research, environmental education, and sustainable tourism.
The Board of the fund consists of 11 members, including top authorities from the Ministries of Environment, Water and Ecological Transition; Foreign Affairs and Human Mobility; Production, Foreign Trade, Investments, and Fisheries; Defense; and the Special Government Council of Galapagos. They will be responsible for the executive control and management of the Fund, as well as ensuring proper and efficient administration considering social, economic, and sustainability aspects.
The debt-for-nature deal will allow for the protection of approximately 2,500 marine species, including 38 migratory species. In addition to conserving protected areas in the Galapagos Islands, it is expected that this initiative will generate a positive impact on sustainable development by promoting biodiversity conservation, job creation, and responsible tourism in the region.
Ecuador has become an example for other countries by leading this initiative and establishing a model that encourages collaboration among different sectors and stakeholders. The success of this transaction strengthens its commitment to biodiversity protection and sustainable development.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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