Financing Forest Conservation: An Overview of the Tropical Forest Conservation Act

Best known for enabling "debt-for-nature" swaps, the Tropical Forest Conservation Act (TFCA) of 1998 offers eligible developing countries options to relieve certain official debt owed the U.S. Government while at the same time generating funds in local currency to support tropical forest conservation activities. In addition to conserving forests and relieving debt, TFCA is intended to strengthen civil society by creating local foundations to support small grants to NGOs and local communities. The program also offers a unique opportunity for public-private partnerships and the majority of TFCA agreements to date have included funds raised by U.S.-based NGOs.

TFCA is implemented through bilateral agreements with eligible countries. As of July 2013, approximately $223 million in congressionally appropriated funds have been used to conclude 19 TFCA debt treatment agreements with 14 countries. These deals will generate over $326 million for tropical forest conservation in these countries over the life of the agreements from their rescheduled debt payments alone.

TFCA agreements offer many benefits to participating countries, including:

  • Forest Conservation and Redirection of Debt: Resources that once went to the U.S. Government for debt payments remain in the host-country economy and are re-directed to local organizations that undertake forest conservation activities.
  • Leverage Opportunities: Participation of third parties under the debt-swap option increases the amount of funds available to treat debt and/or support the trust fund.
  • Stronger Civil Society: Grants to community and other non-governmental groups build grass-roots capacity to complement government sponsored activities.

TFCA is modeled after the successful Enterprise for the Americas Initiative (EIA) established by former President Bush in 1991 to enable Latin American and Caribbean countries that moved to open investment regimes to redirect a portion of their debt payments from the U.S. Government into a local fund to support the environment and child survival and development.. The EAI program is inactive in terms of negotiation of new agreements. The last such EAI agreement was signed with the government of Peru in 1997. Of the original eight EAI agreements, four have expired: Chile (2005), Uruguay (2007), Bolivia (2013) and Argentina (2013).  The four remaining EAI Funds are functioning well and have additional accounts capitalized through the TFCA program: Colombia, El Salvador, Jamaica and Peru.

USAID works with the Departments of Treasury and State to advance the objectives of EAI and TFCA, and USAID hosts a Secretariat to support the implementation and oversight of agreements and management of local funds established under them.

Because the TFCA is based upon the EAI, the laws creating them read very much alike. In fact, the TFCA requires countries to meet the same political and economic eligibility criteria as the EAI. Because of the similarities in their overall objectives, the benefits of the two programs are similar in terms of cash flow relief, financial leverage, debt reduction, strengthening civil society and the creation of grant making foundations. Only the TFCA has received appropriated federal funding in recent years, but with a trend towards significant reductions.

For more information on countries with debt-for-nature agreements, TFCA eligibility, administration, and enabling legislation, follow the embedded and menu links.

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Last updated: February 28, 2014

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