Africa, Development & Aid, Environment, Headlines

MADAGASCAR: Pioneering Debt-For-Nature Swops Bearing Fruit

LONDON, Mar 25 1996 (IPS) - The southern African island of Madagascar’s pioneering ‘debt-for-nature’ swops are easing its commercial debt burden and raising resources to help preserve its environment.

Working closely with the World Wildlife Fund (WWF), Madagascar signed its first debt-for-nature deal with the WWF in 1989. Analysts estimate that the scheme has enabled the country to redeem more than half of its 100 million dollar commercial bank debt.

“There is no loser in these deals,” said Jamie Resor, WWF’s U.S.-based debt-swap expert. “The debtor gets the debts of their books, Madagascar clears some of its debts and gets to strengthen natural resource management and the WWF gets to carry out its work.”

The WWF buys Madagascan debt on the secondary market at a discount and then ‘sells’ it to the government at a higher discount. The money is then lodged into an interest-bearing account which is used to fund programmes to preserve the island’s rich biological diversity.

Secondary market prices for debts vary, depending on the likelihood of the debtor country honouring its obligations. Madagascan debt presently trades at a discount of approximately 50 per cent — so, for instance, one million dollars will buy two million dollars’ worth of debt.

The government also gets to redeem traded debt in local currency — and at a discount of around 60 percent of its original face value. This is a boon for a country in the throes of economic crisis, buckling under debt service obligations and lacking much-needed hard currency.

The scheme has won kudos from governments, environmentalists and the World Bank.

“Madagascar has done a remarkable job,” says Christine Parniere, who works on the African desk at the Paris office of the Dutch bank ING. “When the debt-swap programme started, Madagascar owed over 100 million dollars to commercial banks. They have reduced this debt by at least half.”

Although it is not a complete answer for the country’s debt burden, estimated at over five billion dollars, the debt swaps have provided Madagascar with a means of trying to halt the decline in its unique ecosystems.

Friends of the Earth (FOE) say 90 percent of its 253 reptilian species exclusive to the island, as are its 30 species of lemur, frogs and some 10,000 plants, many of which have medicinal properties.

Several medicinal plants which have been used for centuries in local herbal remedies are now being tested by pharmacological companies and promise to provide not only new and potent medicines but also new chemical structures.

Much of this national heritage is to be found in the country’s lush tropical rainforests, which now cover just 10 percent of the country, a consequence of the deforestation that resulted to the clearing of huge tracts of land to grow cash crops.

The proceeds from the swaps are used to buy large areas of rainforest — held in trust by the government and the WWF — and to train hundreds of Ministry of Water and Forests workers as nature protection agents (NPAs).

NPAs travel all over the island dissuading farmers and villagers from slash-and-burn bush-clearing which the government says destroys 200,000 hectares of forest each year.

Albert Esifosiane, a Madagascan environment ministry spokesman, said: “We’ve received a lot of support in staff training materials and financial input, and we are seeing tangible results in the field.”

Although debt-for-nature swaps are common in Latin America, Madagascar remains the only African country to have signed large scale swop deals of this kind. Other countries in the region have become interested in the scheme and the WWF plan to expand to other countries if they can get the necessary funds.

However, since debt-swaps can only be done with commercial debts — which account for less than 10 percent of the debt of African countries – there is little hope that such arrangements can alleviate the region’s socio-economic crisis.

Thirty percent of Africa’s total debt stock of 300 billion dollars is owed to multilateral creditors such as the IMF and World Bank. Just over 30 percent is owed to Western bilateral creditors. The remainder comprises of principal and interest arrears.

Multilateral debts can not be reduced, rescheduled or traded on the secondary market, and though bilateral debts can be reduced, they cannot be traded. Such creditor inflexibility is a major contributory factor to the region’s economic ills, said Resor.

“If debt swaps were possible with other types of debt, we would be interested,” he added. “The World Bank and IMF should not treat their debts as sacred. I say that multilateral and bilateral debts must be treated in the same way as commercial debt, and then we could see some improvements in the situation.”

— NGOs fear that the gains made by debt-swap deals to preserve the Madagascan ecosystem will be lost if British-based mining giant, Rio Tinto Zinc (RTZ), goes ahead with plans for a new titanium mining operation in the country.

Campaigners say the country, rich in mineral sand deposits, will not substantially gain from the mining operation. Since the cost will be further damage to the coastal forests, they maintain, no financial reward can begin to even compensate for the loss.

“Titanium exploration will inevitably lead to gross degradation of the south-east coast of the country and forests further inland, because of the nature of titanium mining,” said Sue Meagher, FOE’s spokeswoman in London. “Many impact assessments have arrived at this conclusion and the RTZ plan must be resisted.”

NGOs cite the damage caused to Sierra Leone’s south-west coastal regions by titanium mining. The mining itself is done by huge sea- borne dredgers which systematically scoop up huge tracts of land in search of the mineral-bearing sand.

As the soil-munching dredgers move inland they leave mini- rivers in their wake. This has turned south-western Sierra Leone, once a thriving agricultural district, into a wasteland crisscrossed by hundred of estuaries.

Local communities have had their lives and livelihood destroyed and say that promised compensation from U.S.-based Nord Resources Inc. — who have Sierra Leone’s titanium-mining concession — have been slow in coming.

Although campaigners are urging the cash-strapped government to back out of the plan, it is generally accepted that the titanium project will commence within three years. Jamie Resor, WWF’s U.S.- based debt-swap expert says the new project, if approved, will destroy their work to help save the Madagascan forests.

A spokesman for RTZ in London said that no final decision had been made on the Madagascan mining project, but said that the company was in the process of carrying out detailed environmental assessment studies. He stressed however that the final decision on whether the project should go ahead rested not with RTZ but with the Madagascan government.

Republish | | Print |

Related Tags

the scapegoat rene girard