Ecuador seeks swap deal to fund Galapagos reservation

(Bloomberg) – The Ecuadorian government is in talks with a US development bank to raise funds that would finance the protection of a new large marine reserve around the Galapagos Islands, Environment Minister Gustavo Manrique said in an interview .

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The exact details of the fundraiser have yet to be determined, but would likely involve Ecuador buying back some of its more expensive debt and issuing a cheaper “blue bond” backed by the bank. International Development Finance Corporation. from the United States, said Manrique. The operation would reduce the government’s debt burden by around US $ 300 million provided Ecuador increases spending to help the Galapagos, according to Manrique.

The deal, which is part of the administration’s vision to take advantage of capital markets to finance the conservation and greening of the economy of the former OPEC member, will allow the government to double or triple its annual budget of US $ 6 million for the Galapagos National Park. , which manages the protected areas of the famous archipelago home to giant turtles, green turtles and marine iguanas. It will severely limit commercial fishing in 60,000 square kilometers of the Pacific Ocean.

Ecuador’s willingness to sacrifice the region’s fishing income “demonstrates a clear belief that we must grow in balance with nature,” Manrique said. The periodic presence of fishing fleets, mainly Chinese, in the region had drawn criticism from environmentalists and weighed on US-China relations.

However, environmental, social and governance issues have taken an increasing place in capital markets in recent years, with high demand for debt or stocks claiming to help make the world a better place, though some of these claims may sound dubious. . . Ecuador’s plan is similar to a deal with Belize, where the government, its creditors and Nature Conservancy completed one of the largest debt restructurings in history aimed at protecting the environment, also with backing the United States.

Several investment banks have expressed interest in helping Ecuador with the transaction, according to Manrique, who declined to identify them by name. The country has a speculative-grade credit rating after restructuring $ 17.4 billion in bonds last year, its 11th default or debt rescheduling in the past 200 years. Its $ 3.7 billion of notes due 2030 have a yield of approximately 8.8%.

The US development bank did not respond to emails, phone calls or voicemail messages seeking comment.

Although the funds are not yet available, President Guillermo Lasso has already announced the creation of the new reserve at the COP26 conference in Glasgow, alongside leaders from Colombia, Costa Rica and Panama. It will expand an existing 133,000 square kilometer Marine Protected Area established in 1998.

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