[Congressional Record Volume 144, Number 26 (Thursday, March 12, 1998)]
[Senate]
[Pages S1904-S1905]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                TROPICAL FOREST CONSERVATION ACT OF 1998

 Mr. MOYNIHAN. Mr. President, I rise today to join my 
colleagues in support of the Tropical Forest Conservation Act of 1998. 
This important legislation addresses the perils of environmental 
degradation and, to a limited extent, the pressures of third world 
debt.
  As some of the other co-sponsors of this legislation have noted, 
tropical forests around the globe are disappearing at an alarming rate. 
Economic pressures are nearly always the underlying cause. Rural 
populations constrained by poverty engage in destructive short-term 
exploitation of timber. Growing populations result in growing land use 
pressures, often causing large tracts of forested land to be clear cut 
and converted to agricultural uses. Yet in most cases, there are 
opportunities to redirect development toward a sustainable course.

[[Page S1905]]

  The legislation we are introducing today responds to some of these 
opportunities, by establishing a new program for debt-for-nature swaps 
between the United States and the tropical developing countries of 
Africa and Asia.
  The Tropical Forest Conservation Act of 1998 builds upon the 
Enterprise for the Americas Initiative (EAI) first established under 
the Bush Administration. The EAI created a system by which Latin 
American and Caribbean governments could restructure some of their 
official debt to the United States, on the condition that funds be 
established in local currency to support environmental conservation.
  The idea of linking debt to conservation, often referred to as 
``debt-for-nature swaps,'' was first articulated in 1984 by Dr. Thomas 
Lovejoy, then a vice president of the World Wildlife Fund. In early 
1986, Costa Rica announced the first transaction based on this premise. 
The Costa Rican plan involved a debt-for-equity swap in which the 
Northeast Bank of Minnesota was allowed to exchange $10 million in 
Costa Rican debt titles for an equity position in Portico, a local door 
manufacturing industry with considerable export potential. Local 
currency bonds provided by the central bank of Costa Rica were used to 
purchase nearly 5,000 hectares of forest, which was held in trust by 
the government to ensure sustainable forest management practices.
  Since the 1986 Costa Rica transaction, the idea of converting 
commercial debt into local currency instruments for conservation 
projects has gained momentum, and more than a dozen countries in Latin 
America have approved similar projects. Costa Rica has gone on to 
negotiate other debt-for-nature swaps with the governments of Sweden 
and the Netherlands. The success of these projects in Costa Rica, and 
elsewhere in Latin America, make them models for potential projects 
elsewhere on the globe.
  The Tropical Forest Conservation Act is designed to spur new debt-
for-nature exchanges in areas outside of Latin America--namely, in the 
tropics of Asia and Africa. The new conservation projects which are 
established as a result of this legislation will benefit from the 
lessons learned through the earlier Latin American projects. Two 
important lessons are illustrated by the Costa Rican experience.
  First, experience has taught us the importance of the local 
organization administering the conservation program. Non-governmental 
organizations sometimes lack the technical and administrative expertise 
necessary for effective management of a large conservation effort. In 
Costa Rica, the debt-for-nature program has been carried out through 
the National Park Foundation. The respectability of this foundation, 
and its commitment to environmental education, ecological tourism and 
scientific research largely contributed to its successful 
administration of the conservation projects in its charge. We must 
ensure that the organizations administering the conservation efforts 
established through this legislation have the requisite knowledge and 
technical expertise to manage their charges effectively.
  Second, a cautionary note is in order regarding limitations on the 
magnitude of these projects. Ultimately, debt-for-nature exchanges 
imply that the local government must print local currency bonds, and 
eventually these will increase a country's money supply--thus creating 
inflationary pressures. At the request of the Costa Rican government, 
the Nature Conservancy commissioned a study to assess the potential 
inflationary impact of debt-for-nature swaps. This study concluded that 
if Costa Rica were to spend $50 million in local currency generated by 
debt-for-nature exchanges each year, the inflationary impact would be 
less than 0.5 percent. Although this figure may appear negligible, 
inflationary pressures may become significant if a large fraction of a 
nation's debt is involved in a debt-for-nature exchange.
  By incorporating the lessons we have learned through earlier debt-
for-nature projects in Latin America, I am confident that we will 
ensure the success of such exchanges in tropical developing countries 
of Asia and Africa.
  Mr. President, I am pleased to be a co-sponsor of this important 
legislation, which will help third world nations to develop in a 
sustainable, environmentally-minded fashion. I encourage my colleagues 
in the Senate to lend their support to this effort.

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