The Government of Belize (GOB) and The Nature Conservancy (TNC) on 5 November 2021 finalized its debt conversion agreement that will enable the country to reduce its debt burden and increase its investment in conservation. (Image Credit Grand Caribe).
TNC’s “Blue Bonds for Ocean Conservation” program is part of an ambitious plan to drastically scale-up durable ocean conservation around the world. This conservation model is an innovative strategy to work with governments to restructure a portion of their sovereign debt, securing long-term sustainable financing for the management of valuable natural resources. This approach helps governments unlock funds at scale to deliver on their conservation goals and support the well-being of their communities and economies. Belize is the first country in Latin America to use the Blue Bonds for Ocean Conservation Model, which will support Belize in its commitment to protecting 30% of its ocean, as its marine environment is a globally significant hotspot for biodiversity. It is come to over one-third of the Mesoamerican Reef, the largest coral reef system in the Western Hemisphere.
“This deal is huge for Belize, especially during a tremendously difficult time for our economy, but its impact extends far beyond us as well,” said Prime Minister John Briceño. “Blue Bonds will help us support the vibrant marine life that resides here, and maintain the rich biodiversity that is crucial for the health of our ecosystem and the planet. We are proud to be pioneers in this work, and to lead the way for other countries to join us as we conserve our oceans for Belize and beyond.”
The Economist Magazine featured Belize’s Blue Bond initiative:
IF ECONOMIES WERE measured by their natural capital, as well as the physical and human sort, Belize would be a richer country than it is. What the tiny Caribbean state lacks in cold, hard cash, it makes up for in warm, tropical biodiversity. The Belize Barrier Reef, the second largest expanse of coral in the world, is packed with turtles, manatees and other threatened species. Holidaymakers flock to its coast to dive, snorkel or simply gaze at its waters from the comfort of a hammock. Or at least they did before the pandemic. Last year tourism dried up, growth contracted sharply and public debt jumped from just under 100% of GDP in 2019 to over 125%.
That forced Belize, not for the first time, into a debt restructuring—one in which it is seeking to exchange one sort of riches for another. As part of the deal, concluded on November 5th, Belize bought back its only international bond, a $553m liability misnamed the “superbond”, at 55 cents on the dollar. It funded that with $364m of fresh money, arranged by The Nature Conservancy (TNC), an NGO, which is insured by the International Development Finance Corp, an American agency. The transaction is backed by the proceeds of a “blue bond” arranged by Credit Suisse, a bank. The payback is due over 19 years with a coupon that begins below that of the superbond but rises above it over time.
It is called a blue bond because Belize has pledged to invest a large chunk of the savings into looking after the ocean. That includes funding a $23m endowment to support future marine-conservation projects and promising to protect 30% of its waters by 2026.
It might be argued that Belize should do this anyway to support tourism, which accounts for 40% of economic activity. But at a time when governments and investors are looking at novel ways of funding environmental clean-ups, Belize was able to use its natural patrimony to gain leverage over bondholders. Whether it will be enough to stop it defaulting again in the future is another matter. More.