Bolivia to Preserve Forest in Swap for Reduced Debt

In an apparently unprecedented swap, Bolivia has reduced its foreign debt by $650,000 in exchange for establishing 3.7 million acres of conservation areas, a U.S. environmental organization announced Monday.

Under the arrangement, the nonprofit group Conservation International said it has agreed to buy the debt and forgive it if Bolivia promises to preserve certain tropical areas in the Amazon region that represent about 1.5% of the South American country’s land.

The agreement is an important development in the Third World debt crisis, which has prompted fears by environmentalists that debtor nations will resort to selling ecologically sensitive government lands to private enterprises that would develop the areas.

Bolivian Ambassador Fernando Illanes, speaking at a press conference at the Bolivian Embassy here, described the reduction as “only a very small dent” in the country’s $4-billion foreign debt but noted that “anything helps.”

In addition, he said, “More than the money, the important thing here is that we’re preserving the future of our country.”

Peter Seligmann, executive director of the Washington-based Conservation International, said the swap sets a precedent and that he hopes it shows that “ecological health and economic health are linked.” He added that “the wise use of natural resources is a long-term solution, as opposed to a quick-fix solution.”

Using a $100,000 donation from the San Francisco-based Frank Weeden Foundation, which devotes its funds to environmental and other issues, the conservation group bought the $650,000 in Bolivian debt at a discounted rate from unidentified lending institutions. The discount on the debt is the market price deemed by the lending institutions as an acceptable settlement, given Bolivia’s tremendous overall foreign debt burden.

Bolivia will continue to own the conservation areas. Its Congress has approved the establishment of a $250,000 endowment for management and protection of the conservation areas, which will serve as a model for the protection and development of Bolivia’s animals, plants, soil, water resources and ethnic groups that inhabit the lands.

The areas are adjacent to the existing 334,000-acre Beni Biosphere Reserve, about 150 miles northeast of La Paz. The reserve supports the nomadic Chimane Indians, as well as cattle ranching and lumbering, and holds more species of birds than all of North America.

“The people who live there will be taught how to preserve the forest,” said Maria Teresa Ortiz, Conservation International’s program director for Peru and Bolivia. “And they can contribute their knowledge to all the studies that will be done in the area.”

Seligmann said Conservation International is negotiating similar agreements with four other countries. Although he refused to name these nations, he did say that countries such as Brazil, Ecuador, Costa Rica and Peru, all of which have substantial foreign debts, have land that would be suitable for conservation areas.

He also said he hopes that other organizations, including banks, “will be in a position to make contributions of debt.”

Prospects for donations from banks would be “very good,” he said, if Congress passes legislation allowing banks to count such donations as charitable that can be deducted from taxable income. However, no such legislation is pending.

Developing countries owe $1.1 trillion to foreign lenders, according to a 1986 report by the International Monetary Fund. After five years of stretching out repayments of their Third World loans and lowering interest rates, several major U.S. banks recently have taken large deductions from income to inflate their reserves against loan losses.