A conversation with eva Martínez, human rights lawyer
In this article, Andre Standing interviews Eva Martinez, of the Centro de Derechos Economicos y Sociales (CDES) in Ecuador. Eva is a lawyer with a master's degree in Human Rights and International Relations, with a specialisation in Gender. She leads the Economic and Gender Justice work at CDES (Centro de Derechos Económicos y Sociales), focusing on the links between external debt and human rights. She supported Galápagos communities in filing a complaint and reaching an agreement with the Inter-American Development Bank’s Independent Consultation and Investigation Mechanism (MICI) regarding a debt-for-nature swap. She also coordinates training schools for Indigenous Amazonian women on community-based economies and political advocacy.
Reading time: 25 minutes
Background
In May 2023, the Ocean Finance Company, in collaboration with Pew Bertarelli Ocean Legacy Project and a company called Aqua Blue Investments, worked with Credit Suisse Bank to provide a ‘blue loan’ to the government of Ecuador of $656 million. This money —which comes from a special purpose vehicle (SPV) set up in the tax haven of Ireland—was given so that the Ecuador government could fund a debt buyback on US dollar bonds it owed to private investors. It was a huge deal, resulting in the Ecuadorian government retiring $1.6 billion of debt it owed to private creditors. The deal was possible because, at that time, Ecuador was in a dire economic situation, and the market value of its US dollar bonds was less than 40% of their face value. So, many owners of Ecuador’s bonds were happy to get cash for these depreciating assets (they ended up getting a bit more than the market rate, roughly 45% of the face value).
The blue loan was financed by another bond issued by Credit Suisse, which was given the title of the Galapagos Bond. Although information on who invested in this bond are scarce, it most likely includes US and European asset management companies and pension funds, which want to show their clients they are supporting green investing. A critical feature of this blue bond was credit guarantees by the US government and the Inter-American Development Bank. This reduced the interest rate of the bond.
In return for this loan, the Ecuadorian government agreed to expand marine protected areas surrounding the Galapagos Islands and has committed to paying a new organisation—called the Galapagos Life Fund—approximately $17.5 million every year for the next 18 years. Therefore, most of the money Ecuador seemingly saved in the debt buyback transaction has been set aside for the GLF to spend. The GLF is registered in the tax haven of Delaware and is owned by the Ocean Finance Company. The governing board of the GLF has a minority of representatives from Ecuador’s government, a majority of seats for NGOs, and a permanent seat for the Ocean Finance Company, which is also the treasury, and seats for Pew Bertarelli Ocean Legacy Project.
The contract of the blue loan given to the Ecuadorian government has a long list of commitments. A failure by the Ecuadorian government to deliver on these commitments results in a fine that has to be paid to the SPV in Ireland, which is called the GPS Blue Financing Company.
Having just concluded the world’s largest ever debt for nature swap, last year, Ecuador agreed to an even bigger debt swap with The Nature Conservancy, which is targeted at enlarging protected areas in the rainforest. The topic of debt swaps in Ecuador is therefore high on the agenda for many national organisations working on conservation and the rights of indigenous peoples.
AS: Eva, thanks for your availability to talk to us about the deal and the work you have been doing. You have been collaborating with other civil society organisations to campaign for changes to how the Galapagos Life Fund is run. Can you tell me about this?
EM: Yes, the Centro de Derechos Economicos y Sociales (CDES) with several other civil society organisations, we filed a formal complaint to the Independent Consultation and Investigation Mechanism of the Inter-American Development Bank (IDB). Our complaint is based on several concerns we had about the debt swap.
The first is about the lack of transparency. Although the IDB claimed to have complied with its access to information policy, in practice it made it difficult for members of the public to access key documents about the operation. We filed an access to public information action in Ecuador, but the Ministry of Economy and Finance did not provide all the requested documentation, including financial analyses, contract terms and bond valuation documents. The opacity of the process prevents us from knowing with certainty who the final beneficiaries of the transaction are and what costs Ecuador has assumed in the long term.
The second is about a lack of citizen participation and prior consultation. The implementation of the swap was carried out without adequate prior consultation with the Galapagos communities, in violation of Article 398 of the Ecuadorian Constitution, which requires community consultation in decisions that may affect the environment. Although some meetings were held, they were led by private actors, such as Pew Bertarelli Ocean Legacy, without meeting the standards for binding consultation or guaranteeing effective representation of the inhabitants of the islands.
The third complaint was about the loss of sovereignty in the management of public resources. The Galapagos Life Fund, the entity in charge of managing the funds generated by the swap, was incorporated in Delaware, a tax haven, and its governance structure grants a majority to international private actors. This means that decisions on the use of these resources are not under the sovereign control of the Ecuadorian State or local communities, which raises concerns about their use and alignment with national and local conservation priorities.
Finally, the complaint raises concerns about the lack of effective accountability mechanisms. The absence of a clear monitoring and control system for the funds has generated doubts about how the resources are being used and whether they are really meeting conservation objectives.
In light of these concerns, we asked the Independent Consultation and Investigation Mechanism of the Inter-American Development Bank to intervene to ensure the full publication of all documents related to the debt swap, including contractual and financial agreements, and the implementation of an effective and binding citizen consultation process in Galapagos on the management of the funds and administration of the GLF. We also requested that the governance structure of the GLF should be reviewed to ensure equitable participation of representatives of civil society and local communities, and we asked for an independent audit of the actual costs and benefits of the operation, including the identification of the final beneficiaries of the Galapagos Bond.
AS: So, are you happy with the outcome of your complaint to the Independent Consultation and Investigation Mechanism of the IDB?
EM: In some respects, we are. The agreement reached through the Independent Consultation and Investigation Mechanism represents an important step forward in transparency and participation in managing the debt-for-nature swap funds in the Galapagos. But this is the minimum that should have been guaranteed before executing the swap, which is why we cannot speak of the Agreement as an “Achievement”.
“The outcome of our complaint allows the Galapagos communities to achieve some concrete advances in terms of access to information and participation in decision-making, but the financial issues of the swap were not addressed.””
The outcome of our complaint allows CDES and the Galapagos communities to achieve some concrete advances in terms of access to information and participation in decision-making, but the financial issues of the swap were not addressed because people at the Independent Consultation and Investigation Mechanism do not have jurisdiction over these issues.
So, specifically, we are happy that the outcome of the agreement includes having a local NGO and an observer from the communities on the GLF Board of Directors. There is now a commitment by the GLF for public sharing of information on funded projects. We also have a commitment that at least 18% of resources are allocated to local social and community organizations, which is a key step to prevent funds from being concentrated only in large environmental NGOs. But we are still in the dark about some of the financial aspects of the deal.
The positive achievements are relevant because they establish accountability mechanisms that did not exist before and they open an opportunity for communities to play a more active role in monitoring the commitments made. However, despite these advances, there are still significant concerns about how the agreement will be implemented. So far, the Galapagos Life Fund has operated with a lack of transparency and without effective communication with the communities, which raises doubts about its true willingness to fulfil its commitments. It is essential to closely monitor the implementation of the GLF, demand compliance with the transparency and participation commitments, and continue to denounce any attempt to manage these funds in an exclusionary or arbitrary manner.
AS: Why did you submit the grievance to the Inter-American Development Bank and not to your government?
EM: We did file a request for access to public information with Ecuador's Ministry of Economy and Finance to obtain key documents on the financial operation of the debt-for-nature swap in Galapagos. However, the Ministry did not provide all the information we asked for, which prevented us from knowing in detail the terms of the agreement, the real costs for Ecuador, the mechanisms for managing the funds, and who the final beneficiaries of the Galapagos Bond were. The lack of effective compliance by the Ecuadorian government led us to seek other instances of accountability.
“We have a commitment that at least 18% of resources are allocated to local social and community organizations, which is a key step to prevent funds from being concentrated only in large environmental NGOs.””
In addition, we held meetings with IDB representatives, in which we sought clarification on the financial and governance aspects of the debt swap. However, the responses were insufficient and unclear, which reinforced our concerns about the lack of transparency in the process.
Given that the IDB played a key role in structuring and guaranteeing the blue loan, we considered that it had a responsibility to ensure that the operation complied with the principles of transparency, citizen participation and respect for Ecuadorian sovereignty. When we did not receive satisfactory responses from either the IDB or the Ecuadorian government, we decided to file a complaint with the IDB's Independent Consultation and Investigation Mechanism, which is the formal channel for reporting possible breaches of the bank's policies on access to information, participation, and environmental and social safeguards.
AS: Regarding the management of the Galapagos Life Fund, the chair of the board is Robert Weary, who used to work at The Nature Conservancy but left that position a couple of years ago to start an investment company in the US called Aqua Blue. There is no website for Aqua Blue, so we don’t really know what other business interests it is involved with or who else works on this. He is also the permanent Treasury of the GLF, but according to the website of the Fund he represents the Ocean Finance Company. Another board member is a Robert Roeder, who works for the private trust of an Italian billionaire that invests in luxury hotels and eco-tourism ventures...
We could assume that these members of the board are well-meaning people who have a genuine desire for the equitable and sustainable development of Ecuador. However, it seems remarkable that these people—just because of their role in advising on a financial transaction—become members of a board that decides how millions of dollars—which is public money in Ecuador—are spent in the Galapagos Islands over the next two decades. How do you think people in Ecuador feel about the participation of such private actors in the GLF?
EM: The fact that a financial transaction has allowed private actors to decide on the destiny of millions of dollars of public origin is deeply problematic. In the case of the GLF, its governance structure is designed so that foreign investors and private organisations have real control, while the Ecuadorian state has a minority presence. This not only limits the country's ability to decide on its own resources, but also opens the door to opaque management without clear accountability mechanisms or consultation with local communities.
“The governance structure of the Galapagos Life Fund (GLF) is designed so that foreign investors and private organisations have real control, while the Ecuadorian state has a minority presence. This not only limits the country’s ability to decide on its own resources, but also opens the door to opaque management”
The participation of private actors such as Robert Weary and Robert Roader in the management of funds derived from the debt swap does raise many concerns, particularly given their business interests. In the specific case of Robert Roeder we have insisted that he be removed from the Board of Directors since he is occupying the position that corresponds to a local NGO.
The same is happening in the Amazon and is generating much concern and discontent, both in the affected communities and in broad sectors of Ecuadorian society. This situation confronts us with an imminent loss of sovereignty over the management of strategic resources, which are not only fundamental for Ecuador, but also for the international community in terms of environmental conservation.
AS: Given the amount of criticism surrounding the Galapagos debt swap, was there an improvement in how TNC approached the debt swap for the Amazon forest?
EM: No! The omissions continue to be repeated in the Ecuadorian Amazon swap. Instead of correcting the errors and guaranteeing transparency and participation, the same model is maintained in which private actors with unknown interests take control of public resources, without any real democratic debate or guarantees that these funds will really benefit local communities and environmental conservation.
These agreements, which in theory should serve to protect biodiversity, are being used to privatize the management of strategic areas without the consent of those who inhabit these territories. This lack of consultation and sovereignty in decision-making generates great distrust and forces us to continue demanding greater transparency, accountability and citizen participation in these processes.
AS: The same problems are evident in other debt swaps, such as the one TNC concluded in Gabon in 2023. There is still no information on how the funds in Gabon are going to be used. But what is objectionable about these deals is that when they are made public, the press statements claim there have been enormous efforts for community consultations. What you describe, and from other deals’ experience, shows this is not true.
EM: The dishonesty and misleading information is very frustrating. In the case of the Galapagos debt swap, the Government of Ecuador, the Inter-American Development Bank (IDB) and the private actors involved have insisted that there was a consultation process with local communities, including artisanal fishers and other coastal sectors. However, this is not true. During the dialogue tables in the framework of the Independent Consultation and Investigation Mechanism, the Ministry of Environment told us that consultations did take place, but this was done only for the creation of the new Hermandad Marine Reserve, not for the debt swap. Their argument was that it was not necessary to consult for the swap because the marine reserve itself is not inhabited. Obviously, we do not agree with this interpretation. Any action or omission related to the conservation of the Galapagos Islands directly affects its inhabitants.
“The government’s argument for not consulting communities is that it was not necessary because the marine reserve itself is not inhabited. We do not agree with this interpretation: any action related to the conservation of the Galapagos directly affects its inhabitants.””
As mentioned previously, the Constitution of Ecuador, in Article 398, clearly states that any state decision that may affect the environment must be consulted with the community. In this case, the decision to tie conservation funding to the debt swap mechanism should have been consulted with the inhabitants of the islands.
In the case of the debt swap that is now being promoted in the Ecuadorian Amazon, the situation is even more serious. Here we are not only talking about the environmental consultation mentioned in Article 398 of the Constitution, but also about the free, prior and informed consultation that is a right of the indigenous peoples, as stipulated in Article 57 of the Constitution of Ecuador. This right requires that any measure that may affect indigenous territories be consulted with them in a prior, free and informed manner. However, neither for the debt swap nor for the creation of the “Amazon Bio Corridor” has there been any due consultation.
From my organisaton, we have requested official information from the Government on this process, and so far, we have not received clear answers. Likewise, the Confederation of Indigenous Nationalities of the Ecuadorian Amazon has demanded explanations, since their peoples have not been taken into account at all.
So, what we see is a systematic pattern of deliberate omission of consultation processes, both in the environmental field and in the field of the collective rights of indigenous peoples. These debt swaps are announced as “green” and participatory agreements, when in fact they have been negotiated behind closed doors. The affected communities are informed after the decisions have already been made, without their opinion having really been heard. Then, private actors end up having majority control over conservation funds, while local communities are marginalized from decision-making.
Since the Constitution of Ecuador clearly states that any state decision that may affect the environment must be consulted with the community, the decision to tie conservation funding to the debt swap mechanism should have been consulted with the inhabitants of the islands. Photo: Nathalie Marquis.
AS: This has to be something that the US conservation organisations should respond to. It is so objectionable that a small number of very wealthy people working from opaque company structures registered in offshore tax havens get to determine national policies on conservation in confidential deals. It is important to recall that the debt swap is not just about enlarging marine reserves, it comes with a long list of other commitments on things such as fisheries management policies affecting the entire country.
On the other hand, the Galapagos Life Fund will distribute this money via a competitive grant system. Organisations have to apply for this money and the board will decide who is successful. One of the risks of this system is that poorer communities might not get access to the funding because they might struggle to write proposals. The board also has a powerful role in deciding who and what gets rewarded. What do you think about how the money is being handled by the fund?
EM: This was one of the main concerns raised during the dialogue process with the independent complaints mechanism: the way in which the new fund manages the money. This concern was expressed by many of the communities and organisations that intervened in the complaint, since, historically, conservation funds in Galapagos have ended up in the hands of the same large environmental NGOs, while local and community organisations have been systematically excluded. It is worth noting that so far, there has yet to be any money distributed from the swap.
The model that the Galapagos Life Fund has implemented for the distribution of funds exacerbates this problem. Many communities and grassroots organisations do not have access to resources because they do not have the technical or administrative capacity to submit “winning” proposals in these funding competitions. Meanwhile, the larger NGOs with more resources manage to corner most of the funds, perpetuating a situation of inequality in the distribution of conservation funding.
“There is a systematic pattern of deliberate omission of consultation processes, both in the environmental field and in the field of the collective rights of indigenous peoples.””
This point was hotly debated at the negotiating table, and although significant progress was made, it was not possible to guarantee an effective control mechanism. What was agreed upon was that the government directors on the GLF Board would request that at least 18% of the funds be allocated to social and community organisations and local collectives in Galapagos. This was an achievement within the process, but it is clearly not enough to guarantee a fair and equitable distribution of resources.
Another critical problem that was not resolved in the negotiation was the risk of favouritism and conflicts of interest within the GLF. Control mechanisms were sought to prevent the directors of conservation NGOs, who have been the main beneficiaries of these funds, from continuing to distribute them among the same networks of influence, often with kinship ties. However, this control mechanism was not accepted at the negotiation table, which means that the problem remains latent.
AS: The GLF will spend about $12 million a year on these grants. International reporting on this deal gives the impression that this is a huge injection of cash that could be decisive in saving the marine wildlife of the Galapagos and helping to grow a sustainable blue economy there, including boosting eco-tourism. But the social and ecological problems facing the Galapagos Islands are not simply caused by a lack of money.
Tourism already generates over $200 million a year for the government, and donors such as the US and the IDB have been providing millions for conservation efforts as well. There are complicated problems caused by the dependency on tourism for the Island’s economy and the ecological damages caused by the growth in tourism. Meanwhile, the Islands have faced pressure from increasing migration and poverty. Clearly, another $12 million a year might not have a positive impact, and much depends on how it is spent. Often, there is a superficial view that a few million dollars from NGOs or donors can solve complex political problems.
EM: I agree that the idea that the idea $12 million per year through the Galapagos Life Fund can solve conservation problems in the Galapagos Islands is a superficial and erroneous view of the problem. Conservation in a territory as fragile and complex as Galapagos requires not only financial resources but also comprehensive public policies that structurally address the socioeconomic, environmental and tourism pressures affecting the archipelago. And of course, simply injecting money is not enough to ensure effective conservation. It can also cause problems and divisions.
It is important to realise that the governance and distribution of previous funds have often been inefficient, with a high concentration on specific projects and little attention to the structural needs of the local population. The lack of investment in sustainable infrastructure, public services and economic alternatives outside of tourism has generated risky dependency and exacerbated migration and inequality.
The Galapagos’ economy dependency on mass tourism has carried out problems of its own, including environmental damage due to the unregulated growth of tourism. Photo: A group of tourists in Bartolomé Island, by Andre Robles.
Mass tourism has severe impact on conservation. Galapagos faces an environmental paradox: tourism, which is the main source of income, is also one of the main threats to conservation. Increasing pressure from tourism has contributed to increased migration, which in turn has led to increased demand for services, uncontrolled urbanisation, and increased ecological impact on the archipelago. So, while funding of $12 million per year could support some good conservation initiatives, without proper regulation of the tourism model and long-term sustainable planning, these efforts may be insufficient or even contradictory to the environmental and social realities of the islands.
AS: Do you think the GLF has a clear strategy for how it will use its funds based on a good understanding of the social and political context? Do they have clear measures of success for what they are doing?
Well, they have not communicated this to the public. There are no solid indicators of success or a public impact assessment framework to verify whether these resources are actually meeting conservation and sustainability objectives.
There is insufficient or timely communication from the Galapagos Life Fund about its vision for the economic transformation of the islands and about how it will address structural problems such as inequality and poverty in the Galapagos. The GLF has not only assumed a role in protecting marine wildlife and fisheries management, but has also signalled its interest in boosting the economic development and profitability of ecotourism. This type of approach requires detailed planning and a clear implementation strategy. However, so far, no concrete plan has been published explaining how the GLF plans to execute these transformations.
“Debt swaps have deepened a model of privatisation of environmental governance, where the administration of public funds ends up in the hands of foreign actors and large NGOs, without adequate democratic control mechanisms.””
Furthermore, using its funds to attract other investments could entail a covert privatisation of strategic sectors in the Galapagos. While investment in ecotourism can generate economic opportunities, without adequate regulation and an inclusive approach, the risk is that these investments will end up benefiting large tour operators and private investors, neglecting the local population.
What is also worth discussing here is the role of the State in conservation. Conservation cannot be delegated to the private sector nor depend on the goodwill of private organisations with opaque governance structures registered in tax havens. The Ecuadorian State has a constitutional and legal duty to guarantee the protection of ecosystems and the sustainable development of the country. However, debt swaps have deepened a model of privatisation of environmental governance, where the administration of public funds ends up in the hands of foreign actors and large NGOs, without adequate democratic control mechanisms.
Therefore, if a sustainable solution for the conservation of Galapagos is truly sought, a long-term structural strategy is needed, including stricter regulations on tourism to avoid overexploitation of ecosystems, public policies that diversify the islands' economy and reduce dependence on mass tourism, and a sustainable and sovereign state financing mechanism that does not depend on private entities with unknown interests.
AS: The expansion of the marine protected area could be quite costly in terms of management for the Ecuadorian government, while it may well reduce incomes for fishing communities. Has anyone asked whether the state authorities are able to run it with the resources they have?
EM: There have been concerns about the costs and benefits of expanding the marine protected area, especially in terms of management and its impact on fishing communities. While the debt-for-nature swap seeks to provide financing for the conservation of the Hermandad Marine Reserve, this does not necessarily cover all long-term operating costs.
Artisanal fishers have concerns about the restrictions that will be imposed due to the expansion of the marine protected area, as it may limit their access to traditional fishing grounds and impact their income. Photo by: Evan Boehs.
One of the main challenges is that expanding protected areas requires greater monitoring, control, and surveillance capacity, which entails significant costs in infrastructure, technology, and specialised personnel. This can serve as an excuse for interventionist activities, and I will come back to this later.
Likewise, artisanal fishing sectors have expressed concerns about the restrictions imposed by the expansion of the marine protected area, as it may limit their access to certain traditional fishing grounds and reduce their income. Although the debt swap includes mechanisms to support local communities, there is a risk that these funds will not be sufficient or will not reach those who depend on fishing for their livelihoods efficiently.
AS: In December last year, your government announced that it had signed a deal with the US government to open a military base on the Galapagos Islands. Unfortunately, it is hard not to wonder whether the US government’s support for the Galapagos Bond had some part to play in getting the approval for the military base. What are your thoughts on this?
EM: The establishment of a US military base in the Galapagos Islands represents a direct violation of the Ecuadorian Constitution, which in Article 5 establishes the country as a territory of peace and expressly prohibits the establishment of foreign military bases. This decision is not only unconstitutional but also endangers an extremely fragile ecosystem and contradicts the conservation principles that supposedly justified the Galapagos debt swap.
There is a strategic connection between these events. Both follow the same logic of monitoring and controlling the Hermandad Marine Reserve, which was established in January 2022 as part of conservation commitments that later led to the debt-for-nature swap signed in May 2023 under the administration of Guillermo Lasso.
“Beyond the environmental rhetoric, the US military presence in the Galapagos is part of its geopolitical strategy in the region.””
This swap allowed for the restructuring of Ecuador’s debt with the aim of securing financing for the conservation of the Hermandad Marine Reserve, a 60,000 km² protected area that connects the Galápagos Islands with marine reserves in Colombia, Panama, and Costa Rica. The primary justification for this initiative was the protection of biodiversity and the fight against illegal fishing, which necessitated enhanced maritime monitoring in the region.
At the same time, in October 2023, Ecuador and the United States signed the "Agreement on the Status of Forces" (SOFA), which establishes the legal framework for the presence of U.S. military personnel in Ecuador. This agreement facilitates the deployment of forces for joint operations aimed at combating drug trafficking and other transnational threats.
In this context, drug trafficking routes crossing the Hermandad Marine Reserve have been used as a justification to increase military presence in the region. While there has been no official announcement regarding the establishment of a U.S. military base in the Galápagos, the security cooperation between Ecuador and the U.S. under the SOFA agreement allows for the expansion of military operations and deployments on Ecuadorian territory—which, in practice, could translate into greater strategic control over the area.
Beyond the environmental rhetoric, the US military presence in the Galapagos is part of its geopolitical strategy in the region, which includes greater control over drug trafficking and migration routes in the Pacific, containing the influence of China, and the expansion of its military presence in the Southern Hemisphere, in a context where the US seeks to reaffirm its hegemony in the region.
AS: In an interview, the head of the Ocean Finance Company said they want to raise more money beyond what was acquired through the debt swap. One of the strategies they are pursuing is to raise money by blending private investments with public funds from the Dutch government to buy more Ecuadorian bonds on secondary markets. The idea is that the earnings from these bonds will become additional revenues for conservation spending. This could become a lucrative strategy used by more environmental NGOs—raise money from subsidised finance to buy up cheap debt on secondary markets with the promise that they will spend this on conservation.
EM: This is a matter of particular concern, as what was initially presented as a mechanism to reduce Ecuador's debt is evolving into an opaque financial strategy that could benefit and even perpetuate Ecuador's economic crisis.
According to available information, the OFC plans to take advantage of the low prices of the Ecuadorian bonds in the secondary markets and acquire them with hybrid financing, combining private investment and public funds, such as those of the Dutch government and the European Union. These bonds were originally issued by the Ecuadorian government and sold in the market to private investors, who are now willing to dispose of them below face value due to the country's economic crisis.
“In these schemes, “green” or “sustainable” financing becomes a vehicle for attracting capital, but with little transparency regarding the actual environmental and development impacts.””
The financing model proposed by OFC consists of buying Ecuadorian bonds at a discount in the secondary market, and then to receive the interest payments (coupons) that the Ecuadorian government continues to pay on these bonds. They will use part of this revenue to pay back private investors who financed the purchase of the bond notes and then use the remaining profit for themselves.
This ressembles to the operations of vulture funds. These have historically purchased bonds from countries in crisis at very low prices and then sued governments to force them to pay the face value plus interest. Maybe the OFC is not going to litigate against the government of Ecuador, but the principle is the same: (1) Acquire cheap debt in secondary markets. (2) Take advantage of subsidised financing to increase the profitability of the operation. (3) Generate financial returns using public money and investment funds.
AS: In this new way of raising funds, they do not need the blessing of the debtor country. So, they bypass governments altogether, meaning they would face even less pressure for public scrutiny. But it also raises questions about the nature of debt swaps: One of the core justifications of debt-for-nature swaps is that they supposedly help lower the debts of Southern countries.
EM. Indeed, this new model has nothing to do with reducing Ecuador's debt, as argued in the Galapagos debt swap. On the contrary, it exploits the country's debt crisis to generate financial returns for private investors, with the justification of financing conservation.
The risk is that this model could be replicated by other environmental NGOs and private actors, creating a market for purchasing sovereign debt, with subsidies, under the pretext of environmental conservation. If this becomes a trend, we would be witnessing a new international financing mechanism that generates economic benefits for a small group of financial actors while perpetuating the debt crisis in countries of the Global South.
On this, I want to mention the recent sustainability-linked bond issued by Difare with the support of IDB Invest, Proparco, and the Guayaquil Stock Exchange. This shows how private actors are exploring new forms of financing using the discourse of sustainability and conservation. In these schemes, "green" or "sustainable" financing becomes a vehicle for attracting capital, but with little transparency regarding the actual environmental and development impacts.
These types of financing models should be subjected to much greater scrutiny. Some key aspects to monitor include: What are the exact terms of the financing? What percentage of the returns is actually allocated to conservation? How are the beneficiaries of these funds chosen? Is conservation being prioritized or simply being used to justify a financial operation? What is the real impact on Ecuadorian debt? If these mechanisms only generate more interest payments without reducing the debt stock, it could worsen the country's fiscal problem in the medium term. And I think it is really important to ask who are the investors behind these operations? The lack of transparency in the structure of groups such as the OFCs is a red flag.
AS: Thank you, Eva for your time. We hope what you are doing in the Galapagos Islands, and the Amazon will be an inspiration to civil society groups in different countries.
Banner photo: Galapagos Islands’ iguanas, by Deb Dowd.
Eva Martinez, an Ecuadorian lawyer expert in human rights and gender and working at the Centro de Derechos Económicos y Sociales (CDES), discusses with Andre Standing the complaint against the Galapagos debt-swap the CDES filed along with other civil society organisations. The complaint raised concerns about the lack of transparency, participation and effective accountability mechanisms as well as the loss of sovereignty of Ecuador to manage its natural resources.