• Debt conversion is set to yield over $800 million debt service relief over 11 years, unlock $460 million over the next 17 years for terrestrial and freshwater conservation.
• First-of-its-kind operation for the Amazon region made possible by $155 million IDB guarantee.
Ecuador completed a debt conversion that will save it more than $800 million over the next 11 years, of which $460 million will be used to finance conservation in the Ecuadorian Amazon within the framework of the Amazon Biocorridor Program (BCA), representing the largest amount raised for conservation through a debt conversion. This operation was made possible by a guarantee from the Inter-American Development Bank (IDB).
The savings were the result of exchanging $1.5 billion in external commercial debt at a large discount for a new $1 billion loan.
To structure this innovative operation, the IDB issued a $155 million partial credit guarantee, and the U.S. International Development Finance Corporation (DFC) provided political risk insurance of up to $1 billion. Bank of America acted as the sole arranger, bookrunner, coordinator and initial purchaser of the new financing that was used to fund the tender of the pre-existing Ecuadorian sovereign bonds, as well as the sole dealer manager of the tender. This transaction is part of the IDB's Amazonia Forever program and had the support of the Swedish International Development Cooperation Agency (Sida).
In addition, the IDB coordinated the dialogue among partners and played a catalytic role in the credit enhancement structure. The operation will provide institutional and public policy support to help Ecuador reach fiscal targets as well as enhance management of natural capital and improve public financing for environmental sustainability.
“We are happy to support Ecuador’s first-of-its-kind operation in the Amazon to scale up sustainable financing for environmental protection,” said IDB President Ilan Goldfajn. “The Amazon plays a key role in maintaining global environmental balance and is a priority for the IDB, which we promote through our Amazonia Forever program. This type of operation helps our countries advance biodiversity conservation and build resilience to climate change,” he added.
“The Government of Ecuador reaffirms its commitment to conserving the Amazon region by implementing innovative financing mechanisms. As part of a responsible fiscal management framework, we have carried out a financing operation that not only alleviates the burden of public debt but also ensures sustainable resources for the development of the BCA. This sustainable financing model exemplifies our leadership in addressing environmental and climate challenges for the benefit of current and future generations. Thanks to the coordinated efforts of an inter-institutional team, that includes IDB, DFC and TNC; with the guidance of Enosis Capital as the Technical Advisor and Financial Structuring Agent of the Republic and the Global Green Growth Institute and Centerview, we have secured credit benefits that link our public finances to concrete actions for the preservation of this invaluable ecosystem” said Juan Carlos Vega, Ecuador’s Minister of Economy and Finance.
“The Amazon Biocorridor Program is not simply a strip of territory; it is a comprehensive management model that strategically addresses the major environmental challenges of our time. Through innovative mechanisms in financing and conservation, this program places the Amazon at the center of a transformative vision that not only protects one of the most biodiverse ecosystems on the planet but also ensures the long-term resilience of Ecuador, the Amazon region, and the entire world. The Government of Ecuador, through the Ministry of Environment, Water, and Ecological Transition, is proud to lead an initiative that demonstrates how conservation and innovation can converge to ensure the well-being of our communities and foster truly sustainable economic development”, said Inés Manzano, Minister of Environment for Ecuador.
The Amazon Biocorridor Program is a comprehensive initiative of the government of Ecuador, supported by the IDB, DFC, and The Nature Conservancy (TNC). It aims to ensure a management model for effectively conserving the Ecuadorian Amazon region that seeks to improve the management of 4.6 million hectares of areas already under protection and create new protected areas in 1.8 million hectares of climate-mitigating forests and wetlands. This model will also protect 18,000 kilometers of rivers, bolster climate resilience, and support human well-being.
The program is the result of a participatory and continuous co-design process with Indigenous Peoples that was conceived under the principles of respect for diversity and the different forms of local governance and Indigenous Peoples.
Most of the conservation funding unlocked by the debt conversion will be disbursed through grants from a new independent conservation trust fund, Fondo del Biocorredor Amazónico, Fondo BCA (Amazon Biocorridor Fund, BCA Fund). The BCA Fund will focus on the Ecuadorian Amazon and will be run by a local board of directors that includes representatives from the government, indigenous groups, local communities, academia, the finance industry, sustainable development organizations, private enterprise, and TNC.
The IDB is a pioneer in developing innovative debt management operations that promote environmental sustainability. The IDB recently supported The Bahamas in a debt conversion that will save $124 million to help finance ocean conservation and worked with Barbados in advancing the world’s first debt-for-climate-resilience swap that will generate $125 million to enhance water resource management and increase water and food security.
“Ecuador is a key U.S. ally and one of DFC’s largest markets worldwide,” said DFC CEO Scott Nathan. “Today’s announcement underscores DFC’s commitment to leveraging innovative financial tools to reduce sovereign debt, strengthen resilience to economic coercion, and raise money for biodiversity. DFC and the United States are proud to have enabled this debt conversion transaction to benefit the Amazon Biocorridor Program.”
“This joint effort between the Ecuadorian government and TNC is a significant milestone for conservation in the Ecuadorian Amazon,” said Galo Medina, Director of TNC’s Ecuador program. “The Amazon Biocorridor Program will help protect one of the most biodiverse regions on the planet and ensure that conservation benefits reach the people who depend on these ecosystems. This initiative exemplifies how the combination of innovative financial mechanisms, the technical expertise of an organization like TNC, and the leadership of a government committed to Amazonian conservation can drive both environmental sustainability and the well-being of local populations, which are fundamental elements for building a resilient and sustainable future for Ecuador.”
“Our role in this transaction highlights the expanding interest and opportunity for private capital to invest in a new asset class focused on nature and biodiversity,” said Augusto Urmeneta, president of BofA Latin America and head of Latin America, Global Corporate & Investment Banking at Bank of America. “This transaction for the Republic of Ecuador demonstrates a model that can be replicated with other developing nations worldwide.”
About Amazonia Forever
Amazonia Forever is the IDB’s holistic umbrella program that aims at protecting biodiversity and accelerating sustainable development in three lines of action: expanding funding, boosting knowledge exchange, and facilitating regional coordination among the eight Amazonian countries.
The program is based on five pillars: (i) Combating deforestation and strengthening environmental control and security in the context of national governments; (ii) Bioeconomy and creative economy, promoting alternative and sustainable economic activities; (iii) People, aiming at adequate access to quality education, healthcare, and employment; (iv) Sustainable cities and infrastructure and connectivity; and (v) Sustainable, low-carbon agriculture, livestock and forestry. In addition, the program focuses on promoting the inclusion of women, indigenous peoples, people of African descent and local communities; climate and forest conservation; and strengthening institutional capacities and the rule of law.
About the IDB
The Inter-American Development Bank (IDB) is devoted to improving lives across Latin America and the Caribbean. Founded in 1959, the IDB works with the region’s public sector to design and enable impactful, innovative solutions for sustainable and inclusive development. Leveraging financing, technical expertise and knowledge, it promotes growth and well-being in 26 countries. Visit our website https://www.iadb.org/en.
Molina Medina,Vanessa Carolina
Borges De Padua Goulart,Janaina
Amazonia Forever
A holistic umbrella program for the region's sustainable development that aims to collaborate on forest conservation and climate action, offering economic alternatives to improve people's quality of life.
Financial Markets
Working with the public sector to design funding solutions that mobilize private investments and ensure inclusive and sustainable development. As well as improve access to formal financial systems by groups including women-owned businesses, rural populations and micro, small and medium enterprises.