DEBT SWAPS: THE JAMAICAN EXPERIENCE

COFO 21 & 3RD WORLD FOREST WEEKRome, Italy.

September 24 – 28, 2012

Prepared by: Marilyn HeadleyCEO and Conservator of Forests

Forestry DepartmentJamaica

Debt Reduction for Jamaica

–The Tropical Forest Conservation Act in the USA provided the facility for countries with tropical forests to convert some of its debt payment into a forest fund.–DEBT SWAP - Third party purchases

the loan on condition that the country commits a specified amount of local currency to fund forest conservation activities.

DEBT SWAP• External debt load is reduced• Local currency payments lessens pressure

on the foreign exchange market• No upfront cash payment is needed by the

negotiating country• A schedule of payment can be negotiated

to extend the period of repayment

Need an interested “third party” as the Swap CANNOT proceed without it

COMPONENTS OF THE SWAP

• GOJ expresses interest to USG in 2001• TNC acts as third party and facilitated

process• The Swap was completed in September

2004 and became operational in 2005..• Swap amount – US $15.9M payable over

19 years

THE FCA• Forest Conservation Agreement sets out– Management responsibilities.• created the 7 member Oversight Committee.

– Roles of the parties– Authorised uses of the fund income– General terms

• All decisions on the management, use or disbursement of fund income have to be authorised by the OC

GOVERNANCE STRUCTURE

• Oversight Committee– 3 Permanent Members (GOJ, USG & TNC)– 4 Term members - NGOs

• Aim is to have a NGO Majority• The Company has two main functions – It implements the instructions of the OC;– Receives the deposits from the GOJ

• Allowance is also made for a Fund Administrator

FCA STIPULATIONS

Grants are to be used to provide conserve, maintain & restore priority sites in Jamaica, through one or more of the following activities

• Establish, restore, protect and maintain parks, protected areas and reserves

• Develop & implement scientifically sound natural resource management systems

• Capacity building for NGO’s, CBO’s

AUTHORISED PURPOSES

• Restore, protect or sustainably use diverse animal or plant species

• Research and identify medicinal uses of tropical forest plants to treat human diseases etc.

• Develop alternate livelihood options for border communities

PRIORITY SITES

Projects Approved

• Since 2007 fifty –nine (59) projects have been approved.

• ~ US$ 5M have been approved for these projects to date

LESSONS LEARNED - NEGOTIATING

• Explore all debt reduction options• Involve the government from the onset.

Though NGOs are the direct beneficiaries, it is an agreement between governments

• Identify third party for a debt swap early

• Completion took longer than was originally anticipated

LESSONS LEARNED - NEGOTIATING

• Negotiations of the FCA was tedious• Debt identification and discounting was

straight forward• Think outside the box e.g. By allowing

the state and private landowners to access some grant funds

LESSONS LEARNED – GOVERNANCE

• Keep the management structure simple with the authority and responsibilities of the parties clear

• Do not rush to get the first set of grants out the door. Establish operational framework to guide implementation

• Determine if its a sinking or endowment fund

• Develop networks links e.g. REDLAC

LESSONS LEARNED - GRANTS

• Strengthen the capacity of NGO’s if this is not there

• Planning is key. Deposits will most likely be made by the state in accordance with a payment schedule which decreases as time passes. Fund income must be managed accordingly to ensure that cash-flow is not impaired

CONCLUSIONS

• Several financing options exist • Debt-swaps have the following benefits– Fund income paid in local currency not US– Money is channelled into local forest

conservation projects and not to the US• Possibility of creating alliances between

Government and NGO sector where the Govt. owns the natural resources and / or the land requiring protection but cannot benefit from the fund income.

THANK YOU