Mexico to Ease Debt, Help the Environment

Mexico and an environmental group said Tuesday they have agreed to turn $4 million worth of foreign debt into $2.6 million for environmental programs in this country’s first debt-for-nature swap.

More than half of the $2.6 million will be used for programs to study and protect the last North American rain forest, the Selva Lacandona in southern Mexico, said Javier de la Maza, Mexico representative for Conservation International, the Washington-based environmental group that arranged the swap.

Sergio Fadl, director of foreign debt at the Mexican Finance Ministry, said the government expects it to be the first of several debt-for-nature swaps in relatively small amounts. One private foundation, Pronatura, headed by Monterrey businessman Andres Marcelo Sada, is said to be negotiating a second swap for about $1.5 million.

The way the swap will work is that Morgan Guaranty Trust Co. will sell Conservation International $4 million worth of debt at the market rate, currently 42 cents on the dollar. That will cost about $1.7 million. The Mexican government will repurchase the debt at 65 cents on the dollar, giving the organization a 23-cent premium, an extra $920,000.

The resulting $2.6 million will be divided among five private foundations and the National Autonomous University, which operates a biology station in the Selva Lacandona. Part of the money will be used for educational programs.

While three other countries--Bolivia, Costa Rica and Madagascar--have negotiated such swaps, Mexico is the first major debtor to do so. Mexico is the Third World’s second-largest debtor, after Brazil, with debts of about $100 billion.

Mexico’s participation is also important because the country is one of 13 nations that contain 60% of the world’s plant and animal species, said Russell Mittermeier, president of Conservation International.

“This is a good effort, if it is administered correctly,” said noted author Homero Aridjis, president of the Group of 100, a Mexican environmental organization that is frequently critical of the government.