The Metamorphosis: Expected Changes in the Brazilian Debt-for-Nature Swap Process and Policy Implications
Fordham International Law Journal
Copyright c 1993 by the authors. Fordham International Law Journal is produced by The
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The Metamorphosis: Expected Changes in the
Brazilian Debt-for-Nature Swap Process and
Antonio N. Piccirillo
This Note argues that the new Brazilian debt-for-nature swap legislation, if passed in its
current form, will make debt-for-nature swaps in Brazil more financially attractive to international
and Brazilian non-governmental organizations (“NGOs”). Part I provides a description of a
typical debt-for-nature swap, the purposes of a debt-for-nature swap, and the interests of the U.S.
government and U.S. NGOs in debt-for-nature swaps. Part I also discusses the grounds for the
initially adamant Brazilian opposition to debt-for-nature swaps and the recent moderation of this
opposition. Part II reviews the changes in the policies of the Brazilian government toward
debt-fornature swaps, from the pragmatic but modest measures taken by the Collor administration (1990
to 1992) to the outright approval of debt-for-nature swaps by the Franco administration (1992 to
present). Part III analyzes the differences between the current Brazilian debt-for-nature swap
regulations and the proposed legislation, highlighting the benefits of the latter. Part III also sets forth
several policy recommendations directed at the U.S. government and U.S. NGOs. Finally, this
Note concludes that, if complemented by the policy recommendations presented in Part III, the
proposed Brazilian legislation will weaken the lingering Brazilian opposition to debt-for-nature
swaps and ensure that the interests of the U.S. government and U.S. NGOs in these transactions
The debt-for-nature swap process in Brazil is undergoing a
striking metamorphosis. As little as four years ago, the Brazilian
government forcefully rejected the idea of debt-for-nature
swaps' as an affront to Brazilian national sovereignty.2 The
government based its opposition on the theory that debt-for-nature
swaps were a form of external control over the country's natural
resources and domestic policy.' In addition, many Brazilians
believed that debt-for-nature swaps would legitimize the country's
large and controversial external debt.4 Today, in contrast, the
* The 1993 MCI-Fordham International Law Fellowship generously funded the
research for this Note. The Author would like to thank all those who graciously
consented to interviews in Brasilia, Rio de Janeiro, Washington, D.C., and New York
City. The Author also wishes to thank Dean John Feerick and Professor Henry W.
McGee, Jr. of Fordham University School of Law for their efforts on his behalf.
1. SeeJ. Eugene Gibson & Randall K. Curtis, A Debt-for-NatureBlueprint, 28 COLUM.
J. TRANSNAT'L L. 331, 335-36 (1990). In essence, a debt-for-nature swap allows a
developing country with a large external debt to obtain some debt relief by having an
international conservation organization buy shares of the developing country's external
debt. Id. at 333. The international conservation group then donates its shares to a
conservation group in the developing country, which converts the shares into local
currency or interest-bearing bonds that ultimately finance an environmental project in the
developing country. Marianne Lachman, Debt-for-NatureSwaps: A Case Study in
Transactional Negotiation, 2 J. CONTEMP. LEGAL IssuEs 139, 143 (1989).
2. James Brooke, Brazil Announces Plan to Protect the Amazon, N.Y. TIMES, Apr. 7,
1989, at A5; Eugene Robinson, Brazil Angrily Unveils Planfor the Amazon, WASH. POST,
Apr. 7, 1989, at Al. The rejection came in a speech by former President Sarney
announcing a domestic plan, entitled "Our Nature," to protect the Amazon. Brooke,
supra, at AS; Robinson, supra,at Al. The President explicitly ruled out debt-for-nature
swaps due to sovereignty concerns. Brooke, supra, at A5; Robinson, supra, at Al.
3. See Priya Alagiri, Comment, Give Us Sovereignty or Give Us Debt: Debtor Countries'
Perspective on Debt-for-Nature Swaps, 41 Am. U. L. REv. 485, 496-503 (1992) (discussing
debt-for-nature swaps and sovereignty infringement on developing countries'
governments and indigenous groups).
4. CONS6RCIO DE ONGs BRASILEIRAs, ASPECTOS POLtTICO-ECON6MICOS E
ExPERItNCIAS INTERNACIONAIS RELACIONADAS A CONVERSkO DA DIVIDA ExTERNA PARA PROJETOS
DE MEIo AMBIENTE [CONSORTIUM OF BRAZILIAN NGOs, POLITICAL-ECONOMIC ASPECTS AND
INTERNATIONAL EXPERIENCES RELATED TO DEBT-FOR-NATuRE SwAPS] 2-3 (on file with
Fundaoho Brasileira para a Conservaoio da Natureza, Rio deJaneiro, Brazil)
Brazilian government is poised to enact advanced
debt-for-nature swap legislation that could significantly improve conditions
for the implementation of ecologically and financially successful
debt-for-nature swaps in Brazil.'
This Note argues that the new Brazilian debt-for-nature
swap legislation, if passed in its current form, will make
debt-fornature swaps in Brazil more financially attractive to international
and Brazilian non-governmental organizations ("NGOs").6 Part
I provides a description of a typical debt-for-nature swap, the
purposes of a debt-for-nature swap, and the interests of the U.S.
government and U.S. NGOs in debt-for-nature swaps. Part I also
discusses the grounds for the initially adamant Brazilian
opposition to debt-for-nature swaps7 and the recent moderation of this
opposition. Part II reviews the changes in the policies of the
Brazilian government toward debt-for-nature swaps, from the
pragmatic but modest measures taken by the Collor administration
(1990 to 1992) to the outright approval of debt-for-nature swaps
by the Franco administration (1992 to present). Part III analyzes
the differences between the current Brazilian debt-for-nature
swap regulations and the proposed legislation, highlighting the
benefits of the latter. Part III also sets forth several policy
recommendations directed at the U.S. government and U.S. NGOs.
Finally, this Note concludes that, if complemented by the policy
recommendations presented in Part III, the proposed Brazilian
legislation will weaken the lingering Brazilian opposition to
debt-for-nature swaps and ensure that the interests of the U.S.
government and U.S. NGOs in these transactions are preserved.
I. DEBT-FOR-NATURE SWAPS AND BRAZILIAN DISAPPROVAL:
Debt-for-nature swaps can be classified as either private
sector debt-for-nature swaps8 or public sector debt-for-nature
swaps.9 The purposes of a debt-for-nature swap reflect the
interests of the different parties involved in the transaction, including
the local and international NGOs, the creditor bank or
government, and the debtor government. In Brazil, questions of
external interference with natural resources and domestic policy1 °
and the legitimacy of the Brazilian external debt"' caused the
Brazilian government to oppose initially debt-for-nature swaps. 12
Today, opposition based on external interference is
weaken8. See Gibson & Curtis, supranote 1, at 335-54. In a private sector debt-for-nature
swap, an international NGO purchases a debtor country's commercial bank debt and
donates the debt to a local NGO. Id. at 335-36. The local NGO then converts the debt
into local currency and uses the funds to implement an environmental program. Id.
9. See J. Eugene Gibson & William J. Schrenk, The Enterprisefor the Americas
Initiative: A Second Generation of Debt-for-Nature Exchanges-With an Overview of Other Recent
Exchange Initiatives, 25 GEo. WASH. J. INT'L L. & ECON. 1, 16-18 (1991). In a public
sector debt-for-nature swap, a creditor government, such as the United States, forgives
portions of its bilateral aid to a debtor country in exchange for the debtor country's
commitment to fund certain environmental projects. Id.
10. See supra note 3 and accompanying text (discussing suspicions of foreign
control over Brazilian natural resources and domestic policy).
11. See supra note 4 and accompanying text (discussing widespread belief that
Brazilian external debt is illegitimate).
12. Brooke, supra note 2, at AS.
FORDHAM INTERNATIONAL LAWJOURNAL
ing,' s but questions concerning the legitimacy of the external
A. Description of a Debt-for-Nature Swap
Although all debt-for-nature swaps vary to some extent,
most private sector debt-for-nature swaps follow a common
scheme. Normally, an international NGO acquires title to a
portion of a debtor country's external debt either by a donation
from a commercial bank or, more likely, by purchasing the debt
at a discount on the secondary market. t5 The international
NGO then donates the debt titles to an NGO in the debtor
country (the "local NGO"),16 which then converts the debt titles into
local currency or interest-bearing bonds.1 7 The local NGO uses
the proceeds to administer an environmental program in that
In other private sector debt-for-nature swaps, the
internaStional NGO agrees to cancel the debt it purchased in return for
the debtor country's commitment to create a conservation fund
13. FUNDACAO. BRASILEIRA PARA A CONSERVACAO DA NATUREZA, SEMINARIO SOBRE
RECURSOS EXTERNOS EM PROJETOS DE MEIo AMBIENTE [BRAZILIAN FOUNDATION FOR THE
CONSERVATION OF NATURE, SEMINAR CONCERNING EXTERNAL FUNDS FOR ENVIRONMENTAL
PROJECTS] 7 (1989) (on file with Funda iio Brasileira para a Conserva to da Natureza,
Rio de Janeiro, Brazil) [hereinafter FBCN SEMINARIO].
14. CONSORCIO, supra note 4, at 2-3. An indication of the current feelings against
the external debt is the party platform of the leading candidate in the polls for Brazil's
October 1994 presidential election, which platform calls for the suspension of external
debt payments. James Brooke, Lula's Progress: From PeasantBoy to President?,N.Y. TIMES,
Dec. 27, 1993, at A4. However, the candidate himself, Luis Indcio Lula da Silva, of the
Partido Trabalhista [Workers' Party] ("PT"), may prove to be more flexible than his
party platform. Id.
15. Gibson & Schrenk, supra note 9, at 3. The secondary market is the market in
which public and private external debt is traded. UNITED NATIONS CENTRE ON
TRANSNATIONAL CORPORATIONS, DEBT EQUITY CONVERSIONS 17 (1990). The debt on the
secondary market sells at a discount reflecting the market's perception of the
creditworthiness of the debtor country and the ultimate probability that the debt will be paid
according to the loan agreements. Id. Commercial banks are willing to sell the debts of
many developing countries on the secondary market because full payment of these
debts is considered unlikely. Gibson & Schrenk, supra note 9, at 3. For example, in
1987 Citibank, determining that full payment of Brazilian loans was improbable,
reserved U.S.$3 billion dollars for anticipated losses on Brazilian loans. Lachman, supra
note 1, at 141.
16. See Gibson & Curtis, supra note 1, at 341. The international and local NGO
may or may not have had prior cooperative relationships. Id.
17. Lachman, supra note 1, at 143, 146.
18. Id. at 143.
to protect certain areas.19 At least one debt-for-nature swap has
also provided for the cancellation of trade credits.20 Whether
the debt-for-nature swap affects external debt or trade credits,
the debtor country's government negotiates each phase of the
transaction with the local and international NGOs, from the
financial terms of the debt conversion to the details of the
environmental program.2" Ultimate approval of any debt-for-nature
swap, therefore, rests with the local government. 22
A recent development has been the emergence of public
sector debt-for-nature swaps.23 Unlike a private sector
debt-fornature swap, in which an international NGO acquires and
converts a country's commercial bank debt,24 in a public sector
debtfor-nature swap a creditor government 25 directly reduces its
bilateral debt26 to a debtor country in return for a commitment by
19. Gibson & Schrenk, supra note 9, at 7-9, 14-15. Such swaps took place in Bolivia
and Mexico, for example. Id. In the Bolivian swap, Conservation International, a U.S.
NGO, purchased U.S.$650,000 worth of Bolivia's commercial bank debt for
U.S.$100,000. Id. at 7. Conservation International agreed to cancel this debt in return
for the Bolivian government's commitment to create a U.S.$250,000 fund to finance
the management of the Beni Biosphere Reserve. Id. In the Mexican swap,
Conservation International agreed to purchase up to U.S.$4 million of Mexico's commercial
bank debt. Id. at 14-15. In return for the cancellation of this amount, the Mexican
government agreed to establish a conservation fund equivalent to 35% of the face value
of the cancelled debt. Id. For an overview of past debt-for-nature swaps in several
countries, see id. at 7-15, and Derek Asiedu-Akrofi, Debt-for-NatureSwaps: Extending the
Frontiersof Innovative Financingin Support of the GlobalEnvironment, 25 Irr'L LAw. 557, 565-71
20. Gibson & Schrenk, supra note 9, at 14. Such a swap took place in Madagascar.
Id. The government of Madagascar and Conservation International agreed to convert a
total of U.S.$1 million worth of Madagascar's commercial bank debt and trade credits
per year for five years. Id.
21. Id. at 4-5.
22. Gibson & Curtis, supra note 1, at 344.
24. See supra note 15 and accompanying text (discussing acquisition of commercial
bank debt for private sector debt-for-nature swaps).
25. See Cole, supra note 23, at 80. In 1990, the Paris Club, a group of Western
creditors including the United States, Great Britain, France, Germany, and Japan,
agreed to sell or donate their government-to-government loans to developing countries.
26. See MALCOLM GILuS ET AL., ECONOMICS OF DEVELOPMENT 364 (2d ed. 1987).
Bilateral aid is aid given directly by one government to another. Id. Bilateral aid
donors normally disburse such aid through official aid agencies, such as the United States
Agency for International Development and Britain's Overseas Development Ministry.
Id. at 370.
that country to fund environmental The United
States has taken a step in the advancement of public sector
debtfor-nature swaps with the Enterprise for the Americas Initiative
(the "Initiative") .28 The Initiative aims to strengthen growth in
Latin America through increased trade, investment, and
reduction of official debt owed to the United States. 2' The Initiative
allows a reduction of concessional debt3 ° owed by Latin
American or Caribbean countries to the U.S. government under U.S.
international economic assistance programs.3 1 Such a reduction
would allow the eligible debtor country3 2 to pay a reduced
(a) REQUIREMENTs.-To be eligible for benefits... a country must be a Latin
American or Caribbean
country(1) whose government is democratically elected;
(2) whose government has not repeatedly provided support for acts of
(3) whose government is not failing to cooperate on international
narcotics control matters;
(4) whose government (including its military or other security forces)
does not engage in a consistent pattern of gross violations of
internationally recognized human rights;
(5) that has in effect, has received approval for, or, as appropriate in
exceptional circumstances, is making significant progress
toward(A) an International Monetary Fund standby arrangement,
extended Fund arrangement, or an arrangement under the...
[Enterprise for the Americas] facility, or in exceptional circumstances, [an
IMF] monitored program or its equivalent, unless the President
determines . . . that such an arrangement or program (or its
cipal in dollars while paying the interest in local currency into an
Enterprise for the Americas Fund" created by an Environmental
Framework Agreement 4 between that country and the United
States.3" The Initiative also allows for the sale of
nonconcessional debt owed under programs administered by the
Commodity Credit Corporation 6 and the Export-Import Bank.37 The
purchaser of this nonconcessional debt must use it to finance
equivalent) could reasonably be expected to have significant adverse
social or environmental effects; and
(B) as appropriate, structural or sectoral adjustment loans from the
International Bank for Reconstruction and Development or the
International Development Association, unless the President
determines.., that the resulting adjustment requirements could
reasonably be expected to have significant adverse social or environmental
(6) has put in place major investment reforms in conjunction with an
Inter-American Development Bank loan or otherwise is implementing, or
making significant progress toward, an open investment regime; and
(7) if appropriate, has agreed with its commercial bank lenders on a
satisfactory financing program, including, as appropriate, debt or debt service
33. 22 U.S.C. § 2430f. The fund must be used to finance, inter alia, "activities that
link the conservation and sustainable use of natural resources with local community
development." 22 U.S.C. § 2430g(d)(1). The fund shall be governed by an
administering body composed of members of the U.S. government, individuals appointed by the
host country, and other individuals with broad ranges of experience. 22 U.S.C.
§ 2430g(c) (2) (A)-(C).
34. 22 U.S.C. § 243 0g. A framework agreement governs the operation and use of
an Enterprise for the Americas Fund. 22 U.S.C. § 2430g(a); see supra note 33
(discussing Enterprise for Americas Fund).
35. 22 U.S.C. § 24 30g.
36. 7 U.S.C. § 1738o-r (1988 & Supp. IV 1992). The Commodity Credit
Corporation ("CCC") is a federally-owned corporation through which the federal governent
implements its policies to protect farm income and commodity prices. Ralph A.
Linden, An Overview of the Commodity Credit Corporation and the Procedures and Risks of
LitigatingAgainst It, I IJ. AGRIC. TAx'N & L. 305, 305-09 (1990). Its policies and actions affect
domestic and foreign aspects of U.S. agriculture. Id. The CCC has traditionally
provided support to "middle-tier" developing countries, guaranteeing repayment terms of
up to three years on commodities consumed within a year. John A. Bohn, Jr.,
Governmental Response to Third World Debt: The Role of the Export-Import Bank, 21 STAN. J. INT'L L.
461, 468 (1985).
37. 12 U.S.C. § 635i-6 (1988 & Supp. IV 1992). The Export-Import Bank
("Eximbank") is a federally-owned bank whose purpose is to promote U.S. exports by
making direct loans to foreign buyers of U.S. exports. Bohn, supra note 36, at 468-69.
Eximbank can also issue credit insurance and guarantee loans to developing countries by
other lenders. Id.
dmeebnt-tfoswr-anpast,u4r°eosrwdaepbs,t" budye-bbt-afcokrs-.e4"quity swaps, s"
B. Purposes of a Debt-for-Nature Swap
International and local NGOs enter into debt-for-nature
swaps because the leveraging effect of the debt-for-nature
transaction allows these groups to increase the effectiveness of their
conservation dollars.42 This leveraging or magnification effect
occurs when the debt titles, purchased from a creditor bank at a
steep discount, are converted into local currency near or at face
value. 43 This increase in funds improves the ability of
environmental NGOs to achieve their goals of preserving biological
diversity44 and promoting sustainable development.4 5 These two
principles were the cornerstones, respectively, of the Biodiversity
38. 12 U.SC. § 635i-6(c)(1)(A); see supranotes 15-22 and accompanying text
(discussing traditional private sector debt-for-nature swaps).
39. 12 U.S.C. § 635i-6(c)(1)(A). A debt-for-equity swap functions much like a
debt-for-nature swap, with the exception that in a debt-for-equity swap the purchaser of
discounted shares of a developing country's debt does not donate the debt for
environmental purposes, but rather converts the debt into foreign equity in a domestic firm in
the developing country, thereby actually acquiring ownership of assets in the
developing country. DEBT EQurrv CoNVERSIONS, supra note 15, at 5-6.
40. 12 U.S.C. § 635i-6(c) (1) (A). Debt-for-development swaps function in the same
manner as debt-for-nature swaps, with the exception that the international organization
purchasing or receiving as a donation a developing country's debt uses the funds to
operate a development program, instead of an exclusively environmental one, in the
developing country. Eve Burton, Debtfor Development: A Ne Opportunityfor Nonprofits,
Commercial Banks, and Developing States, 31 HARv. INT'L L. J. 233, 245-46 (1990).
41. 12 U.S.C. § 635i-6(c)(1)(B). In a debt buy-back, a debtor government
purchases its debt at a discount from its creditor banks. Anthony Flint, When Nations Try
to Swap Their Way Out of Debt; Practicesare Innovative, but Skeptics Say They're No Answerfor
Empty Pockets, BOSTON GLOBE, Aug. 19, 1990, at A14.
42. Gibson & Curtis, supra note 1, at 335-36.
43. Id. For example, if an international NGO purchases for U.S.$25 a debt note
with a face value of U.S.$100 and redeems it with the local government for U.S.$75, the
NGO will have multiplied its original U.S.$25 by a factor of three. Id. Without the debt
swap transaction, the NGO could have purchased only U.S.$25 in local currency at the
market rate of exchange. Id. at 336.
44. See Robert Fischman, BiologicalDiversity and EnvironmentalProtection:Authority to
Reduce Risk. 22 ENVrL. L. 435 (1992), reprintedin partin WILLIAM WEINER ET AL.,
INTERNATIONAL ENVIRONMENTAL LAw 10-1 (1993). Biological diversity is defined as "'the variety
and variability among living organisms and the ecological complexes in which they
occur' . . . in essence, a framework for sorting out what we know about nature." Id.
45. See WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT, OUR COMMON
FuTURE 24 (1987). Sustainable development is a model of economic development that
meets present needs without compromising the ability of future generations to meet
their own needs. Id.
Treaty46 and Agenda 21, both signed at the United Nations
Conference on Environment and Development (the "Earth
Summit") 48 in Rio deJaneiro in 1992. Environmental NGOs are
eager to promote biological diversity and sustainable
development practices in Brazil because Brazil contains roughly thirty
percent of the world's tropical forests49 and is the most
biologi46. 1992 United Nations Framework Convention on Biological Diversity, openedfor
signatureJune 5, 1992, U.N. Doc. DPI/1307 (1992), reprintedin 31 I.L.M. 818 (1992)
(not yet in force) [hereinafter Biodiversity Treaty]. The Biodiversity treaty will set
"common requirements, definitions and procedures for ecosystem conservation and
economic utilization of the worlds' [sic] genetic resources." John Fitzgerald & David Favre,
A Summary of the Biological Diversity Treaty and Its Development, 9 ENDANGERED SPECIES
UPDATE 9 & 10 (July/Aug. 1992), reprintedin part in WEINER ET AL.., supra note 44, at
1010. The treaty has the potential to become the foundation for national policies and
international cooperation in protecting biodiversity. Id.
47. Report of the United Nations Conference on Environment andDevelopment, U.N. Doc.
A/CONF.151/26/Rev. 1 (1993) [hereinafter Agenda 21]. Agenda 21 was designed to be
the blueprint for the worldwide adoption of sustainable development practices. WEINER
ET AL., supra note 44, at 10-5 to 10-6. An 800-page document, Agenda 21 makes
recommendations dealing with: the socio-economic dimension of global environmental
problems; conservation and resource management; strengthening the role of
non-governmental organizations and other social groups; and the means of implementing
sustainable development practices (i.e., financing, institutions, etc.). Id. at 10-6.
Furthermore, sustainable development is recognized by the 1992 United Nations
Framework Convention on Climate Change as an important component in combatting
global warming. United Nations Framework Convention on Climate Change, openedfor
signatureJune4, 1992, U.N. Doc. A/AC.237/18 (Part 11)/Add. 1 and Corr.1, reprintedin
31 I.L.M. 849 (1992) (not yet in force) [hereinafter Convention on Climate Change].
48. See Edith Brown Weiss, Introductoiy Note, 31 I.L.M. 814 (1992) (giving overview
of Earth Summit). Officially entitled the United Nations Conference on Environment
and Development, the Earth Summit was attended by representatives of over 170
countries. Id. The Earth Summit attempted to deal with the global challenge of achieving
decent living conditions for all people without destroying the natural foundations of
life on Earth. Benjamin A. Goldman, Equity and the 1992 Rio Earth Summit, 4 FoRuHAM
ENvT'L L. REP. 1, 1 (1992). The Summit's underlying theme was the link between the
environment and development. Id. Documents negotiated and signed at the
conference were Agenda 21, supra note 47, and the Non-Legally Binding Authoritative
Statement of Principles for a Global Concensus on the Management, Conservation, and
Sustainable Development of All -Types of Forests, U.N. Doc. A/CONF.151/26/Rev. 1
(1993), reprinted in 31 I.L.M. 881 (1992). Documents negotiated prior to the
conference but opened for signature at the conference were the Rio Declaration on
Environment and Development, U.N. Doc. A/CONF.151/26/Rev. 1 (1993), .reprinted in 31
I.L.M. 874 (1992), the Biodiversity Treaty, supra note 46, 31 I.L.M. at 818, and the
Convention on Climate Change, supra note 47, 31 I.L.M. at 849; see Goldman, supra
(concluding that although Earth Summit represented advancement of ideals set forth
in United Nations Conference on Human Environment twenty years earlier in
Stockholm, agreements in Earth Summit provide few guarantees that future global
decisionmaking will be more equitable).
49. Asiedu-Akrofi, supra note 19, at 577; see Michael S. Giamo, Comment,
Deforestation in Brazil: Domestic PoliticalImperative-GlobalEcologicalDisaster,18 ENvTL L. 537, 538
cally diverse country on Earth. 50
Debtor countries' governments enter into debt-for-nature
swaps because through such swaps they are able to repay an
external loan with local currency instead of scarce external
currency.5 1 These external debts and the requirement that they be
repaid in external currency have produced serious
consequences to the environment in debtor countries.5 2 To repay
these debts, debtor countries have intensified activities aimed at
producing exports, which in turn produce external currency.5 3
Export-producing activities include the leveling of forests for
timber and pasture lands and the destruction of woodlands,
which in turn lead to soil erosion, reduced water supplies, loss of
fisheries, and the extinction of species of flora and fauna. 4
Commentators have criticized Brazil and other Latin American
countries for engaging in these activities in order to service their
large external debts.5 5 Others have noted that it may be more
(1988) (noting that area in Brazil known as "classic Amazon" covers 3.5 million square
kilometers and, by itself, would constitute ninth largest country in world).
50. See Henry W. McGee, Jr. & Kurt Zimmerman, The Deforestation of the Brazilian
Amazon: Law, Politics, and InternationalCooperation, 21 U. MIAMI INTER-AM. L. REV. 513,
516 (1990) (noting that Amazon contains perhaps half of world's species); Paul A.
Colinvaux, The Pastand FutureAmazon, ScI. Am., May 1989, at 102 (estimating that
Amazon rain forest contains up to 80,000 plant and 30 million animal species).
51. See Cole, supra note 23, at 64 (explaining that once debtor country is relieved
of having to pay external loan in hard currency, debtor country can then dedicate hard
currency reserves to capital investment and economic growth).
52. See NATIONAL WILDLIFE FEDERATION, THIRD WORLD DEBT AND NATURAL
RESOURCES CONSERVATION 1-2 (Mar. 1986) (noting that environmental damage in debtor
nations has been caused not only by promotion of exports but also by lending
conditions that force debtor nations to enact domestic Spending limits, ultimately resulting in
elimination of environmental protection programs).
53. Asiedu-Akrofi, supra note 19, at 577.
54. Nancy Knupfer, Debt-for-NatureSwaps: Innovation or Intrusion?, 4 N.Y. Irrr'L L.
REV. 86, 86 (1991). Tropical forests are also important to rural populations in
developing countries, as these populations rely on forests for food, fodder, and fuel.
AsieduAkrofi, supra note 19, at 577. Industrialized countries, meanwhile, can use tropical
forests for medicinal and industrial products. Id. Furthermore, the clearing of forests has
been thought to increase the effects of global warming by not only reducing the Earth's
capacity to consume carbon dioxide, the most prominent greenhouse gas, but also by
releasing carbon dioxide into the atmosphere as the trees are burned. McGee &
Zimmerman, supra note 50, at 519.
55. See, e.g., Nina M. Dillon, Comment, The Feasibility of Debt-for-Nature Swaps, 16
N.C.J. INT'L L. & COM. REG. 127, 127 (1991) ("Tragically, the rate of tropical
deforestation in Latin America has paralleled the region's astronomical borrowing patterns.");
Brazilian Environmentalist Urges U.S. to Halt Threats on Amazonian Deforestation, 12 Int'l
Env. Rep. (BNA) 180 (Apr. 12, 1989) (explaining that U.S. Congress was threatening
sanctions against Brazil to force Brazil to stop cutting and burning of Amazon forest);
profitable .for these countries to leave their forests intact and
adopt sustainable development practices than to clear the forests
for timber or cattle grazing. 56
The advent of public sector debt-for-nature swaps 7
indicates that creditor governments also have an interest in
debt-fornature swaps. In the case of the United States, the Initiative5"
makes clear that debt-for-nature swaps are an important
component of a strategy of debt relief for Latin American countries.5 9
Debt relief, along with increased trade and investment between
the United States and Latin America, comprises the U.S.
economic policy of promoting economic growth in Latin American
countries. 60 Stronger Latin American economies, in turn, serve
U.S. interests by expanding the market for U.S. goods, services,
and investment capital.6"
Finally, commercial banks enter into debt-for-nature swaps
because the swaps are a vehicle for the banks to remove
unproductive sovereign debt 62 from their balance sheets while
receiving a modest return on the loans."3 This improvement in
shortterm liquidity allows the bank to enter into new, and presumably
safer, lending arrangements. 6 4 Thus, one commentator
described debt-for-nature swaps as a link between the two problems
of non-performing debt and environmental destruction over the
bridge of sustainable development. 65
C. Brazilian Opposition to Debt-for-NatureSwaps: Questions of
Sovereignty and the Legitimacy of the BrazilianExternal Debt
The Brazilian government intially opposed debt-for-nature
swaps.6 6 In a speech delivered in April 1989, former Brazilian
PresidentJos6 Sarney announced a domestic environmental
protection program, entitled "Nossa Natureza"6 ' ("Our Nature"),
while rejecting debt-for-nature swaps on Brazilian soil.6" This
opto external enforcement. Id. Sovereign debt is backed only by the good faith and
credit of the debtor government. Id.
63. Gibson & Curtis, supranote 1, at 335-36. In addition, the removal of insecure
debts relieves banks of the burden of carrying and restructuring these debts, which
burden hinders the ability of banks to attract new capital. Cole, supra note 23, at 67.
So far, however, commercial banks, especially larger ones, have not been induced
to donate developing countries' debts due to uncertain tax consequences. See Ronny
Jay Halperin, Comment, Revenue Ruling 87-124:
Treasury'sFlawedInterpretationofDebt-forNature Swaps, 43 U. MIAMI L. REv. 721 (1989). The Treasury Department has tried to
encourage banks to donate external debt by allowing banks to claim a deductible
charitable donation equal to the fair market value of the loan donation and a deductible loss
for the difference between the face value and the market value of the loan. Id. at
72728. A lender bank which donates debt to an international NGO would therefore
receive the same net tax savings as if it had sold the debt on secondary market. Id. at 732.
This liberal treatment, however, may compromise future IRS positions in lieu of
taxpayers seeking similar treatment of "losses, bad debts, and charitable contributions outside
the context of debt-for-nature swaps." Id. at 737.
64. John K. Shubin & Daniel J. Gibby, The Promotion of Debt-Equity Swaps in Latin
America: A Survey of the Regulatory Regimes and the InternationalPolicy Framework, 20 U.
MIAMI INTER-AM. L. Rv. 31, 41 (1988).
65. Lachman, supra note 1, at 142. "[D]ebt-for-nature swaps link the twin problems
of non-performing debt and' environmental destruction over the bridge of sustainable
development, by attaching economic health to ecological health." Id.
.66. Brooke, supra note 2, at A5; Robinson, supra note 2, at Al.
67. Julia Michaels, Brazil Amazon Plan Faces Stiff Odds, CHRISTIAN SCI. MONITOR,
Apr. 11, 1989, at 3. "Our Nature" was designed to improve the government's
environmental policing measures, create ecological and economic zones and national parks,
regulate the use of mercury in gold mining, fund ecology training and research, and
establish a National Environmental Fund. Id. The program was criticized as an
unambitious and underfunded response to international criticism of Brazil's
controversial environmental record, including the large-scale burning of the Amazon and the
murder of environmentalist Francisco Mendes. Id.
68. Brooke, supra note 2, at A5; Robinson, supra note 2, at Al. President Sarney
position stemmed from several arguments that together
precluded the prospect of debt-for-nature swaps in Brazil. Many
Brazilians contended that debt-for-nature swaps infringed
Brazilian national sovereignty by limiting Brazil's use of its natural
resources and controlling Brazil's internal affairs. This contention
was strengthened by the debt-for-nature swap's association with
the related debt-for-equity swap," which allowed non-Brazilians
to gain control of assets in the Brazilian economy. Furthermore,
many Brazilians believed that debt-for-nature swaps would
legitimize the controversial Brazilian external commercial debt.
1. The Sovereignty Issue: Control Over Natural Resources and
Critics of debt-for-nature swaps in developing countries7"
have long asserted that debt-for-nature swaps violate the
permanent sovereignty71 of developing countries because they
interfere with developing countries' internal affairs and constitute a
declared a willingness to accept international aid to protect Brazil's environment, but
rejected any aid accompanied by conditions such as debt-for-nature swaps. Brooke,
supra note 2, at A5; Robinson, supranote 2, at Al. The President's language mirrored
that of the Amazon Declaration, issued less than two months earlier, in which the
Amazon countries expressed a willingness to accept international aid only if such aid was
unencumbered by "external impositions." The Amazon Declaration, May 6, 1989, art.
4, U.N. Doc. A/44/275, E/1989/79, Annex (1989), reprinted in 28 I.L.M. 1303, 1304
69. See supra note 39 (describing debt-for-equity swaps).
70. See L.K.JHA, NORTH SouT- DEBATE 22 (1982). Developing countries are those
that are in the early stages of development and that provide low standards of living for
their people. Id. Also known as countries of the "South," developing countries are
characterized by high levels of illiteracy, malnutrition, and child mortality, as well as low
life expectancies. THE INDEPENDENT COMMISSION ON INTERNATIONAL DEVELOPMENT
IsSUES, NORTH-SoUTH: A PROGRAM FOR SURVIVAL 31-32 (1980) [hereinafter PROGRAM FOR
SURVIVAL]. Developing countries account for three-quarters of the world's population
but only one-fifth of the world's income. Id. at 32. There are at least four groups of
developing countries: OPEC nations with large financial surpluses; newly
industrializing countries that are expanding rapidly; middle income countries whose economies
are expanding but still depend on exports of primary products; and low income
countries with per capita income of less than U.S.$350 per year, Robert Cassen et al.,
Overview, in RICH COUNmRY INTERESTS AND TmIRD WORLD DEVELOPMENT 1, 5 (Robert Cassen
et al. eds., 1982). For a discussion of developing countries' concerns over the growing
international environmental movement, see Patrick Low, Afterword: Trade and the
Environment: What Worries the Developing Countries?, 23 ENvrL. L. 705 (1992).
71. J.G. STARKE, INTRODUCTION TO INTERNATIONAL LAw 95 (9th ed. 1984).
"Normally a state is deemed to possess independence and 'sovereignty' over its subjects and
affairs, and within its territorial limits." Id. A state possessing sovereignty has the
authority to control exclusively its own domestic affairs. Id. at 96.
form of external control over developing countries' natural
resources. 71 Specifically, the interference and control allegedly
occur when an international organization is allowed to supervise
the environmental program and use of funds generated by the
debt-for-nature swap. 73 Consequently, debt-for-nature swaps
violate developing countries' sovereign rights to exploit their
natural resources as expressed in United Nations Resolution 523
("Resolution 523")7' and United Nations Resolution 626
("Resolution 626") .7 Resolution 523 recognized that developing
countries have the right to determine by their own accord the use of
their natural resources in order to further their national policies
of economic development. 76 Resolution 626 recommended that
all member states respect the sovereignty that each state
possesses over its natural resources. 77 These resolutions were
followed by others that strengthened the concept of permanent
sovereignty over natural resources.78
co BRASILEIRA PARA A CONSERVACAO DA NATUREZA, DMDA EXTERNA, CONVERSAO E MEIO
AMBIENTE [BRAZILIAN FOUNDATION FOR THE CONSERVATION OF NATURE, EXTERNAL DEBT,
CONVERSION, AND THE ENVIRONMENT] 3 (on file with the Fundao~o Brasileira para a
Conservao~o da Natureza, Rio de Janeiro, Brazil) [hereinafter DIDA EXTERNA] (arguing
that Brazil's sovereignty allows it to use Amazon as it wishes, according to Brazilian
national prerogatives); Jodo Amazonas, Nuvens Negras na Amaz6nia, in DMDA EXTERNA,
supra, at 9 (denouncing debt-for-nature swaps as indiscreet intervention in Brazil's
internal affairs); Marcelo Miranda Soares, Ecologia corn Soberania, in DMDA EXTERNA,
supra, at 5 (equating debt-for-nature swaps with indentured servitude).
73. Alagiri, supra note 3, at 497.
74. G.A. Res. 523, U.N. GAOR, 6th Sess., Supp. No. 20, at 20, U.N. Doc. A/2119
(1952). General Assembly resolutions are not a form of international legislation. MARK
W. JANIS, AN INTRODUCrION TO INTERNATIONAL LAw 50 (2d ed. 1993). Such resolutions,
however, are "not infrequently invoked" as evidence of customary international law. Id.
75. G.A. Res. 626, U.N. GAOR, 7th Sess., Supp. No. 20, at 18, U.N. Doc. A/2361
76. G.A. Res. 523, supranote 74, at 20. The resolution states that developing
countries have "the right to determine freely the use of their natural resources and that they
must utilize such resources in order to be in a better position to further the realization
of their plans of economic development in accordance with their national interests." Id.
77. G.A. Res. 626, supra note 75, at 18. The resolution recommends that all
member states "refrain from acts, direct or indirect, designed to impede the exercise of the
sovereignty of any State over its natural resources." Id.
78. Alagiri, supra note 3, at 498 n.74. Resolution 1803 declared that the right of
each state to permanent sovereignty over its natural wealth and resources must be
exercised in the interests of that state's development and welfare. G.A. Res. 1803, U.N.
GAOR, 17th Sess., Supp. No. 17, at 15, U.N. Doc. A/5217 (1962). Each state therefore
has the right to establish rules and conditions for the exploitation of such resources and
the import of foreign capital for that purpose. Id. Resolution 3202 asserted that the
These arguments form part of a larger perception by
developing countries of an environmental double standard on the
part of developed countries.7" This "hypocrisy" allegedly occurs
when developed nations, having exploited their natural
resources to develop economically, call on developing nations to
preserve their natural resources and thereby forego their own
development. Developing countries contend, therefore, that it
is unfair that they should have to pay for the world's
environmental ills when the principle causes of the degradation of the
world's environment are, arguably, the patterns of
industrialization, consumption, and waste in developed countries.8"
Accordingly, Mohammad Nawaz Sharif, Prime Minister of Pakistan and
Chairman of the Group of 77,82 made clear at the Earth
Sumnew international economic social order should be based upon each state's permanent
sovereignty over its natural resources. G.A, Res. 3202, U.N. GAOR, 6th Spec. Sess.,
Supp. No. 1, at 9, U.N. Doc A/9559 (1974). Furthermore, the Charter of Economic
Rights and Duties of States (Resolution 3281) declared that "[e]very State has and shall
freely exercise full permanent sovereignty, including possession, use and disposal, over
all its wealth, natural resources, and economic activities." G.A. Res. 3281, U.N. GAOR,
29th Sess., Supp. No. 31, at 50, 52, U.N. Doc. A/9631 (1974).
79. SeeJohn Vidal, Good IntentionsDoomed &yGulf Between Rich and Poor,THE
GUARDAN, June 15, 1992, at 6 (discussing "winners" and "losers" of Earth Summit and noting
that "rich nations' calls for sustainable development and ecological restraint were
matched by developing countries' accusations of hypocrisy and attempts to control
their development"); PROGRAM FOR SURVIVAL, supra note 70, at 31-32. Developed
countries, also known as countries of the "North," are those countries that have
industrialized market economies. Id. at 31. This definition includes Australia and New Zealand,
two industrialized countries south of the equator. Id. Developed countries have a
quarter of the world's population but control four-fifths of the world's income. Id. at 32.
80. See Vidal, supranote 79, at 6 (noting that developing countries accused
developed countries of hypocrisy at Earth Summit); North/South Conflict Will
HamperEnvironmental Cooperation,Lawyer Says, 16 Int'l Envtl. Rep. (BNA) No. 4 at 131 (Feb. 24, 1993)
(discussing North-South conflict's hampering of agreements reached at Earth Summit).
81. The Amazon Declaration, supra note 68, art. 8, 28 I.L.M. at 1305; see Soares,
supranote 72, at 5 ("[Os] paises de origem [da idtia de conversdo da divida externa em
projetos ambientais] puderam se desenvolver a base dos pr6prios recursos naturais e
dos oriundos de paises [menos desenvolvidos] como o nosso. No 6 justo, portanto,
pretender que deixemos de utilizar nossas potencialidades naturais: nfo 6justo querer
impedir o nosso progresso.") ["(Those countries proposing debt-for-nature swaps) were
able to develop themselves through the use of their own natural resources and those of
(less developed) countries like ours. It is not fair, therefore, to suppose that we now
decline to utilize our natural potentialities: it is not fair to impede our progress."]
(translation by Note Author).
82. See BAtv E. CARTER & PILLIP R. TiMBLE, INTERNATIONAL LAw 501-02 (1991).
The Group of 77 is a coalition of more than 120 developing countries in Africa, Asia,
and Latin America. Id. at 501. The Group of 77 was created in order to coordinate the
international policies of developing countries, thereby giving developing countries a
greater equality in affairs with developed countries. Id. Although an expression of
mit 3 that developing countries recognize the importance of the
principle of sustainable development,8 4 but do not want
developed nations to use sustainable development as a justification
with which to deprive developing countries of their right to
choose their own growth strategies.8 5
Brazilians in particular have been sensitive to any
international attention on their natural resources, especially the
Amazon rain forest.8 6 As early as the late 1940's, the Brazilian
military" challenged a United Nations Educational, Scientific, and
unity among developing countries, the Group of 77 does not espouse a common
ideology. Id. Rather, it functions as a caucus for the economic and political concerns of
developing countries before various U.N. bodies. Id.
83. See supra note 48 (discussing Earth Summit).
84. See supra note 45 and accompanying text (describing the concept of
85. WEINER ET AL., supra note 44, at 10-8.
86. See Brooke, supra note 2, at A5 (noting that in speech announcing domestic
environmental protection program, President Sarney invoked Brazil's "centuries-old
battle cry 'A Amaz6nia Nossal'" or "The Amazon is Ours!"); supra notes 49-50
(describing geographic features of Amazon); McGee & Zimmerman, supra note 50, at
515 (noting that Amazon contains deposits of manganese, aluminum, copper, tin,
nickel, iron, gold, and natural gas).
87. See E. BRADFORD BURNS, A HISTORY OF BRAZIL 505-38 (2d ed. 1980). In the
twentieth century prior to 1964, Brazilian military officers frequently intervened in
politics by changing the civilian chief executive. Id. at 506. The military viewed itself as the
"poder moderador," or fourth branch of government, whose function it was to oversee
the three other branches. Id. at 549. In 1964, however, the military removed the
civilian president but did not return to its barracks, keeping power to itself instead. Id. at
508. Successive military governments strengthened the powers of the
general-presidents at the expense of the judiciary, legislature, and state and local governments. Id.
at 516. The first military government's objectives were achieving economic stability and
combatting communism. Id. at 509. Later governments stressed economic growth
above all other concerns, including environmental ones. See Giamo, supra note 49, at
541-51 (discussing military governments' Amazonian development plans). In
attempting to achieve rapid economic growth through import-substitution industrialization and
the encouragement of settlement in the Amazon, the military government offered
numerous financial incentives, such as tax breaks and easy credit, designed to attract
capital and settlers from Brazil and abroad. Id. at 541. Initial military governments oversaw
a period of impressive economic growth, which the military lauded as an "economic
miracle." BURNS, supra, at 533. Later, when it became clear that the economic growth
had been short-lived and had benefited relatively few, id. at 534, military rule came
under increasing criticism and the military finally ceded the government to civilian rule
in 1985. See, e.g., Alan Riding, PragmaticBrazil Changes Course, N.Y. TIMES,Jan. 20, 1985,
§ 4, at 1 (describing undramatic transition of power). Even today, however, as the
civilian government fails to control inflation of 2,500% per year and is embroiled in
continuous corruption scandals, the spectre of military rule looms over the civilian
government. James Brooke, A Vast New Scandal is Shaking Brazilians'Faith in Democracy, N.Y.
TIMS, Jan. 4, 1994, at Al. Civilian and military leaders reportedly planned a
militaryCultural Organization ("UNESCO")"8 plan to create an
international institution for the Amazon region, entitled "Hilkia
Amaz6nica," as an international conspiracy to deprive Brazil of
nearly half its national territory.8 9 Other regional governments
supported the proposed institution, but due to the Brazilian
military's opposition, the Brazilian Congress never approved it.90
Thereafter, the government embarked on a series of
development projects in the Amazon for the purposes, among others, of
increasing population in the region and securing Brazil's claims
to its Amazon territory.9" The Brazilian development plans
emphasized highway construction, colonization, large-scale
ranching and agribusiness, lumbering, mining, and hydroelectric
In response to international criticism of the Amazonian
development plans,93 in 1978 Brazil joined Bolivia, Colombia,
Ecuador, Guyana, Peru, Suriname, and Venezuela in signing the
Brasilia Treaty for Amazonian Cooperation (the "Amazon
Treaty") . The Amazon Treaty sought to promote harmonious
style coup in the fall of 1993, but backed down when the plan was rejected by President
Franco. Brazilian Official Tells of '93 Plot, N.Y. TIMES, Jan. 7, 1994, at A8.
88. See ROGER A. COATE, UNILATERALISM, IDEOLOGY, & U.S. FOREIGN POLICY 35-36
(1988). Founded in 1945, UNESCO is a functional agency of the United Nations
mandated to promote worldwide collaboration in education, science, culture, and
communications. Id. at 36. Critics have recently accused UNESCO of becoming increasingly
politicized and departing from its original mandate. See generally CLARE WELLS, THE
UN, UNESCO AND THE POLITICS OF KNOWLEDGE (1987) (discussing politicization of
89. Otto Lara Resende, 0 Controvertido Verde de Nossas Matas, in DIVIDA EXTERNA,
supra note 72, at 13.
91. Giamo, supra note 49, at 542. The Brazilian government felt compelled to
secure this territory in part because the other Amazon countries, in particular Peru and
Venezuela, were also strengthening their shares of the Amazon by occupying their own
92. Id. at 541-53; see McGee & Zimmerman, supra note 50, at 524-28. The
Amazonian development plans "probably helped to integrate the historically remote Amazon
into the Brazilian nation state and led to economic development in the region." Id. at
527. However, the development of the Amazon may have also led to "extensive and
potentially catastrophic deforestation," Id.
93. See supra notes 91-92 and accompanying text (discussing Amazonian
94. Brasilia Treaty for Amazonian Cooperation, July 3, 1978, reprintedin 17 I.L.M.
1045 (1978) [hereinafter Amazon Treaty]; see Military, Other Groups Press Their Claimsfor
Amazon's Future, Lagniappe Letter, Oct. 18, 1991, available in LEXIS, Nexis Library,
NSAMER File (stating that Brazil signed Amazon Treaty in response to international
criticism of Amazonian development plans).
development in the Amazon region in a manner that would raise
the standard of living of the region's peoples and incorporate
the Amazon into the respective national economies of the
parties to the treaty.95 In Article I of the Amazon Treaty the parties
agreed to undertake joint actions to achieve such harmonious
development while preserving the environment and conserving
natural resources.9" This commitment to the environment was
conditioned, however, upon equitable and profitable results for
all parties.97 Furthermore, Article IV echoed the 1952 United
Nations resolutions98 in affirming that the sovereignty of each
country allows it the inherent right to determine the exclusive
use of the natural resources within its territory. 99
The Amazon Treaty had little effect on the environmental
and developmental practices in the Amazon region because the
treaty focused predominantly on national sovereignty and lacked
substantive provisions to implement its objectives.' A decade
later, however, the parties to the Amazon Treaty signed the
Amazon Declaration,' a non-binding statement in which the parties
to the Amazon Treaty called for the promotion of sustainable
development practices in the region.10 2 The parties recognized
the importance of the rational use of the resources in the
Amazon region °3 while reaffirming the sovereign right of each
country to manage freely its natural resources.10 4 In declaring this
freedom to manage natural resources, however, the parties
observed the need for the economic and social development of the
region's people and the adequate conservation of the
environment.0'° In addition, the parties expressed a willingness to
accept cooperation from other countries and international
organizations as long as such cooperation did not include external
impositions and was in accordance with the priorities of the parties'
95. Amazon Treaty, supra note 94, pmbl., 17 I.L.M. at 1045.
96. Id. art. 1, 17 i.L.M. at 1046.
98. See supra notes 74-77 and accompanying text (discussing U.N. resolutions
declaring right of permanent sovereignty over natural resources).
99. Amazon Treaty, supra note 94, art. 4, 17 I.L.M. at 1046-47.
100. Giamo, supra note 49, at 560. Indeed, destruction of the Amazon continued
unabated in the years following the signing of the Amazon Treaty. Id.
101. The Amazon Declaration, supra note 68, 28 I.L.M. at 1303.
102. Id. art. 1, 28 I.L.M. at 1304.
103. Id. art. 2, 28 I.L.M. at 1304.
104. Id. art, 4, 28 I.L.M. at 1304.
BRAZIIJAN DEBT-FOR-NATURE SWAPS
Central Bank has the authority to enter into agreements with
private or public Brazilian organizations, such as the Instituto
Brasileiro do Meio Ambiente e dos Recursos Naturais Renoviveis
(Brazilian Institute for the Environment and Renewable Natural
Resources or "IBAMA"),1s6 to audit the project to ensure that its
funds are properly applied."8 7 The Central Bank also has the
authority to declare guidelines and measures for the execution
of Resolution 1840.1"" One such measure was Circular 1988,189
which established the limit of convertible external debt at
U.S.$100 million."' This limit, along with the above-mentioned
financial elements of Resolution 1840, was designed to mitigate
any inflationary impact that debt-for-nature swaps might have on
projects approved and referred by the Technical Commision, or will revert to the
National Treasury."] (translation by Note Author).
186. See Foundationfor Nature's PresidentAppointed to Head EnvironmentalAgency, 15
Int'l Envtl. Rep. (BNA) No. 7 at 194 (Apr. 8, 1992). IBAMA is Brazil's national
environmental agency. Id. It was created in 1989 and functions as an independent agency with
ties to the executive branch's Secretariat for the Environment. THE NATURE
CONSERVANCY, BRASIL VERDE CONSERVATION CAMPAIGN 7 [hereinafter BRASIL VERDE].
187. Resolution 1840, supra note 147, art. 7, D.O.,July 17, 1991, at 14,153. Article
7 states as follows:
Poderfi o Banco Central do Brasil, em articulagio com a Comissio Thcnica de
Avalia~do de Projetos Ambientais, firmar conv~nios corn instituiC6es pfiblicas e
privadas, em especial corn o Instituto Brasileiro de Meio Ambiente e dos
Recursos Renovfiveis (IBAMA) . . . [c]om a finalidade de fiscalizar e atestar a
aplica~gto dos recursos nos projetos pertinentes. [The Central Bank may, in
consultation with the Technical Commission, enter into agreements with
public or private institutions, in particular with the Brazilian Institute for the
Environment and Renewal Natural Resources (IBAMA), to audit and verify the
application of funds of pertinent projects] (translation by Note Author).
188. Id. art. 9, D.O.,July 17, 1991, at 14,153 ("0 Banco Central do Brasil baixar-A as
normas complemetares e adotara as medidas necessfirias 'a execup5o do disposto nest[a]
Resolugio."). Id. ["The Central Bank will declare the proper guidelines and enact the
necessary measures for the execution of this Resolution."] (translation by Note Author).
189. Banco Central do Brasil, Circular No. 1988 [Central Bank of Brazil, Circular
No. 1988], Difrio Oficial [D.O.],July 18, 1991, at 14,258 [hereinafter Circular 1988]. A
circular is an administrative act by which a government authority transmits internal
orders to subordinate authorities. DI PIETRO, supra note 179, at 177. Circulars are
utilized by superior authorities to guide subordinate authorities in the development of
administrative activities. JosE CRETELLA JONIOR, CURSO DE DIRErrO ADMINISTRATIVO
[CoURSE IN ADMINISTRATIVE LAw] 272 (6th ed. 1981); see supra note 179 (discussing
legality of administrative acts).
190. Circular 1988, art. 1, D.O.,July 18, 1991, at 14,258. The figure is set in dollars
and not local currency because the external commercial loans being converted were to
be repaid in external currency, most likely dollars; see THIRD WORLD DEBT AND NATURAL
RESOURCES CONSERVATION, supra note 52, at 1-2 (discussing environmental impact in
debtor countries of paying loans in external currency).
FORDHAM INTERNATIONAL IAWJOURNAL
the national economy.' '
Central to the procedures established by Resolution 1840
and Circular 1988 is the role of the Comissdto Tcnica de
AvaliaCdo de Projetos Ambientais ("Technical Commission for the
Evaluation of Environmental Projects" or "Technical
Commission"),1 9 2 created by presidential decree shortly prior to the
Central Bank regulations. 193 Resolution 1840 confers upon the
Technical Commission broad powers to evaluate and approve
appropriate debt-for-nature swap projects.19 4 In doing so, the
Technical Commission has the authority to determine which
projects should be given higher priority in light of the maximum
amount of convertible debt established by Circular 1988.195 The
Technical Commission also consults with the Central Bank on
any audits of approved debt-for-nature swap projects.19 6
Circular 1988 reiterates that any party interested in a
debtfor-nature swap must first obtain its project's approval by the
Technical Commission before the Central Bank will take any
action.'9 7 The Technical Commission evaluates debt-for-nature
swaps according to a prescribed set of official eligibility
requirements. First, the project must fall within one of the following
subject areas ("Areas temiticas"): conservation of biological
diversity; urban environment; energy; conservation and
sustainable use of natural resources; environmental education; and
institutional development of environmentally-driven NGOs and
research organizations"'8 Second, the project must be
implemented by a local nonprofit organization.1 99 Third, the
project must have a pre-identified international donor.2 00 Next,
the project must fall within the U.S.$100 million maximum. 0 1
Finally, the proposal must comply with the Technical
Commission's procedural regulations.0 2 In addition to these five
requirements, the Technical Commission's decisions account for
the likelihood of the project's environmental and financial
success, 20 and place significant weight on the qualifications of the
international and Brazilian NGOs.2 °4
To date the Technical Commission has approved only one
debt-for-nature swap project.205 This project is being
implemented by the Brazilian NGO Funda do Pr6-Natureza
("FUNATURA"),2206 in accordance with its agreements with
IBAMA 207 and the American NGO (and donor) The Nature
Conservancy. 20 8 The project funds conservation and
management activities in the Grande Sertdo Veredas National Park in
zilian NGO dedicated to strengthening the role of the private sector in protecting
Brazil's biological diversity and quality of human life. Id.
207. INSTITUTO BRASILEIRO DO MEIO AMBIENTE E DOS RECURSOS NATURAms
RENOVAVEIS, CONVtNIO QUE CELEBRAM 0 INSTITUTO BRASILEIRO DO MEIO AMBIENTE E DOS
REcURsos NATURALS RENOVAVEIS E A FUNDACAO PR6-NATUREZA [BRAZILIAN INSTITUTE FOR
THE ENVIRONMENT AND RENEWABLE NATURAL RESOURCES, ACCORD BETWEEN THE
BRAzILIAN INSTITUTE FOR THE ENVIRONMENT AND RENEWABLE NATURAL RESOURCES AND
FUNDACAO PRO-NATUREZA] (Sept. 5, 1990) [hereinafter CONVtNIO]; see supra note 186
(describing IBAMA); supra note 206 (describing FUNATURA).
208. THE NATURE CONSERVANCY, AGREEMENT OF COOPERATION BETWEEN THE
NATURE CONSERVANCY AND FUNDACAO PRO-NATUREZA (Nov. 5, 1990). The Nature
Conservancy is an American NGO dedicated to the worldwide protection of biological
diversity. BRASIL VERDE, supra note 186, at 19.
the interior state of Minas Gerais.2"9 The project's activities
include efforts to strengthen the park's infrastructure and
surrounding community through educational programs and new
income sources. 21 ° Other debt-for-nature swap proposals were
either rejected by the Technical Commission or voluntarily
withdrawn because the proposed project either did not meet the
established criteria or lacked the appropriate funds to be
financially successful.2 11
B. Expected Changes: A Statutory Framework
A proposal to the Brazilian National Congress by the
administration of President Itamar Franco 2 12 will modify the current
debt-for-nature swap regulations. 21' Entitled "Programa de
Conversdo da Divida Externa Doada para Fins Ambientais, Sociais e
Culturais" ("Program for the Conversion of External Debt
Donated for Environmental, Social, and Cultural Purposes" or
"the Proposal"), the Proposal envisions the modification of the
financial, dimensional, and procedural aspects of the current
debt-for-nature swap regulations. 1 4 Unlike Resolution 1840, the
Proposal was developed subsequent to discussions between
governmental and nongovernmental organizations.2 15
Under the Proposal, the maximum amount of convertible
209. THE NATURE CONSERVANCY, GRANDE SERTAO VEREDAS NATIONAL PARK DEBT
CONVERSION PROPOSAL (Oct. 25, 1991). The approved plan calls for a two-phase swap of
U.S.$2,192,000 of Brazilian debt, which will generate U.S.$131,520 annually under the
financial scheme established by Resolution 1840. Id. at 12; see Brazil: GovernmentAllows
PioneerDebt-for-NatureSwap, supra note 147, at 7 (discussing details of the swap).
211. Interview with Paulo Roberto Frana, supra note 203.
212. See LochinvarGoes West, THE ECONOMIST, Oct. 3, 1992, at 41. Mr. Franco is the
former vice-president who assumed the presidency when the Chamber of Deputies, the
lower house of Brazil's Congress, voted on September 29, 1992 to impeach President
Collor. Id. The impeachment vote was a result of the President Collor's participation
in a high-level bribery ring which extracted millions of dollars from businessmen
soliciting government contracts. Id.
debt would increase to U.S.$200 million.2 16 Furthermore, a local
NGO that deposits donated debt into the Central Bank would
receive federal treasury notes that pay a high percentage of face
value instead of paying solely the interest on the face value.2 1 7
Payments would be made to the NGO according to four
different plans, each based on the expected duration of the proposed
project.2 18 Under a twenty-year project plan, the NGO would
receive 15% of full face value up front and the balance in eighty
trimestral payments. 219 The NGO would also receive annual
interest of 4% on the remaining principal until the principal is
exhausted.2 2 0 A fifteen-year project plan would entitle the NGO
to receive 15% of full face value up front and the balance in sixty
trimestral payments. 22 ' The NGO would also receive annual
interest of 2% on the remaining principal until the principal is
exhausted.222 Under a ten-year project plan, the NGO would
receive 15% of 95% of face value up front and the balance in forty
trimestral payments. 223 Finally, a five-year project plan would
allow the NGO to receive 15% of 80% of face value up front and
the balance in twenty trimestral payments. 224
The proposal presents a shift of authority from the
Technical Commission225 to a more broadly worded Executive
Branch.226 The Technical Commission will continue to exist
under the Proposal, although its wide discretionary powers will
be curtailed. 227 Article Six, the only article in the Proposal to
of several Brazilian NGOs, such as FUNATURA and the National Congress of Bishops.
mention the Technical Commission, states concisely that the
Executive Branch will create a Commission to oversee the
utilization of the funds allocated to the debt-for-nature swap
program.22 8 Article Four states that it is the responsibilty of the
Executive Branch to allocate these funds.2 29 Article Seven,
moreover, grants the Executive Branch, and not the Commission
itself, the authority to establish the rules necessary to implement
the program.23 ° In establishing such rules, the Executive will
observe such factors as the monetary impact of the debt
conversions2 31 and the program's compatibility with the country's
environmental, social, and cultural policies.2 3 2 In addition, the
Executive will have the authority to define which local institutions
may be the beneficiaries of donated debt.23 3 Under the
Proposal, these institutions should be national organizations with
proven experience in the field of the proposed debt-for-nature
The Proposal also widens the scope of debt-for-nature swap
projects. 2 35 In addition to the environmental projects that fall
under the categories currently defined by the Technical
Commission, local NGOs will also be able to submit proposals for
social and cultural projects. 236 Debt-for-nature swaps, therefore,
would constitute only one type of debt swap under an umbrella
program providing funds to projects in areas such as health,
education, urban infrastructure, and the preservation of historical
monuments. 2 3 7
14,153 (granting Technical Commission authority to evaluate and approve
debt-for-nature swap projects as well as to decide which projects should have higher priority);
Circular 1988, supra note 189, art. 3, D.O., July 18, 1991, at 14,258 (stating that any
debt-for-nature swap project must first receive approval of Technical Commission
before Central Bank will take any action).
228. Franco Proposal, supra note 177,. art. 6. The Commission will be chaired by a
representative of the Secretariat of Planning, Budgeting, and Coordination. Id.
229. Id. art. 4.
230. Id. art. 7. "Fica o Poder Executivo autorizado a baixar os atos necessirios [A]
implementa¢fo do Programa... ." Id. ["The Executive Branch is authorized to declare
the acts necessary for the implementation of the Program ... ."] (translation by Note
235. PROPOSAL OUTLINE, supra note 215, art. 3.
237. Interview with Dr. Dagoberto Koehntopp, supra note 5.
III. COMPARATIVE ANALYSIS OF THE CURRENT AND
PROPOSEDPROCEDURES AND POLICY RECOMMENDATIONS
The new legislative proposal by the administration of Itamar
Franco will improve the current debt-for-nature swap regulations
by creating a more streamlined debt-for-nature swap process and
offering more attractive financial terms to participating NGOs.
These improvements will increase the prospect of successful
debt-for-nature swap projects in Brazil. This watershed in
Brazilian policies toward debt-for-nature swaps presents an
oppportune time to reexamine U.S. policies relative to debt-for-nature
swaps. There are several steps that the U.S. government and
U.S. NGOs can take to ensure the success of the new Brazilian
legislation and the protection of the interests of the U.S.
government 23 8 and U.S. NGOs 239 in these transactions. These steps
include a revised description and presentation of debt-for-nature
swaps, 240 the encouragement of the donation of multilateral
development bank ("MDB") debt241 and bilateral credit agency
("BCA") debt, 24 2 and the strenthening of relationships between
Brazilian and U.S. NGOs.24 3
A. ComparativeAnalysis of the Current Regulations and the
The financial and procedural provisions of Resolution 1840
and Circular 1988,244 combined with the regulations of the
Technical Commission,245 have caused debt-for-nature swaps in
Brazil to be financially unattractive and time-consuming for
in238. See supra notes 58-61 and accompanying text (discussing interests of U.S.
government in debt-for-nature swaps).
239. See supra notes 42-50 and accompanying text (discussing interests of U.S.
NGOs in debt-for-nature swaps).
240. See supra notes 15-22 and accompanying text (describing in general
241. See supranote 169 and accompanying text (discussing MDB debt in context of
242. See supra notes 26, 170 and accompanying text (discussing BCAs in context of
243. See supra notes 15-18 and accompanying text (discussing role of international
and local NGOs in debt-for-nature swaps).
244. See supra notes 180-97 and accompanying text
(discussing financial and
procedural elements of Resolution 1840 and Circular 1988)
245. See supra notes 192-211 and accompanying text (discussing current functions
of Technical Commission for the Evaluation of Environmental Projects).
ternational and Brazilian NGOs 4 6 The new legislative proposal,
by contrast, will provide for a streamlined debt-for-nature swap
process that will allow NGOs to receive a higher return on their
investments. 24 7 As a result, there is an increased likelihood of
successful debt-for-nature swap projects in Brazil. Furthermore,
as a federal statute passed by the Brazilian National Congress,
the new regulations will bring relative stability to the Brazilian
debt-for-nature swap process,248 which is currently governed
solely by administrative acts of the Central Bank and other
Executive branch organs of Brazil. 49
1. Resolution 1840: A Hindrance to the Brazilian
Nature Swap Process
The financial limitations and bureaucratic procedures
established by Resolution 1840 have caused it to be characterized
as "not user friendly"25 0 and a hindrance to the debt-for-nature
swap process in Brazil. 25 1 Conceived at a time when the
Brazilian government was negotiating the restructuring of the
Brazilian external debt with a view towards non-payment of that
debt,2512 Resolution 1840 provides for a return of only 6%
annually on any debt conversions. 255 This minimal amount has meant
that a project of even small dimensions would require large sums
of converted debt, thereby severely limiting the number of
international NGOs that can raise such amounts, and placing a great
strain on the resources of those that can.2 54 Even if
tional NGOs can raise such amounts, international NGOs would
be constrained by the U.S.$100 million convertible debt limit
imposed by Circular 1988.25 This limit, which assures that at any
given time all debt-for-nature swap projects in Brazil together
cannot receive more than U.S.$6 million per year, restricts the
number and scope of otherwise viable debt-for-nature swap
Furthermore, the procedural requirements established by
Resolution 1840, Circular 1988, and the Technical Commission's
own regulations 25 7 have created a bureaucratic maze that
frustrates the attempts of Brazilian and international NGOs to
obtain approval of debt-for-nature swap projects.2 5 8 Brazilian
NGOs are particularly critical of the broad powers conferred
upon the Technical Commission.25 9 These powers, they claim,
create a scenario conducive to arbitrariness and corruption.2 6
Finally, the fact that Resolution 1840 and Circular 1988 are
administrative acts by the Brazilian Central Bank,26 1 as opposed
to federal statutes, is reason for consternation among advocates
of debt-for-nature swaps.2 62 As administrative acts, Resolution
1840 and Circular 1988 can be withdrawn if the present
adminispurchase the U.S.$2.2 million it intended to donate to FUNATURA, it has since
encountered problems raising the necessary funds. Id.
255. Circular 1988, supra note 189, art. 1, D.O., July 18, 1991, at 14,258; see supra
notes 189-90 and accompanying text
(discussing Circular 1988 in relation to Resolution
256. Interview with Dr. Anthenor Navarro, supra note 246.
257. See supranotes 180-204 and accompanying text (discussing procedures of
current debt-for-nature swap regulations).
258. BrazilSeeks to FacilitateDebt-for-NatureSwaps, supranote 5. The article quotes a
project coordinator at FUNATURA as complaining that a "bureaucratic maze" allowed
the Central Bank to take two years to approve FUNATURA's debt-for-nature swap with
The Nature Conservancy. Id.
259. See supra notes 192-211 and accompanying text (discussing current functions
of Technical Commission for the Evaluation of Environmental Projects).
260. Interview with Ana Maria Fonseca, Funda~io Brasileira Para a Conserva~do da
Natureza ("FBCN") [Brazilian Foundation for the Conservation of Nature], Rio de
Janeiro, Brazil (July 12, 1993); see Brooke, supra note 87, at Al. The Brazilian
government is currently enmeshed in a fascinating web of corruption scandals. Id. The
scandals range from the bribery ring run by ex-President Collor to a kickback scheme
involving dozens of national congressmen. Id. When investigators questioned one
congressman about his bank deposits of U.S.$51 million relative to his U.S.$84,000 annual
salary, the congressman casually explained that he had won 24,000 lotteries. Id.
261. See supra note 179 (defining resolution and discussing legal effect of
administrative acts); supra note 189 (defining circular).
262. Interview with Debra James, supra note 250.
tration sees fit, or if a new administration opposed to
debt-fornature swaps assumes power. 6 3 The latter scenario is especially
plausible, as the leading candidate for Brazil's 1994 presidential
elections is Luis Inicio Lula da Silva ("Lula").264 Mr. da Silva is
the leader of the Workers' Party, whose official platform is
opposed to the payment of the Brazilian external debt.265 The
prospect that a "Lula" administration will suddenly revoke the
current regulations, leaving the international and Brazilian
NGOs with an unenforceable agreement,2 66 has created a
spectre of instability that causes international NGOs to be wary of
investing their efforts and resources in the Brazilian
debt-for-nature swap process.2 6 7
2. The Proposed Legislation: A Watershed in the Brazilian
Debt-for-Nature Swap Process
The proposed legislation recognizes that Resolution 1840
has not succeeded in attracting international institutions
interested in financing debt-for-nature swaps.2 68 The proposed
legislation will provide international and Brazilian NGOs with
significantly more financially attractive, debt-for-nature swap
transactions. 6 9 Instead of receiving a meager six percent annual
return, in most cases the Brazilian NGO will receive installment
payments eventually equaling the full face value of the converted
debt amount.2 7° The increased leveraging effect 27 1 means that
263. See supranote 179 (defining resolution and discussing legal effect of
administrative acts); supra note 189 (defining circular).
264. Brooke, supra note 14, at A4.
265. See supra notes 14, 162 and accompanying text (discussing Workers' Party's
opposition to debt payments); supra notes 125-32 and accompanying text (discussing
Brazilian opposition to debt-for-nature swaps based on alleged illegitimacy of external
266. See supranote 152 and accompanying text (discussing unenforceability of host
country's obligations in debt-for-nature swaps).
267. Interview with DebraJames, supranote 250. Some feel, however, that once a
"Lula" administration assumes power, it will moderate its nationalist views to reflect the
new realities of international cooperation, and therefore allow debt-for-nature swaps to
proceed. Interview with Paulo Roberto Franca, supra note 203.
268. PROPOSAL OUTLINE, supra note 215, art. 1.
269. See supra notes 216-24 and accompanying text (discussing financial elements
of proposed legislation).
270. See supra notes 219-24 and accompanying text (discussing payment plans of
271. See supra notes 42-45 and accompanying text (discussing debt-for-nature
swaps' leveraging effect on international NGO's investment).
international NGOs will not need to raise as much money as is
currently needed to sustain viable debt-for-nature swap
projects.272 As a result, the Brazilian NGOs that receive
donations for debt-for-nature swaps will experience a substantial
increase in their spending power. The prospect of this increased
spending power, in turn, may cause some of the Brazilian NGOs
that remain opposed to debt-for-nature swaps 273 to moderate
their views once they perceive the swaps as a significant new
source of funding.274
The more attractive financial provisions of the proposed
legislation2 75 will also make debt-for-nature swap transactions
less vulnerable to a secondary market price increase resulting
from the restructuring of the Brazilian commercial external
debt.2 76 Under the new provisions, the secondary market
discount on the external debt does not have to be as steep as is
currently required for the conversion to be financially viable.277
272. See supra notes 15-18 and accompanying text (discussing mechanics of
debtfor-nature swap transaction).
273. See FBCN SEMINARIO, supra note 13, at 12-13. Some Brazilian NGOs remain
opposed to debt-for-nature swaps due to the traditional arguments concerning national
sovereignty. Id. Other Brazilian NGOs, notably those of smaller scale, oppose
debt-fornature swaps because of the inherent disadvantages of small-scale NGOs relative to
large-scale NGOs to attract international donors for debt-for-nature swap projects. Id.
274. Interview with Paulo Roberto Franca, supra note 203.
275. See supra notes 216-24 and accompanying text (discussing financial provisions
of proposed legislation).
276. See supra note 168 and accompanying text (discussing impact of restructuring
on secondary market price of external debt); see also supra note 165 and accompanying
text (discussing completion of Brazil's commercial debt restructuring agreements).
277. See supra notes 216-24 and accompanying text (discussing financial provisions
of proposed legislation, which give international NGOs high percentage of face value of
Furthermore, a restructuring in practice does not guarantee that the debtor
country will abide by its debt obligations. Brazil: Debt - Brazil Gets Serious, Reuter Textline
Euromoney Trade Finance and Banker Int'l, Aug. 26, 1991, available in LEXIS, Nexis
Library, NSAMER File. Brazil, for example, has a reputation of not honoring its debt
agreements, such as the 1988 restructuring agreement, on which Brazil defaulted
within months. Id.; see ENCYCLOPAEDIA BRITANNICA, 1989 BRITANNICA BOOK OF THE YEAR
496 (1989) (stating that 1988 agreement rescheduled U.S.$62.1 billion of commercial
debt over 20 years, and provided for U.S.$5.2 billion in new money from World Bank, a
trade deposit facility, and bonds). This perpetual uncertainty concerning repayment
will guarantee that a certain discount, no matter how small, will always be applied to
shares of the Brazilian external debt on the secondary market. See supra note 15
(explaining that secondary market discount reflects impaired creditworthiness of debtor
country in response to perception that country will not make full payments on its
Therefore, under the terms of the proposed legislation, the
essential leveraging effect of the debt conversion should not be
lost on account of the Brazilian external commercial debt
Furthermore, the fact that the proposed legislation will
create a federal statute should reduce, if not eliminate, the air of
instability surrounding the current Brazilian debt-for-nature
swap process. 278 No longer will an administration be able to
unilaterally revoke existing debt-for-nature swap regulations.2 79 Any
changes in the debt-for-nature swap regulations will also have to
be approved by the National Congress. 28 ° An administration
unfavorable to debt-for-nature swaps, however, may still be able to
affect the debt-for-nature swap program under the Proposal,
given the broad authority granted to the Executive Branch to
allocate the funds for the program 28 1 and to implement
guidelines for the evaluation of proposed projects.2 8 2
Furthermore, the proposed legislation attempts to
streamline the bureaucratic procedures developed by Resolution
1840.283 The proposed legislation provides stricter guidelines
that the Commission must observe when it evaluates
debt-for-nature swap project proposals. 8 4 By limiting the broad
discretionary powers of the Commission, these guidelines should reduce
the risks of arbitrariness and corruption in the evaluation
Finally, the proposed legislation, drafted after consultations
278. Interview with Dr. Dagoberto Koehntopp, supranote 5; see supranotes 261-67
and accompanying text (discussing instability of current regulations).
279. See supra note 179 (discussing legal effect and revocation of administrative
280. See supra note 179 (discussing power of law over administrative acts).
281. See supranote 229 and accompanying text (discussing Executive's authority to
allocate funds for debt-for-nature swaps).
282. See supranotes 230-34 and accompanying text (discussing Executive's
authority to declare guidelines for evaluation of debt-for-nature swap projects).
283. Resolution 1840, supra note 147, arts. 3-9, D.O.,July 17, 1991, at 14,153; Brazil
Seeks to FacilitateDebt-for-Nature Swaps, supra note 5 (noting that one objective of new
legislation is to streamline prior regulations).
284. See supra notes 230-34 and accompanying text (discussing rules to be
established by Executive for evaluating debt-for-nature swap projects).
285. Interview with Dr. Dagoberto Koehntopp, supranote 5; see supranote 260 and
accompanying text (discussing corruption scandals in Brazilian government and NGOs'
fears of corruption in debt-for-nature swap process).
with various sectors of Brazilian society,28 6 provides for the useful
expansion of debt swaps to social and cultural projects2. 7 This
expansion not only removes debt-for-nature swaps from the
public limelight, but also includes in a larger debt swap process
other Brazilian NGOs. These Brazilian NGOs may perceive
themselves as having been unfairly deprived of the institutional
benefits which come from debt swaps and relations with
international NGOs. 288 The inclusion of these groups should help
reduce further the opposition to debt-for-nature swaps as the debt
swap umbrella grows and more people benefit from other debt
B. Policy Recommendationsfor the United States Government
The shift in Brazilian policies towards debt-for-nature swaps
presents some important implications for the policies of the U.S.
government and U.S. NGOs. Even though the trend in Brazil is
clearly towards supporting debt-for-nature swaps, 2 9 there are
still several steps that the United States can take to mitigate the
lingering Brazilian opposition to debt-for-nature swaps and to
assure that future swaps are carried out efficiently and effectively.
In this manner the interests of the U.S. government 29 and U.S.
NGOs 2 11 in these swaps will be adequately protected.
1. Presentation of Debt-for-Nature Swaps: the Shift in Focus
Commentators currently depict debt-for-nature swaps as a
transaction originating with an international NGO that acquires
a developing country's debt titles in order to preserve an area of
land in that country.2 9 2 The point of reference for a
debt-for286. See supra note 215 and accompanying text (discussing consultation process of
287. See supra notes 235-37 and accompanying text (discussing proposed
legislation's increased scope of debt-for-nature swap projects).
288. Interview with Paulo Roberto Frana, supra note 203. The benefits of a
debtfor-nature swap to a local NGO include increased funding and expertise in
conservation activities. Dietz, supra note 149, at 7.
289. See supra notes 133-73 and accompanying text (discussing changes in
Brazilian views of debt-for-nature swaps).
290. See supra notes 58-61 and accompanying text (discussing interests of U.S.
government in debt-for-nature swaps).
291. See supra notes 42-50 and accompanying text (discussing interests of U.S.
NGOs in debt-for-nature swaps).
292. See supra notes 15-22 and accompanying text (describing debt-for-nature
nature swap should switch, however, to the perspective of the
local NGO. A debt-for-nature swap, therefore, is a transaction
through which a local NGO interested in preserving an area of
land seeks an international NGO to help plan a conservation
strategy for the area financed through a debt conversion. In
other words, one should depict a debt-for-nature swap solely as a
financing mechanism for a pre-approved conservation plan
originating in the developing country. In this manner no one
can accuse the international NGO of attempting to control
either the developing country's resources or the conservation
Control of the debt-for-nature swap project's priorities is
important to the Consortium of Brazilian NGOs 939 The
Consortium has made clear that only debt-for-nature swaps whose
priorities are established by the Brazilian government or Brazilian
NGOs are acceptable.2 94 A U.S. NGO, however, may face
undesirable tax consequences if it appears to grant complete control
of a debt-for-nature swap project to a local NGO.2 95 U.S. tax law
allows deductions for the U.S. NGO's contribution to a local
NGO only if the U.S. NGO exercises sufficient discretion and
control over its contribution to ensure that the local NGO
spends it in a manner consistent with the U.S. NGO's functions
This apparent conflict between U.S. tax law and NGO policy
can be overcome by a carefully negotiated agreement between
the Brazilian and U.S. NGOs. Such an agreement can convince
the Technical Commission that the Brazilan NGO established
the priorities of the project while simultaneously satisfying the
U.S. tax law requirement that the U.S. NGO exert sufficient
control over the use of its contributions to the project. A closer look
swaps). For examples of the traditional description, see Lachman, supranote 1, at 143,
and Alagiri, supra note 3, at 494.
293. See supra note 163 and accompanying text (describing Consortium of
294. CONS6RCIO, supranote 4, at 5.
295. See supra note 151 and accompanying text (discussing tax consequences of
ceding control of debt-for-nature swap project to local NGO).
296. Rev. Rul. 66-79, 1966-1 C.B. 48; see supra note 151 and accompanying text
(discussing tax consequences of cedingcontrol of debt-for-nature swap project to local
at Brazil's first debt-for-nature swap 2 9 7 demonstrates how this can
The Agreement of Cooperation Between The Nature
Conservancy 298 and Fundaviio Pr6-Natureza ("FUNATURA") 2 9 9
explicitly states that U.S. tax law ° ° requires The Nature
Conservancy to exercise sufficient control over its contributions to
ensure that the contributions are used to fulfill The Nature
Conservancy's objective of protecting biological diversity. 30 1
This contribution provision agreement appears in the context of
other language in the agreement granting FUNATURA
apparent control over the priorities of the debt-for-nature swap
project, including the responsibility for preparing the
implementation plan for the debt-for-nature swap project.3 0 2 The agreement
gives The Nature Conservancy the task of assisting and
approving FUNATURA's implementation plan. 0 3 The fact that this
agreement, in conjunction with FUNATURA's agreement with
297. See supra notes 205-10 and accompanying text (discussing first Brazilian
298. See supra note 208 and accompanying text (describing The Nature
299. AGREEMENT OF COOPERATION BETWEEN THE NATURE CONSERVANCY AND
FUNDA,Ao PR6-NATUREZA, supra note 208; see supranote 206 and accompanying text
300. Rev. Rul. 66-79, 1966-1 C.B. 48; see supra note 151 and accompanying text
(discussing control requirements of U.S. tax law).
301. AGREEMENT OF COOPERATION BETWEEN THE NATURE CONSERVANCY AND
FUNDACAO PRO-NATUREZA, supra note 208, art. 4(e).
302. Id. art. 3. FUNATURA was given the responsibility of: (a) hiring the project
manager; (b) preparing the Park Project Plan (to be approved by The Nature
Conservancy), including a preserve design, a land acquisition plan, a management plan, and a
fundraising.plan; (c) all fundraising activities for the support of the Park Project Plan;
and (d) the actual implementation of the Park Project Plan. Id.
303. Id. art. 4. The Nature Conservancy's duties are limited to: (a) assisting
FUNATURA in the selection of the project manager; (b) providing a short-term
conservation fellowship for the project manager; (c) providing technical assistance in the
preparation of the Park Project Plan, consisting of hiring an advisor to the project
manager; (d) helping to make travel arrangements in the United States for the project
manager and his staff to seek funding for the project; and (e) acceptingcontributions for the
Park Project Plan subject to the requirements of U.S. tax law. Id. (emphasis added).
Interestingly, The Nature Conservancy exercises control over the contributions it accepts
on behalf of the Park Project Plan, id. (emphasis added), while FUNATURA is charged
with actually procuring the contributions for the project. Id. art. 3. This description of
the project's fundraising duties may seem curious given that the Nature Conservancy
committed itself to raising the U.S.$850,000 it estimated was necessary to purchase the
U.S.$2.2 million in Brazilian external debt needed to finance the project. THE NATURE
CONSERVANCY, GRANDE SERTAO VEREDAS NATIONAL PARK DEBT CONVERSION PROPOSAL,
supra note 209, at 12.
the Brazilian Institute for the Environment and Renewable
Natural Resources ("IBAMA"),30 a makes up the only debt-for-nature
swap project approved by the Technical Commission to date is
instructive. One can conclude that a provision allowing an
international NGO to ensure that its contributions are being used for
the fulfillment of its objectives, if included in a carefully-worded
agreement, does not significantly offend the local control of the
priorities of the debt-for-nature swap project.
2. Multilateral Development Bank Debt: A Potential New
Source for Debt-for-Nature Swaps
The United States should encourage Multilateral
Development Banks (MDBs) ,305 such as the International Bank for
Reconstruction and Development (the "World Bank"),3°6 to donate
or sell at a discount their shares of Brazilian external debt for
debt-for-nature swaps. Brazilians view their MDB debt as more
legitimate than commercial bank debt,3 °7 and would therefore
raise less opposition to a debt-for-nature swap which converted
MDB debt.30 8 The MDB reluctance to donate or sell at a
discount developing countries' debts3 0 9 appears to neglect the fact
that several developing countries owe so much to MDBs that it is
unlikely that they will be able to repay their debts. 310 Rather
than writing off such loans, as is often done,3 1 these banks could
either sell the loans on the secondary market or donate them
with the caveat that the debtor country must repay a percentage
of the loans in local currency towards a conservation or other
304. CONVtNIO, supranote 207; see supra note 186 and accompanying text
305. See supra note 169 and accompanying text (defining MDBs and discussing
their lack of participation in debt-for-nature swaps).
306. SeeJANis, supra note 74, at 291. The World Bank, owned and operated by
more than one hundred countries, promotes economic and social progress in
developing countries by helping these countries raise their productivity and standards of living.
307. See supra notes 169-73 and accompanying text (explaning why Brazilians see
MDB debt as more legimate than commercial debt).
308. CONsORCIO, supra note 4, at 3.
309. See supra note 169 (discussing MDB reluctance to sell or donate developing
country debt due to possible violations of MDB charters and risk of impairing MDB
credit rating on international capital markets).
310. Asiedu-Akrofi, supra note 19, at 583.
socially useful program.112
The United States has advocated a slightly different
approach for the MDBs in the International Development and
Finance Act of 1989. i ' The International Development and
Finance Act requires the Secretary of the Treasury to direct the
U.S. Executive Directors of the MDBs to negotiate for the
creation of a department in each respective bank that will actively
promote, coordinate, and facilitate debt-for-nature swaps. 14
The role of the MDB would be to assist debtor countries to
reduce and restructure their debts by using a portion of a MDB
loan to buy back their private commercial debt at a discount on
the secondary market.3 15 The U.S. directors would also
encourage the MDBs to promote collaboration between debtor
governments and local and international NGOs in the
implementation of debt-for-nature swaps3.1 6 While the U.S. position
concerning MDB participation in debt-for-nature swaps seems to
be a useful compromise between the sale or donation of MDB
debt and the MDB reluctance to do so, it is not a substitute for
direct MDB participation through donations or sales. The U.S.
policy risks failure because it does not address the Brazilian
viewpoint that the Brazilian external commercial debt is
illegitimate. 1 7 Furthermore, the policy may prove impracticable due
to restrictions in commercial loan agreements that prevent
debtor countries from repurchasing their own debt without the
consent of the lending bank.3 18
3. Bilateral Credit Agency Debt: Encouraging Brazilian
Participation in the Enterprise for the Americas Initiative
In addition to MDB debt, Brazilians consider bilateral credit
agency debt,31 9 such as loans incurred under Commodity Credit
Corporation 320 or Export-Import Bank 32 1 programs, more
legitimate than commercial bank debt. 2 2 The United States should
therefore construe liberally the eligibility requirements for the
debt-for-nature swap aspects of the Enterprise for the Americas
Initiative (the "Initiative") 23 so as to allow Brazilian
participation in that part of the Initiative. Current eligibility
requirements for debt reduction under the Initiative require a Latin
American or Caribbean country to meet certain conditions
concerning macroeconomic policies, investment policies, and debt
restructuring agreements, among other requirements. 3 24 Due to
concerns that these strict requirements would effectively
preclude the participation of a number of Latin American
countries, including Brazil,32 5 the U.S. Congress allowed the
President considerable flexibility in applying them if a country is
mak317. See supra note 315 and accompanying text (discussing MDB assistance in
debtor countries' commercial debt buy-backs); supra notes 125-32 and accompanying
text (discussing Brazilian view that Brazilian external commercial debt is illegitimate).
318. See Gibson & Schrenk, supranote 9, at 4 n.9. These provisions are intended
to guard against the possibility of a debtor country causing the secondary market price
of its own debt to decrease by defaulting or threatening to default, and then
repurchasing its debt at discounted prices. Id.
319. See supra note 26 and accompanying text (describing bilateral credit agency
debt in debt-for-nature swap context).
320. See supra note 36 and accompanying text (discussing Commodity Credit
Corporation and its role in Enterprise for Americas Initiative).
321. See supranote 37 and accompanying text (discussing Export-Import Bank and
its role in Enterprise for Americas Initiative).
322. See supra notes 170-73 and accompanying text (explaining reasons for
perceived greater legitimacy of BCA debt).
323. See supra notes 28-41 and accompanying text (discussing Initiative).
324. Enterprise for the Americas Act of 1992, Pub. L. No. 102-549, tit. VI, § 703,
106 Stat. 3664-65 (1992)
(to be codified at 22 U.S.C. § 2430b)
; see supra note 32
(discussing eligibility requirements for debt-for-nature swap provisions of Initiative).
325. Gibson & Schrenk, supra note 9, at 20; see Greener, supra note 150, at 146
(noting that Initiative's conditions may make it impossible for environmentally crucial
developing countries such as Brazil and Peru to participate).
ing significant progress toward meeting the requirements.
Brazil's participation in the Initiative's debt-for-nature
provisions is still unclear. As mentioned above, Brazil has just
completed commercial debt restructuring negotiations, 27 and has
recently carried out some structural reforms designed to
liberalize foreign investment.3 28 The Franco administration is
provisionally receptive to the Initiative,3 2 9 but awaits a clarification of
how strictly the demands for macroeconomic reform and an
open investment regime will be interpreted by the U.S.
administration. 33 0 Furthermore, the Franco administration will have to
convince the Brazilian NGOs that the requirements do not
amount to what other Latin American NGOs have denounced as
"eco-imperialism."3 3 1 A liberal interpretation of the eligibility
requirements by the United States would therefore be the best
manner of encouraging Brazilian participation in the
debt-fornature swap provisions of the Enterprise for the Americas
4. Strengthening Relationships with Brazilian NGOs
U.S. NGOs should continue to build relationships with
Bra326. 22 U.S.C. § 2430b(b). Section 2430b(b) gives the President the authority to
determine, consistent with the Initiative's eligibility requirements, when a country is
eligible for benefits under the Initiative. Id.; see supra note 32 (discussing eligibility
requirements for participation in debt-for-nature swap provisions of Initiative).
327. See supra note 165 and accompanying text (discussing Brazilian commercial
328. Carrie B. Clark, The Enterprisefor the Americas Initiative: Supporting a "Silent
Revolution" in Latin America, Bus. Am., Sept. 23, 1991, at 6. Brazil is currently reducing
tariffs and other import barriers, beginning a privatization program, and developing a
New Industrial Property Code designed to strengthen the protection of intellectual
property rights and pharmaceutical patents. Id. Furthermore, Brazil is dismantling
import barriers by abolishing its list of banned imports and lowering average import
tariffs. James Brooke, Brazil Opens Its Borders to Goods from Abroad, N.Y. TIMES, Aug. 16,
1993, at DI.
329. Interview with Paulo Roberto Frana, supra note 203; see supra note 216 and
accompanying text (noting that proposed Brazilian debt-for-nature swap legislation
includes specific provision for donation of bilateral debt).
330. Interview with Paulo Roberto Fran a, supra note 203.
331. Gibson & Schrenk, supra note 9, at 30 (citing INSTITuTO DE ECOLOGIA
POLITICA, CONSECUENCIAS POLITICAS Y AMBIENTALES DE LA "INICIATIVA DE LAS AMERICAS" PARA
EL MOVIMIENTO ECOLOcICO LATINOAMERICANO [INSTITUTE FOR POLITICAL ECOLOGY,
ENVIRONMENTAL AND POLITICAL CONSEQUENCES OF THE 'INITIATIVE FOR THE AMERICAS' ON THE
LATIN AMERICAN ENVIRONMENTAL MOVEMENT] (1990) and Manifesto from the
Conference of Latin American NGOs meeting at Las Lefias, Argentina (Apr. 19, 1991) (both
on file with The George WashingtonJournalof InternationalLaw and Economics)).
zilian NGOs, including those NGOs that currently oppose
debtfor-nature swaps. Relationships among NGOs strengthen the
debt-for-nature swap process because the relationship between
the international NGO and the local NGO is perhaps the most
important link in a debt-for-nature swap. 32 Such a relationship
can assure a doubtful local NGO that the international NGO is
not interested in controlling local territory or imposing its
priorities upon the local NGO. This understanding, along with the
scientific expertise and potential increase in funds that the local
NGO may receive from a debt-for-nature swap,3 3 may convince
the local NGO to change its opposition to debt-for-nature
swaps.3 3 4
Furthermore, the increased expertise and funding arising
out of a relationship with an international NGO allows a local
NGO to exert more influence in the environmental and
development policies of its country3. 3 5 A strong local NGO can
therefore play a key role in confronting issues of sovereignty33 6 and in
educating the local public about sustainable development
programs3. 3 7 In addition, the strengthening of the local NGO is
imperative to the international NGO's interests because the local
NGO plays an essential role in the enforcement of a local
government's obligations under a debt-for-nature swap
agreement.3 3 Local NGOs are in better positions than international
NGOs to act as "watchdogs" to verify that the local government
properly converts the donated debt according to the purposes of
the debt-for-nature swap.339 The proximity of local NGOs, along
with their knowledge of local priorities and their stakes in the
ultimate outcome of the debt-for-nature swap, makes local NGOs
332. Greener, supra note 150, at 152; see Edith Brown Weiss,
InternationalEnvironmental Law: ContemporaryIssues and the Emergence ofa New World Order,81 GEO. L. J. 675,
693-94 (1993) (discussing increasing importance of NGOs in "negotiation, ratification,
implementation, and enforcement of international environmental agreements").
333. See supra note 274 and accompanying text (discussing financial rewards of
debt-for-nature swaps to local NGO).
334. Interview with Paulo Roberto Franca, supra note 203.
335. Dietz, supra note 149, at 7. "NGOs try to influence national governments
directly and indirectly by increasing public awareness and public pressures on national
legislatures." Weiss, supra note 332, at 694.
336. Gibson & Curtis, supra note 1, at 344.
338. See supra note 152 and accompanying text (discussing unenforceability of
339. Greener, supra note 150, at 153.
the focal point of political and legal action against the local
government.3 40 Indeed, the relationship between the two NGOs
involved in Brazil's first debt-for-nature swap 341 demonstrates the
local NGO's dominant enforcement role. For example, the
agreement between The Nature Conservancy 342 and
FUNATURA34 3 does not include any enforcement provisions,344
but the complementary agreement 45 between FUNATURA and
IBAMA,146 a government agency, does include a choice-of-forum
provision.347 Although legally such a provision may give a local
NGO the requisite standing to enforce the agreement in court,
in practice the local NGO may lack the financial resources and
experience necessary to do so. 3 48 It is therefore in the
international NGO's best interests that the local NGO have sufficient
political clout to be capable of influencing government
decisionmaking and, if influence is not effective, sufficient financial
resources to bring a successful action against the government.3 49 A
strong relationship between the local and international NGOs is
an effective way to ensure that the former will possess such
influence and resources.
The evolution of Brazilian perceptions of national
sovereignty to include notions of international responsibility for
domestic activities has attenuated the domestic opposition to
debtfor-nature swaps. These vicissitudes in Brazilian attitudes will
341. See supra notes 205-10 and accompanying text (discussing first Brazilian
342. See supra note 208 and accompanying text (describing The Nature
343. See supra note 206 and accompanying text (describing Funda~do
344. AGREEMENT OF COOPERATION BETWEEN THE NATURE CONSERVANCY AND
FUNDAcAo PRO-NATuREZA, supra note 208.
345. CONVtNIO, supranote 207.
346. See supra note 186 and accompanying text (describing IBAMA).
347. CONVPNIO, supra note 207, cl.9. The agreement selects the Federal District as
the forum for the determination of any doubts or questions which cannot be resolved
by the direct understanding of the parties. Id.
348. Gibson & Curtis, supra note 1, at 342.
349. See Greener, supra note 150, at 163 n.292 ("Although international [NGOs]
may have no legal recourse if the agreement is not adhered to, they remain legally
responsible to their donors and tax authorities for assuring that the agreement is not
come codified should the Brazilian Congress adopt the Franco
administration's proposed debt-for-nature swap reforms. These
reforms will turn what is now a restrictive debt-for-nature swap
process into a promising framework providing for an increased
number of financially and environmentally viable
debt-for-nature swaps on Brazilian soil. The swaps and the relationships
established through them will strengthen the already growing
Brazilian environmental movement and promote sustainable
development practices in a country where these practices were not
observed in past development plans. Furthermore, the changing
attitudes in Brazil present a propitious occasion for the U.S.
government and NGOs to modify U.S. policies toward
debt-for-nature swaps. By changing the focal point in the description of
debt-for-nature swaps, encouraging multilateral development
banks and bilateral credit agencies to enter the debt-for-nature
swap forum, and continuing to build relationships with Brazilian
NGOs, the United States will have taken important steps to
ensure the success of the proposed reforms and the protection of
U.S. interests in Brazilian debt-for-nature swaps.
23. Daniel H. Cole , Debt-Equity Conversions , Debt-for-NatureSwaps, and the Continuing World Debt Crisis, 30 COLUM. J. TRANSNAT'L L . 57 , 80 ( 1992 ).
27. Gibson & Schrenk, supra note 9, at 16-18.
28. Enterprise for the Americas Act of 1992, Pub . L. No. 102 - 549 , tit. VI, § 602 , 106 Stat. 3664 ( 1992 ) (to be codified at 22 U .S.C. §§ 2430 - 2430h and 22 U.S.C. § 2077 ) ; see Enterprisefor the Americas Initiative: HearingBefore the Subcommittees on Human Rights and InternationalOrganizations,Western HemisphereAffairs, and InternationalEconomic Policy and Tradeof the House Foreign Affairs Committee, 101st Cong ., 2d Sess . ( 1990 ) (giving overview of Initiative); Walt Schaffer, Enterprisefor the Americas Initiative Offers New Trade, Investment Opportunities,Bus . Am., Mar . 23 , 1992 , at 2 (discussing economic benefits of Initiative); Gibson & Schrenk, supra note 9 (discussing new generation of debt-for-nature swaps brought about by Initiative) .
29. Schaffer , supra note 28, at 2.
30. Gibson & Schrenk, supra note 9, at 16. Concessional debt is debt that carries interest rates that are lower than market rates and that may also include other terms favorable to the borrower . Id. n.81.
31. 22 U.S.C. § 2430c. The Initiative authorized the reduction of loans under the Foreign Assistance Act of 1961, Pub . L. No. 87 - 195 , 75 Stat. 424 ( 1954 ) (codified as amended in scattered sections of 22 U .S.C., 7 U.S.C., and 42 U.S.C.), and as food assistance credits under the Agricultural Trade Development and Assistance Act of 1954, Pub . L. No. 83 - 480 , 68 Stat. 454 ( 1954 ) (codified as amended in scattered sections of 7 U.S.C.) (commonly known as " P.L. 480 "). 22 U.S.C. § 2430c.
32. 22 U.S.C. § 2430b. Section 2430b states in pertinent part as follows: Brooke, supra note 2, at A5 (noting that Brazil announced domestic environmental protection program in response to worldwide criticism of Amazonian development ).
The current external debt owed by Brazil is estimated at U.S.$123 billion . MacLeod, supra note 4, at 8.
56. Rain Forest Worth More if Uncut, Study Says, N.Y. TIMES , July 4 , 1989 , § 1 at 18; Emily T. Smith , Growth vs. Environment, Bus. WEEK, May 11 , 1992 , at 66.
57. See supra notes 23-27 and accompanying text (describing public sector debt-fornature swaps).
58. See supra notes 2841 and accompanying text (describing Initiative) .
59. Gibson & Schrenk, supra note 9, at 16.
60. Shaffer , supra note 28, at 2. Although the Enterprise for the Americas Initiative was a product of the Bush administration, the Clinton administration has announced that it will also promote the Initiative . Peter Hakim, Opportunityfor the Amercas , CHRISTIAN Sci. MONITOR , May 27 , 1993 , at 18. The United States has also promoted increased trade and investment with Latin America through the North American Free Trade Agreement ("NAFTA"), ratfled by Congress in November 1993 . Helen Dewar, NAFFA Wins FinalCongressionalTest, WASH . POsT, Nov. 21 , 1993 , at Al. NAFTA created a free trade zone throughout North America . Id. Although Mexico is the only Latin American country included in NAFTA, both the Bush and Clinton administrations have expressed a willingness to allow Chile and Argentina to join the free trade zone in the near future . Don Podesta , South AmericansBank on NAFTA; TradePact'sPassageViewed as Crucialfor U.S. Ties in Region, WASH . PosT, Nov. 13 , 1993 , at A20. For a more comprehensive overview of the U.S. national interest in NAFTA, see NAFTA and the National Interest , N.Y. TIMES , Nov. 17 , 1993 , at A26, and Henry Kissinger, NAFTA: Clinton'sDefining Task, WASH. PosT, July 20 , 1993 , at A17.
61. Hakim , supra note 60, at 18.
62. See GILLIS ET A.., supra note 26 , at 398. Sovereign debt is debt that is contracted by a sovereign government as an obligation of an entire country . Id . Unlike ordinary debt between private parties, sovereign debt is above the law and is not subject 72 . Alagiri, supra note 3, at 496- 503 . Brazilian critics also assailed debt-for-nature swaps on these grounds . See, e.g., Wilson Matheus, Amaz6nia x DividaExterna , in FUNDA-
191. Brazil : Government Allows PioneerDebt-for- Nature Swap , supra note 147 , at 7.
192. Resolution 1840 , supra note 147, arts. 5-7, D.O. , July 17 , 1991 , at 14 , 153 . An interministerial group, the Technical Commission is chaired by a representative of the Department of International Affairs of the Ministry of Finance and includes representatives of the Ministry of Foreign Relations, the Secretariat of the Environment, and the Central Bank . Decreto de 29 de abril de 1992 [Presidential Decree of April 29 , 1992 ], art. 1, § 1, Diirio Oficial [D.O.], Apr. 30 , 1992 , at 5427.
193. Decreto de 28 dejunho de 1991 [Presidential Decree ofJune 28 , 1991 ], Digrio Oficial [D.O.], July 1 , 1991 , at 12 , 671 . The Technical Commission was reorganized pursuant to Decreto de 29 de abril de 1992 [Presidential Decree of April 29 , 19921, supra note 192, D.O. , Apr . 30 , 1992 , at 5427. Presidential decrees are administrative acts by which the President carries out his or her responsibilities pursuant to law . Di PIETRO, supra note 179 , at 175; see id. (discussing legal effects of administrative acts).
194. Resolution 1840 , supra note 147, art. 6, D.O. , July 17 , 1991 , at 14 , 153 .
195. Circular 1988 , supranote 189, art. 1, D.O. , July 18 , 1991 , at 14 ,258; Resolution 1840, supranote 147, art. 6, D.O. , July 17 , 1991 , at 14 ,153; see supranote 190 and accompanying text (discussing U.S.$100 million limit imposed by Circular 1988 ).
196. Resolution 1840 , supranote 147, art. 7, D.O. , July 17 , 1991 , at 14 ,153; see supra note 187 and accompanying text (discussing Central Bank's authority to audit debt-fornature swap projects).
197. Circular 1988 , supra note 189, arts. 3-5, D.O. , July 18 , 1991 , at 14 , 258 .
198. Comissio T6cnica de Avaliagfo de Projetos Ambientais , Edital No. 01 /91 [ Technical Commission for the Evaluation of Environmental Projects , Edict No. 01 /91], Di5rio Oficial [D.O.], Dec. 18 , 1991 , at 29 , 472 .
199. Id .
200. Id .
201. Id .
202. Id .
203. Interview with Paulo Roberto Frana, Primeiro Secrettrio, Minist6rio de RelaC6es Exteriores [First Secretary, Ministry of Foreign Relations, Environmental Division (Brazilian Government)] , in Brasilia, Brazil (July 29 , 1993 ).
204. Id .
205. Comissao T ~cnica de Avaliagiio de Projetos Ambientais, Resoluqiio No. 01 de 11 de maio de 1992 [ Technical Commission for the Evaluation of Environmental Projects , Resolution No. I of May 11 , 1992 ], Didrio Oficial [D.O.], May 15, 1992 , at 6083.
206. BRASIL VERDE , supranote 186 , at 13. Founded in 1986 , FUNATURA is a Bra-
213. Franco Proposal, supra note 177; see supra notes 179-204 and accompanying text (discussing current debt-for-nature swap regulations).
214. Franco Proposal, supra note 177.
215. SECRETARIA DE PLANEJAMENTO , ORCAMENTO E COORDENACAO , PROGRAMA DE CONvERSAO DA DIVIDA EXTERNA DOADA PARA FINS AMBIENTAIS , SOCIAIS E CULTURAIS [SECRETARIAT OF PLANNING, BUDGETING, AND COORDINATION, PROGRAM FOR THE CONVERSION OF EXTERNAL DEBT DONATED FOR ENVIRONMENTAL, SOCIAL, AND CULTURAL PURPOSES (OUTLINE)] , art. 4 (July 1993 ) [hereinafter PROPOSAL OUTLINE] . Included in the discussions were several congressmen and the executive secretaries of the ministries of the Environment, Social Well-Being, and Culture . Id. Also included were representatives
246. Interview with Dr . Anthenor Navarro , Director Executivo, Fundalfdo Brasileira para a Conserva kio da Natureza ("FBCN") [Executive Director, Brazilian Foundation for the Conservation of Nature] , Rio de Janeiro, Brazil (July 6 , 1993 ). FBCN, founded in 1958, is one of the oldest environmental NGOs in Latin America . BRASIL VERDE, supra note 186 , at 15. FBCN is dedicated to the preservation of natural resources in a manner that promotes sustainable development . Id.
247. See supra notes 216-24 and accompanying text (discussing financial elements of Franco Proposal) .
248. Interview with Dr . Dagoberto Koehntopp, supra note 5.
249. See supra notes 179-204 and accompanying text (discussing current debt-fornature swap regulations).
250. Telephone Interview with DebraJames, Associate , Shearman &Sterling, New York, New York (June 2, 1993 ).
251. Interview with Dr . Anthenor Navarro, supra note 246.
252. Lemos & Pimentel, supra note 4, at 3.
253. See supranote 183 and accompanying text (discussing amount payable to local NGOs per Resolution 1840 ).
254. See FirstDebt ForNatureSwapfor BrazilLacks StartupFunds , supranote 168. For example, while The Nature Conservancy originally planned to raise U .S.$ 850 ,000 to