A Public Choice Analysis on Debt-for-Nature Swap: Case of Belize

With the rise of global environmental issues, safeguarding the rainforests in Latin America and the Caribbean is critical to maintaining global environmental stability. Debt-for-nature swap (DNS) emerged as an innovative mechanism that addresses both nature conservation and debt burdens. However, in reality, there is difficulty in securing these agreements due to the myriad priorities of stakeholders, who often place a range of interests above the imperative of nature conservation. Through a public choice theory perspective this paper reveals how stakeholder's personal incentives may either hinder or promote the attainment of agreements. This paper asserts that it is difficult to achieve DNS agreements due to a lack of compelling incentives for stakeholders. Nonetheless, the 2001 US-Belize swap under the Tropical Forest Conservation Act (TFCA) stands as a notable exception where stakeholders addressed incentives to secure an agreement, attributable to four key factors. Firstly, the involvement of an international NGO in bringing stakeholders together and providing substantial financial partnership. Secondly, the awareness of local populations regarding environmental conservation and the importance of connecting nature conservation with economic benefits. Thirdly, the effectiveness of bilateral over three-party agreements in mitigating risks and removing low-incentivized banks as creditors. Lastly, the requirement of high-level political support, exemplified by the US TFCA. This research suggests the need to strengthen economic incentives as a means to effectively induce interests from stakeholders to achieve the agreement.