A Third World Debt-for-Nature Swap

A MASSIVE third-world debt and an endangered third-world environment. These are two urgent matters over which their principal players - international financiers and conservationists - have often been at odds. But not anymore.

A year and a half ago, the first ``debt-for- nature'' swap was transacted: The nonprofit group Conservation International got a $100,000 foundation grant to buy discounted Bolivian debt, and then traded the debt certificates with the Bolivian government for an agreement to expand an Amazonian nature reserve.

The technique has caught on. And the amounts of money involved are now in the millions of dollars. While this still is only a fraction of the billions owed, it is a funding dream come true in the world of conservation.

Another United States-based nonprofit group, the Nature Conservancy, has just announced the fifth, and largest, debt-for-nature swap to date. Using its own money and grants from US and foreign foundations and environmental groups, the Conservancy bought $5.6 million of Costa Rica's debt for $784,000 from American Express Bank. The Conservancy will then turn the debt into Costa Rican currency bonds worth $1.7 million. The group expects these bonds to pay an average of 25 percent a year in interest over five years, yielding more than $3 million for Costa Rican national parks.

So far only Costa Rica and Ecuador have formal debt-for-nature programs in place, but the Nature Conservancy says Peru, Brazil, and Jamaica are considering similar programs. If a planned swap goes through for the Philippines, it would be the first in a non-Latin nation.

Critics say: These swaps serve mainly to give banks a tax break. They are a fund-raising vehicle for conservation groups. They could spur local inflation. They take third-world land out of local control and into the control of foreign conservation groups. They force governments to allocate resources according to a foreign, not local, agenda.

First-world conservation groups say they are sensitive to these concerns, and have a ready response. They say they work with local conservation groups and officials from the debtor country to set up a program that satisfies everybody - and puts implementation in local control. The role of the creditor banks ends as soon the debt is sold. The impact on local economies remains to be seen. Conservation groups have commissioned independent studies of Costa Rica's program.

While it is true that some banks do get a tax write-off, and conservation groups can use these swaps to raise money, debt-for-nature advocates say it is the end result that counts: the world's natural resources are preserved.