A Need for the Reintroduction of Legislation That May Significantly Impact International Coral Reef Conservation Efforts

Coral reefs are invaluable resources to both humans and other forms of life on earth.  They play many important roles in our day to day lives through medicine, coastal protection, food, and income.  Today, coral reefs around the world are in peril.  Climate change, overfishing, and pollution, are some of the major contributors to their current demise[1], and actions from the past must be built upon in order to create a brighter future for the reefs.  The United States has been actively involved in addressing coral reef issues by passing legislation and becoming involved with other countries that share the same concerns.

A possible addition to coral reef conservation efforts was a proposed amendment to the Tropical Forest Conservation Act of 1998 (TFCA).  In July of 1998, the Foreign Assistance Act of 1961 was amended by Congress to facilitate the protection of tropical forests through debt reduction with developing countries that have tropical forests.[2] In January of 2009, a bill to amend the Tropical Forest Conservation Act to the Tropical Forest and Coral Conservation Act was introduced and referred to the House Committee on Foreign Affairs.[3] In May of 2009, the bill cleared the Senate Foreign Relations Committee and was reported to the Senate in July of 2009 and placed on the legislative calendar.[4] Unfortunately, the bill was never passed and now that a new session of Congress has started, it must be introduced again.  Reintroduction of this bill is extremely important as discussed below.

Currently, the TFCA offers eligible, developing countries, options to relieve certain official debt owed to the United States government while generating funds in local currency to support tropical forest conservation activities.[5] This is also referred to as a debt-for-nature swap.[6] If Congress passes the bill to amend TFCA, it will allow the United States to make debt-for-nature swaps with other countries that want to protect coral reefs.  This action could have a significant impact on reefs around the world.

A debt-for-nature swap is a debt reduction method authorized under 22 U.S.C. §2431(f) which states, “a loan or credit may be sold, reduced, pursuant to subparagraph a, only to a purchaser who presents plans satisfactory to the President for using the loan or credit for the purpose of engaging in debt-for-nature swaps….”[7] The swap was first conceived in the late 1980s when there was extensive foreign debt and degraded natural resources in developing nations.[8] It allowed for debt repayments in local currency and generated funds for the environment by either restructuring, reducing, or buying, a portion of a developing country’s outstanding debt with a percentage of the proceeds being used to support conservation programs in that country.[9] There are three kinds of debt-for-nature swaps; three-party agreements, bilateral agreements, and multilateral agreements.[10]

Three-party agreements involve non-governmental organizations (NGOs) that purchase a hard currency debt owed to commercial banks at a discounted rate compared to the face value of the debt.[11] This money may come from the NGO, government, banks, or other private organization.[12] The debt is then renegotiated with the debtor country and sold back for more than it was purchased by the NGO but less than the original debt owed by the country.[13] The proceeds generated from the renegotiation are generally put into a fund that allocates grants to local environmental organizations for projects that promote conservation.[14] As of 2006, $168 million in face value debt has been reduced, restructured or swapped and approximately $117 million for conservation purposes generated.[15]

Bilateral debt transactions are done with official or public funds directly between the creditor and debtor countries.[16] The creditor country usually cancels debt agreements and either restructures them to extend payback periods or sells the debt back at a discounted price.[17] Funds for the environment are usually generated through interest payments from the debtor country or from a percentage of the buyback price.[18] As of 2006, bilateral agreements, generated $136.5 million in conservation funds.[19]

Multilateral agreements are essentially the same concept as bilateral agreements but the agreement is between the debtor country and more than one creditor country.[20] For example, five countries restructured their debt with Poland between 1991 and 1997 that generated over $473 million for environmental projects.[21]

Currently, the United States has 12 TFCA agreements in 11 countries including Bangladesh, Belize, Botswana, Columbia, and Guatemala.[22] With the amendment of the Tropical Forest Conservation Act, more debtor governments may get involved in debt-for-nature swap agreements that promote conservation efforts for coral reefs.  This can amount to hundreds of millions of dollars being directed towards prevention of pollution, climate change, and overfishing.  Ultimately, it will help lead to the conservation and protection of the world’s reefs that people depend on and enjoy so much.

[1] National Oceanic and Atmospheric Administration, NOAA Coral Reef Conservation Program: Threats, http://coralreef.noaa.gov/threats/ (last visited July 1, 2010).

[2] Tropical Forest Conservation Act of 1998, Pub. L. No. 105-214, 112 Stat. 885 (1998).

[3] Tropical Forest Conservation Act of 1998, H.R. 52, 111th Cong. (2009).

[4] OpenCongress for the 111th United States Congress, S.345, http://www.opencongress.org/bill/111-s345/show (last visited July 01, 2010).

[5] USAID, Innovative Financing for Forest Conservation and the Environment: Tropical Forest Conservation Act (TFCA), Enterprise for the Americas Initiative (EAI), http://www.usaid.gov/our_work/environment/forestry/tfca.html (last visited June 29, 2010).

[6] 22 U.S.C. § 2281 (2010)

[7] 22 U.S.C. §2431 (2010)


[9] Id.

[10] Id. at 3.

[11] Id. at 4-5.

[12] Id. at 5.

[13] Id.

[14] Id.

[15] Id. at 6.

[16] Id. at 8.

[17] Id.

[18] Id.

[19] Id. at 12.

[20] Id. at 8.

[21] Id.

[22] USAID, Tropical Forest Conservation Act (TFCA) Program Descriptions, http://www.usaid.gov/our_work/environment/forestry/tfca_descs.html (last visited June 29, 2010).

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