Can ‘blue bonds’ be the solution to Belize’s debt?

A representative of Belize’s Blue Bonds and Finance Permanence Unit interact with members of the public during an outreach initiative. Photo by Belize’s Blue Bonds and Finance Permanence Unit, courtesy Cari-Bois Environmental News Network, used with permission.

By Carolee Chanona

This story was first published on the Cari-Bois Environmental News Network. An edited version appears below as part of a content-sharing agreement.

Resilience can be defined interchangeably with the word elasticity, considering it’s the capacity to withstand or recover quickly from challenges — but when it comes to one of the world’s most vulnerable regions, how does resiliency look in the face of climate change?

For one Caribbean Community (CARICOM) nation, it’s expanding on the foundation of non-governmental organisations (NGOs) and private reserves that have been selling carbon for decades and swapping debt for the conservation of nature.

Like most Caribbean countries, 2020 was a financially challenging year for Belize as the country’s debt skyrocketed and the COVID-19 pandemic pushed the country into one of its worst recessions.

However, when Belize’s debt-to-gross domestic product (GDP) ratio is placed in a regional context, Caribbean countries face financial challenges which place them among the most highly indebted in the world. In 2018, the average Caribbean country – including Belize – had a debt which was 70.5 percent of GDP.

But in 2019, the country’s public debt climbed from 94.2 percent of GDP to 123.3 percent, while loan payments dwindled from 9.3 percent to 7.5 percent in 2020, due in part to the country’s closed borders to protect against the COVID-19 virus and reduced exports of goods and services connected to the global supply chain issues.

Catalysts for creative carbon solutions

With a decades-long decline of Belize’s agricultural industries peaking during the pandemic, tourism was increasingly promoted as a source for sustainable income to diversify the country’s economy. Today, tourism accounts for nearly half of Belize’s GDP.

Recently, however, proposals have been made to “swap” Belize’s crippling debt for the protection of marine resources. Virginia-based non-profit The Nature Conservancy proposed to front the funds to the Government of Belize to pay its creditors, with the caveat that it must spend a portion of interest savings to deliver on agreed conservation actions.

On November 4, 2021, the Belize Blue Bonds: Blue Finance for Nature and People programme was officially launched to cover public, co-managed, private, and Indigenous lands, as well as all related marine resources, including the Caribbean Sea, endangered mangroves, and vulnerable coral reefs.

Bonds sparked by a blue economy

During a panel discussion by the Belize Blue Bond and Finance for Permanence Unit (BBDPU) in January 2024, Belizean Prime Minister John Briceño noted that the country’s blue spaces “sustain livelihoods, social stability, and climate security.”

He added, “The Belize Blue Bonds is much more than a deal for debt restructuring. It represents the single most successful initiative by the value of our marine resources and our history of good stewardship.”

With The Nature Conservancy agreeing to relieve 12 percent of the country’s debt, the Belize's government is committed to protecting 30 percent of the country’s oceans. An estimated USD 180 million will be prioritised for on-the-ground conservation projects over the next 20 years to ensure that Belize attains its conversation targets by 2029.

As of 2023, Belizean authorities reported that the country has officially protected 20.3 percent of its total ocean space, designated all existing national lands within the Belize Barrier Reef Reserve System as mangrove reserves, and launched the marine spatial planning process for the development of the Belize Sustainable Ocean Plan.

Authorities have now turned their attention towards expanding biodiversity protection zones to 25 percent of Belize’s oceans by November 2024, which is one of the targets under the Blue Bonds agreement.

Overall, the Blue Bonds deal will free up more than USD 200 million — nearly a tenth of Belize’s annual economic output — in funds that are expected to be spent preserving the country’s biodiversity.

Pushing ‘bold bans’ to reduce debt burden

With the economic feasibility of the Blue Bonds programme, Belize has taken a more aggressive approach to preservation, including banning the sale of publicly owned islets on the Belize Barrier Reef, and expanding the reef’s protected areas. The plan is for these areas to be increased by more than 2,000 additional square miles (just under 5,200 square kilometres) by 2026.

The challenge moving forward is to clearly outline both the implementation and enforcement of the projects under the programme. Currently a model of what a successful Blue Bonds project can look like in the Caribbean, it is important to highlight that other countries in the region have undertaken similar projects.

In September 2022, Barbados carried out a “debt-for-nature” initiative, with a swap of USD 150 million of international bonds generating USD 50 million for marine conservation. Ecuador’s record USD 1.6 billion swap in May 2024 sparked even more interest in such arrangements.

Combined, Belize and Barbados — two tourism-reliant nations — exchanged a total of USD 683 million of debt. Data by the World Bank shows that this amounts to 0.03 per cent of what the Global South owed to private creditors.

While Belize’s debt-for-nature swap has been significant, it echoes other attempts by the country to launch carbon-conscious initiatives. In 2012, The Nature Conservancy also played a key role in certifying 1.6 million tons of carbon offset inside the Rio Bravo Conservation Area.

Through the reduction of deforestation rates and sustainable forest management, at least USD 1.5 million in carbon offsets have since been generated through co-management of the Rio Bravo area by the Programme for Belize (PFB) and the Belizean government.

Is the Caribbean the next big market for carbon credits?

Belize’s projects on carbon markets and trading in the Caribbean signal a shift — especially in the context of the introduction of the country's Climate Change and Carbon Market Initiatives Bill in 2023.

While public consultations are continuing, the Bill is already a notable effort. With the country’s authorities elevating the voices of stakeholders and partners like The Nature Conservancy, as well as other NGOs that co-manage protected lands and waters, the Blue Bonds programme provides a blueprint for co-management and debt relief in the Caribbean.

Carbon credits are showing that there are far more innovative and non-extractive ways for countries to generate revenue and develop sustainably.

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