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Mexico gets $15 million from IDB to support climate change mitigation

Program will create conditions that enable a reduction of deforestation in forest landscapes for ejidos and communities

Mexico will receive $15 million in financial and technical assistance to support climate change mitigation efforts. The program will create a dedicated financing line, accessible by communities and ejidos or their members, for identified low carbon projects in forest landscapes in five of the states with the highest levels of net forest loss: Oaxaca, Yucatán, Quintana Roo, Jalisco and Campeche.

The program is sponsored by the Forest Investment Program (FIP) under the Strategic Climate Fund, which supports governments in their efforts to reduce emissions from deforestation and degradation, promote sustainable forest management and enhance forest carbon stocks. Mexico's Investment Plan under the FIP was approved in October, 2011.

The program includes a $10 million loan for financing projects that must reconcile economic profit for the communities and generate environmental benefits through reducing the pressure on forests and promoting enhancement of carbon stocks. Through the dedicated financing line, the program will attend one of the underlying economic causes of deforestation and forest degradation by removing the obstacles that limit access to credit by offering the financial terms and conditions required for these projects.

A $5 million grant will provide additional financial and technical assistance to support the viability of the individual projects. The grant will strengthen the technical, financial and management skills at the ejido and community level for conducting low carbon strategies.

The program is a pilot project that will permit obtaining lessons for its replication in other key geographic areas in Mexico, demonstrating a viable business models that promotes reduction of deforestation and degradation while increasing economic returns, and the corresponding financial structures that are required.

Financiera Rural, a national development finance institution that provides financial and technical services in the rural sector, will carry out the program. The IDB loan has a 40-year term and a ten-year grace period.