The Role of Foreign Debt in Deforestation in Latin America

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Abstract
Much current controversy exists about the role that foreign debt plays in deforestation in Latin America. In an attempt to familiarize concerned biologists with this issue, we present an overview of the proposed positive and negative effects that foreign debt has had on neotropical forest loss. From the literature, we identify three main hypotheses as to how the large external debts of developing Latin American countries may contribute to deforestation. We find that (1) countries have not increased exports of tropical timber and beef in response to rising debt; (2) external debts have contributed to economic stagnation and an associated increase in poverty in Latin America, which in turn has caused the degradation of marginal lands, but the role of debt in this process cannot be isolated from other important contributing factors; and (3) while debt payments have probably led to governmental budget cutbacks in environmental spending, historically spending in these areas has not been high. On the positive side, we found that (1) innovative debt‐for‐nature swaps have traded devalued debt for a commitment and funds to create and protect nature reserves; and (2) debt could be exchanged for forestry and agricultural sectoral reform, which would have very large positive effects on the conservation and management of forests.

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