Galapagos Deal: An Ignominious Legacy

8 Pages Posted: 7 Jun 2023 Last revised: 15 Jul 2023

Date Written: May 19, 2023


The recent debt swap carried out by Ecuador with the objective of financing marine conservation projects in the Galapagos Islands is analyzed through institutional lenses. The debt swap is presented as an "innovative solution" to strengthen public finances and promote sustainable development. However, there are several concerns about the design and structure of the swap, as well as a lack of transparency and a lack of integrity in the process.

The debt swap involves the repurchase of Ecuador's sovereign bonds at a significant discount and the issuance of a new bond linked to Galapagos marine conservation. The deal is structured through a for-profit special purpose vehicle established in Ireland. The swap has been backed by private financial and investment institutions and covered with guarantees from the Inter-American Development Bank and US-DFC.

Financial benefits generated by the exchange are not reflected in favorable conditions for Ecuador, since the loan granted has an interest rate significantly higher than the interest rate of the bond issued. Fiscal savings are re-directed to a non-profit established in Delaware-US. Total budget mobilized for conservation under the deal results in about $11 million dollar in annual deficit relative to planned budget needs and does not show indication of long term replenishment. This raises questions and doubts about the equitable distribution of benefits and costs between the parties involved that may transfer private cost of the deal to Ecuadorian taxpayers.

There is evidence of a lack of transparency in the administrative cost structure of the endowment fund established to finance conservation activities. In addition, the participation of private actors in the fund's board is evident, generating perceived conflict of interest.

Alternative institutional arrangements are explored, showing relative advantage on expected performance. A prototype UN-backed deal and a sovereign driven swap based on previously used financial architectures demonstrate higher performance on legal, governance, integrity and economic dimensions.

In general, great concern is generated by the lack of integrity and transparency in the debt swap process and highlights the imminent need to address these problems to guarantee sustainable and fair financial solutions for Ecuador, avoid reputational risk for investors in blue debt-swaps and other developing countries facing debt distress considering similar debt restructuring processes as means to finance conservation and climate transition.


Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate.
The views expressed in this Working Paper are those of the author(s) and do not necessarily
represent the views of the institution of affiliation, its Board, or management.


Daniel Ortega-Pacheco, served as Minister of Environment of Ecuador and is a former member of the Advisory Council of the Green Bond Principles.

Iolanda Fresnillo, Gerente de Políticas e Incidencia – EURODAD

Patricia Miranda, Directora de Incidencia Global y Directora del Área de Nueva Arquitectura Financiera – LATINDADD

Rodolfo Bejarano, Analista de Financiamiento para el Desarrollo – LATINDADD

Carola Mejía – Analista de financiamiento climático – LATINDADD

Keywords: Debt-Swap; Integrity; Accountability; Ecuador; ESG; Sovereign Debt Restructuring; Green Bonds; Sustainability-Linked Bonds

JEL Classification: F34

Suggested Citation

Ortega-Pacheco, Daniel, Galapagos Deal: An Ignominious Legacy (May 19, 2023). Available at SSRN: or

Daniel Ortega-Pacheco (Contact Author)

ESPAE ( email )

Malecon 100

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics