Belize hopes to show the world that focusing development efforts on the sustainable use of marine resources is among the best ways to mitigate climate change while fostering economic growth.

Though the smallest country by population and land mass in the continental Americas, Belize nevertheless aims to become a ‘blue economy’ pioneer. It has launched its effort by giving blue-economy issues ministerial status and floating so-called blue bonds that have reduced its debt burden while requiring stepped-up spending on marine conservation and remediation. Government officials say international interest in the effort is keen, and they expect the marine-protection planning, projects and policies it enables will spur activity such as tourism, Belize’s principal revenue source.

“We have attracted the attention of stakeholders globally who are not only interested in blue economy policies but in blue bonds,” says Kennedy Carrillo, CEO of the Ministry of Blue Economy and Civil Aviation. “Everyone wants to know how we pulled it off.”

Belizean Prime Minister John Briceño’s government created the new ministry with a dedicated blue economy focus area in Nov. 2020, shortly after taking office. The only other country in the region to do so has been Barbados. The country created a Ministry of Maritime Affairs and the Blue Economy in 2018, but then merged the latter focus area into what is currently the Ministry of Environment, National Beautification and the Blue and Green Economy.

Carrillo notes that the idea of a blue economy is not new to Belize, which has sought to foster green-friendly development through marine-habitat conservation. But she says the ministry “harnesses all blue economy components under one framework.” That, she says, will allow Belize to take a big-picture approach, one that could—for instance—include curbing the use of agricultural chemicals that can wash into the sea and harm reefs.

The government is drafting a Belize Blue Economy Development Policy, Strategy, and Implementation Plan, which it hopes to have in place by the end of the year. The plan will serve as a five-year roadmap for 2023-27 “to guarantee sustainable development and use of our marine and ocean resources as part of our climate change mitigation,” Carrillo says.

Officials say that over 60% of the country’s economic activity is linked to the blue economy. They are studying numerous ways to support that economy while mitigating climate change—for instance, by expanding protection of habitat ranging from reefs to mangroves; reducing the share of electric power Belize generates from oil; and making agriculture compatible with environmental conservation.

Underwater attraction

Tourists visit Belize largely to enjoy coastal resources that include the 180-mile (290-kilometer) Belize Barrier Reef, the second-largest such reef in the world after Australia’s Great Barrier Reef. The reef is the site of seven marine protected areas collectively known as the Belize Barrier Reef Reserve System, which was inscribed as a World Heritage Site in 1996 by the United Nations Educational, Scientific and Cultural Organization (Unesco).

Government plans to make protection of such resources an economic asset are linked to a so-called blue-debt restructuring that Belize concluded last November in coordination with The Nature Conservancy (TNC). In that deal, Belize issued ‘blue bonds’ to buy back a US$553 million superbond at a rate of 55 cents on the dollar. The superbond, the result of a previous amalgamation of bonds into a single vehicle, was equivalent to nearly a third of the country’s gross domestic product (GDP).

The refinancing effectively reduced the size of Belize’s external debt by 10%, according to the International Monetary Fund (IMF). As with other debt-for-nature swaps, the debt reduction comes with expectations that savings will be used to boost spending on environmental protection. But organizers say Belize’s swap breaks ground by spelling out unusually specific environmental commitments, as well as penalties for failing to achieve them. Project organizers say the approach could be a model, with TNC calling the restructuring “audacious,” while Carrillo termed it “novel” and the IMF labeled it “pathbreaking.”

“The government was very keen on solving the debt problem and liked a conservationist angle,” says Kevin Bender, TNC’s sustainable debt director, who helped structure the blue bond deal. “It was a great opportunity for both conservation and debt sustainability.”

The process involved the government, TNC, Swiss banking giant Credit Suisse and the U.S. International Development Finance Corporation (DFC). TNC borrowed the money and on-lent it to Belize to pay off existing obligations. Credit Suisse did the market footwork, and the DFC provided political-risk insurance.

Protected-area expansion

The deal requires Belize to expand the share of its ocean waters under protection from 16% to 30% by 2026 and to make regular investments in marine-protection efforts—US$4.2 million annually over 20 years, Carrillo says—using a special public-private agency created for the purpose. That agency, Belize Fund for a Sustainable Future, is headed by the Ministry of Blue Economy and Civil Aviation, with Carrillo as the first chairperson. A separate endowment fund, started with $23.5 million in capital, will provide conservation support after 2041. It is forecast to grow to $90 million by then.

“These initiatives will also support the authorities’ efforts to strengthen resilience to natural disasters and climate change and reduce greenhouse gas emissions,” the IMF said in a report it issued in May.

If Belize fails to make one of the agreed annual environmental investments, its obligations will increase by $1 million—and higher, if successive investments are missed. Penalties also would apply if Belize doesn’t expand protected areas as promised. Bender says penalty funds would go into an escrow account, to be released when targets are reached. “The agreement put teeth behind the conservation commitment,” he says. “There are penalties, but we want them to be more carrot than stick.”

The Belizean government says environmental programs will receive 40% of the $4.2 million in annual commitments established under the debt plan. Another 40% will go to private organizations and public agencies to fund conservation and climate-change-mitigation projects, officials say, with the remaining 20% earmarked for fund management.