Credit Suisse swaps Ecuador’s debt for preservation of the Galapagos Islands

Dhe major Swiss bank Credit Suisse has bought back Ecuadorian government bonds with a face value of 1.6 billion dollars. This was announced by Ecuadorian bankers on Thursday (local time).

The buyback will free up cash that Ecuador will invest in preserving the Galapagos Islands, one of the world’s most valuable ecosystems. The offer, made by Credit Suisse late last month, is the largest ever swap of debt for nature, as such transactions are known in banking circles. “This private-sector transaction is part of a broader conservation debt restructuring aimed at preserving the Galapagos Islands and the surrounding marine ecosystem,” the Ecuadorian government said in a statement in late April.

At the 2021 UN Climate Change Conference in Glasgow, Ecuador’s President Guillermo Lasso announced that he would use a debt swap to finance a new marine reserve around the Galapagos Islands. The new reserve will cover 60,000 square kilometers. One half is said to be in the northeast of the Galapagos Islands, the other half between the archipelago and Panama on the so-called Cocos Ridge. The new marine sanctuaries are designed to protect species such as hammerhead sharks and sea turtles from fishing and prevent microplastic pollution around the Galapagos Islands.

A debt swap based on the principle of “nature conservation for debt” offers economically weaker countries the opportunity to reduce their foreign debt. In return, the country undertakes to take environmental protection measures. The money from the debt swap is to be managed by a trust fund. It is still unclear what specific consequences the debt swap will have for Ecuador and who will manage the trust fund. The Galapagos National Park, which is responsible for the existing marine reserve, has been criticized for poorly managing the funds made available.

In mid-March it was announced that Credit Suisse would be taken over by competitor UBS for a total of CHF 3 billion. The takeover of Switzerland’s second largest bank is seen as a costly emergency rescue, which is also likely to reduce competition in the Swiss banking market. The takeover of Credit Suisse should be dry and dry by the middle of the year.

A series of mishaps and failures had triggered a crisis of confidence at the institute. In mid-March, the Swiss government, together with the central bank and the financial market supervisory authority, finally rushed the institute to help in order to prevent serious upheavals in the country and possibly also a global financial crisis.

After a weekend of hectic negotiations, the parties agreed on a takeover of CS by UBS, which will be secured with state guarantees worth CHF 209 billion. The takeover of Credit Suisse is the first merger of two globally systemically important banks since the financial crisis.

The Galapagos Islands are around 1000 kilometers off the coast of Ecuador. The archipelago is home to 198,000 square kilometers of protected marine space with unique flora and fauna, which is a UNESCO World Heritage Site.