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Peru Signs $20-million Debt-for-nature Swap With Focus on Amazon Rainforest

Peru signed a deal last week that will redirect millions of dollars of international debt to environmental efforts in the Amazon rainforest, a move that could help it meet long-term conservation goals and reduce pressure from creditors. The South American country struck a $20 million debt-for-nature swap agreement with the U.S. that transfers debt payments to conservation initiatives like improving protected areas and natural resource management. The deal also included four NGOs: Conservation International, The Nature Conservancy, Wildlife Conservation Society and World Wildlife Fund.

The groups donated a combined $3 million — in addition to the $15 million contributed by the U.S. — to make the deal happen. “Our goal is to contribute to the effective management of protected areas and implement other conservation measures in the Peruvian Amazon,” said Fernando Ghersi, director for The Nature Conservancy – Peru. He added, “The debt-for-nature swap represents a significant step towards achieving the long-term financial sustainability of the Peruvian system of protected areas.”

Peru’s investment grade took a hit this year amid ongoing political instability marked by violent protests, corruption, controversial political reforms and impeachments. The country has had six presidents and several overhauls of congress since 2016. This summer, it entered a technical recession after enjoying years of growth that outpaced much of the region. The political and economic instability has taken a toll on conservation efforts in recent years. Some government agencies haven’t received sufficient budgets to fight environmental crime in protected areas, an official told Mongabay at the end of last year.

This is the third debt-for-nature swap deal struck by Peru and the U.S. The other two were made in 2002 and 2008 and have generated around $36 million for the conservation of tropical forests, according to the U.S. Department of the Treasury. The U.S. has now made 13 debt-for-nature and debt-for-climate swaps in Latin America and 22 worldwide. Other Latin American countries with similar deals include Belize, Brazil, Colombia, Guatemala and Paraguay. El Salvador, Costa Rica and Panama all have two deals with the U.S.

Other countries with deals include Bangladesh, Botswana, Indonesia, Jamaica and the Philippines. “As Global South countries face crushing interest payments, compounded by losses from our climate and biodiversity crises, other multilateral funding sources continue to shirk their responsibility. These countries must not bear that cost alone,” said CEO of Conservation International M. Sanjayan. “Debt-for-nature and debt-for-climate swaps can fill a clear supplementary role in relieving that undue burden.”

In addition to lowering the risk default for countries, debt-for-nature swaps can help improve biodiversity, the IMF has said, which can save carbon sinks, create new opportunities for revenue-generating carbon credits and reduce emissions. It could also create new possibilities for ecological tourism.

Some critics of the debt-for-nature and debt-for-climate concept — which was first introduced in the 1980s — warned that combining debt-related issues and climate initiatives isn’t always the right solution for some countries and could lead to “greenwashing.” Analysts at investment bank Barclays said funding needs to be better monitored to ensure it actually has a positive environmental impact.

But a study of Peru’s previous swap agreements found that funding did in fact go towards work like community resource management, constructing guard posts along rivers, inspecting forest concessions and designing training manuals for forest and water management in Indigenous communities, among other things.

“The Peruvian Amazon, like the whole Amazon, faces multiple challenges, and we must act now to prevent the biome from reaching the point of no return,” said WWF-Peru Country Director Kurt Holle. “…Through innovative debt swap initiatives, we can transform economic challenges into nature-friendly solutions for people.”