Costa Rica Will Preserve Forests in Exchange for Reduction of Debt

In what was called the largest private “debt-for-nature” swap to date, the government of Costa Rica has agreed to take new steps to save its vanishing tropical forests in exchange for a reduction in its foreign debt, it was disclosed Thursday.

Under an agreement announced in Washington, Costa Rica will not have to repay a $5.6-million loan it owed the American Express Bank. The bank wrote off the loan as a bad debt, took a tax deduction and sold the debt paper to the Nature Conservancy, a Washington-based private, nonprofit conservation organization, for $784,000.

The Nature Conservancy and another private environmental group in Costa Rica then renegotiated the loan with the government. Under the new terms, the government will owe $1.7 million plus interest, which will be used to issue Costa Rican currency bonds that will finance the tropical forest preservation project as well as other conservation measures involving 355,000 acres.

The exchange is the fifth such transaction and part of a developing trend in dealing with Third World debt while encouraging conservation of what are coming to be known as the “global commons,” precious natural resources that are critical links in preventing or minimizing worldwide environmental problems such as global warming.

Third World countries collectively owe $1.3 trillion in foreign debt and many are forced to service that debt by exploiting natural resources to earn hard currency to repay their loans.

“The monumental environmental problems facing the world are going to require creative solutions,” Jeff Wise of the Nature Conservancy said Thursday in a telephone interview from Washington. “Debt for nature . . . is a model for imaginative ways of dealing with the unimaginable--the loss of a large portion of the world’s animal species.”

He added that as debt-for-nature transactions increase in size, more indebted countries may be encouraged to participate.

Last year, for example, a $30-million government-to-government debt-for-nature exchange was negotiated in Costa Rica by the Dutch government, while the World Wildlife Fund put together a $5.4-million package. Such exchanges were recommended late last year to President-elect Bush in an extensive review of environmental issues funded by major U.S. corporations and foundations. Ecuador has also made provisions for such exchanges.

While Costa Rica has the most extensive park system in the developing world with 11% of its land in national parks and another 14% in some protective status, it experiences the highest deforestation rates outside its parks of any country in the Western Hemisphere, the Nature Conservancy said.

Each year, 4% of Costa Rica’s total forest cover is lost to development. If that trend continues for a decade, the conservancy said, there would be no productive forest outside protected areas.

Each year tropical forests covering an area the size of Austria are cleared and burned to make way for housing, agriculture and other development, according to Irving Mintzer of the World Resources Institute. That amounts to 54 acres each minute.

It has been estimated, for example, that the burning of rain forests for development and agriculture contributes as much as 20% of the total human contribution of carbon dioxide in the atmosphere. Carbon dioxide is a major contributor to the so-called greenhouse effect, a postulated international warming trend.

In addition, tropical forests are significant reservoirs of biological diversity. It has been estimated that 75% of all species on Earth are located in tropical regions.

Assisting the Nature Conservancy in purchasing the $5.6-million Costa Rican debt were the Stroud Foundation; the Noyes Foundation; the W. Alton Jones Foundation; the MacArthur Foundation; the World Wildlife Fund; the National Parks Foundation of Costa Rica; the government of Holland; the Swedish Society for the Conservation of Nature, and the People’s Trust for Endangered Speces based in Great Britain.