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August 19, 2004
WASHINGTON, D.C., August 19, 2004 - The United States Government and the Government of Panama signed a debt-for-nature swap agreement today that will reduce the sovereign debt of the Government of Panama and help conserve 579,000 hectares (over 2,200 square miles) of tropical rainforest, an area larger than the State of Delaware. The deal will fund conservation efforts in a portion of the Darién National Park, an area of dense rainforest, sandy beaches, freshwater marshes and rocky coasts that is environmentally, anthropologically and historically rich.
The park has been officially recognized by the United Nations Educational, Scientific and Cultural Organization as a World Heritage site and as a Biosphere Reserve. It is located in an ecologically vital area that forms a land-bridge between the North and South American continents. The region is home three major indigenous groups, the Emberá, Waunaan and Kunas, who continue to live by traditional practices. The Darién coast was explored by Christopher Columbus in 1502 and visited by Spanish conquistadors. The Darién Gap region is inhabited by numerous rare animal species, including the jaguar, white-lipped peccary, giant anteater, bush dog, mantled howler monkey and harpy eagle (Panama's national bird).
The transaction was made possible in part by a $1.3 million contribution from The Nature Conservancy. The Nature Conservancy is working in the Darién region to prevent deforestation. The U.S. Government will provide $6.5 million to fund the transaction in addition to the $1.3 million contributed by The Nature Conservancy. Panama's debt to the United States will be reduced by $10.9 million over the next 12 years, and in return the Government of Panama will provide $10.9 million to fund conservation activities in ecologically important areas of the Darién Gap region. A portion of these funds will be set aside to form a perpetual endowment for conservation activities. This and other innovative debt-for-nature swaps are made pursuant to the U.S. Tropical Forest Conservation Act of 1998.
Stuart Irvin and Cecilia Macazana Barragán of Covington & Burling acted as counsel to The Nature Conservancy; they provided extensive advice on structuring the transaction and assisted in negotiating with both governments. This is the fourth transaction in which Covington has advised environmental organizations in the negotiation and documentation of debt-for-nature swaps. Covington has become a leader in the legal aspects of subsidized forest conservation transactions and looks forward to working with corporations seeking carbon sequestration opportunities in this fast-developing area.