2023- Galápagos Islands Helped by Innovative Financing Tool

In May 2023, the government of Ecuador completed the world’s largest debt conversion for conservation to protect the Galápagos Islands and its vibrant marine ecosystem. This innovative deal will inject a projected $450 million into marine protection and conservation over the next 18 years and includes building an endowment that will continue to provide about $12 million annually in perpetuity. The Galápagos Life Fund (GLF), a newly established nonprofit organization, will manage and oversee the endowment. Notably, this public-private partnership, which has an explicit mission of protecting the irreplaceable habitat and wildlife of the Galápagos, is led by Ecuadorians and partners who share this common goal.

Beyond the benefits to nature, the deal delivers remarkable financial benefits for Ecuador. It reduces the country’s debt by nearly $1 billion, representing an immediate 6.25% drop in commercial debt, and saves the government more than $1.1 billion over time by reducing interest.

To achieve these benefits and savings, Ecuador effectively converted $1.63 billion of its international debt into a $656 million loan—called the Galápagos Marine Loan—which immediately reduced the principal the government owed by 60%. Backed by political risk insurance from the U.S. International Development Finance Corporation and a loan guarantee from the Inter-American Development Bank (IDB), the transaction was structured and financed by Credit Suisse through the issuance of bonds, which the dealmakers dubbed Galápagos Marine Bond, and through the creation of a new single-purpose EU-based financing vehicle called GPS Blue Financing DAC (GPS Blue). GPS Blue relays payments from Ecuador to pay bond investors and fund conservation grantmaking by the GLF.

The debt conversion came after four years of work that started with an assessment of the existing Galápagos Marine Reserve. In a partnership initiated by the Ecuadorian government, Pew Bertarelli Ocean Legacy led that assessment and developed a collaborative strategy to expand the reserve to better protect migratory species that are critical to the Galápagos’ marine ecosystem.

As a result, in 2022, Ecuador created a new 60,000-square-kilometer (21,166-square-mile) marine protected area—the Hermandad Marine Reserve. Importantly, as part of the 2023 refinancing deal, Ecuador made new commitments that strengthen the effectiveness of the marine reserves and improve the sustainability of its fisheries.