Ecuador has completed a debt exchange to finance long-term marine conservation projects in the Galápagos Islands, according to press releases on Thursday.
Working with the US International Development Finance Corporation (DFC) and the Inter-American Development Bank (IDB), the South American nation swapped $1.63 billion worth of international bonds for a $656 million loan from Credit Suisse.
DFC provided $656 million in political risk insurance for the loan, backed by a reinsurance policy from a group of 11 private insurance companies, while the IDB put up an $85 million guarantee, the two entities said in separate statements. The reinsurers include AXA XL, Fidelis MGU, Chubb Global Markets, Sovereign Risk Insurance, Mosaic and Coface, DFC said.
“Not only is this the largest operation of its kind, but it is the first time that a multilateral institution is combining guarantees with political-risk insurance to mobilize resources from different actors towards conservation,” IDB President Ilan Goldfajn said in a press release.
Through the conversion, Ecuador will cut debt service payments by $1.13 billion and free up an estimated $323 million for marine conservation in the Galápagos Islands for 18.5 years with around $17.5 million per year for the Galápagos Life Fund (GLF) and the Reserva Marina Hermandad, according to DFC and the IDB.
The GLF is expected to grow to $227 million by 2041, which, combined with the debt conversion, will generate $450 million for marine conservation, DFC said.
The GLF will be governed by an 11-member board that will include five government ministers and six non-government members. Oceans Finance Company (OFC), part of Climate Fund Managers (CFM), and the Pew Bertarelli Ocean Legacy provided early-stage capital for the GLF, according to DFC.
Created in 2022, the Reserva Marina Hermandad covers 60,000 square kilometers of ocean between the Galápagos Islands and the maritime border with Costa Rica. It provides a protected area for threatened shark species and is home to more than 3,500 species, 25% of which are found nowhere else on earth, according to the IDB.
Credit Suisse was global lead arranger on the debt-for-nature conversion, while OFC was project manager and the Pew Bertarelli Ocean Legacy was cooperating partner, the IDB said.
Credit Suisse said last month that it would purchase 2030, 2035 and 2040 bonds for Ecuador to finance conservation efforts. Before the conversion, the country had $3.7 billion in outstanding 2030 bonds, $8.46 billion in 2035s and $3.4 billion in 2040s.