SPEAKERS CONTENTS INSERTS
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48–783 CC
1998
H.R. 2870, THE TROPICAL FOREST PROTECTION ACT
HEARING
BEFORE THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
MARCH 4, 1998
Printed for the use of the Committee on International Relations
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
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DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
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GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
BRAD SHERMAN, California
ROBERT WEXLER, Florida
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
MARK KIRK, Counsel
KIMBERLY ROBERTS, Staff Associate
C O N T E N T S
WITNESSES
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The Honorable Rob Portman, a Representative in Congress from Ohio
Mr. Thomas Fox, Assistant Administrator, Policy and Planning Bureau, Agency for International Development
Ms. Mary Chaves, Director, International Debt Policy, U.S. Department of the Treasury
Mr. Ian Bowles, Vice-President of Conservation Policy, Conservation International
Ms. Tia Nelson, Senior Policy Advisor for Latin America and Caribbean Division, The Nature Conservancy
Mr. James Resor, Director of Conservation Finance, World Wildlife Fund
APPENDIX
Prepared statements:
The Honorable Benjamin A. Gilman, a Representative in Congress from New York and Chairman, Committee on International Relations
The Honorable Lee Hamilton, a Representative in Congress from Indiana
The Honorable Rob Portman, a Representative in Congress from Ohio
Mr. Thomas Fox
Ms. Mary Chaves
Mr. Ian Bowles
Ms. Tia Nelson
Mr. James Resor
Additional material submitted for the record:
FY 1998 Supplemental and FY 1999 Budget Request for Treasury International Programs, submitted by Representative Hamilton
H.R. 2870, THE TROPICAL FOREST PROTECTION ACT
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WEDNESDAY, MARCH 4, 1998
House of Representatives,
Committee on International Relations,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room 2172, Rayburn Office Building, Hon. Benjamin Gilman (chairman of the Committee) presiding.
Chairman GILMAN. [presiding] The hearing will come to order.
Our hearing today begins with the formal consideration of bipartisan legislation to help protect the world's precious tropical forests. These habitats are home to half of the world's known species of plants and animals. They hold some of the keys to the future of science, climate change, and environmental values that all of us hold so dear. Legislation before us is H.R. 2870, the Tropical Forest Protection Act. It is part of a proud tradition that stretches back to President Theodore Roosevelt, a New Yorker, I might add, who founded the world's first public park system right here in our own nation.
This bill stems directly from President Bush's Enterprise for the America's Initiative (EAI), to accomplish the twin goals of relieving Latin America's debt burden to the United States while making investments in conservation and tropical forest protection. It has come to be known as swapping debt-for-nature.
President Clinton continued that work, both through the EAI and USAID's Parks in Peril Program. Building on this body of work, we now will hear testimony on this legislation that has been drafted by Mr. Portman, Mr. Kasich, and our own Ranking Member, Mr. Hamilton. And while some of the financial transactions that will take place under the bill are complicated, the overall operation of the bill is quite simple: The 11 countries identified in the bill for early action owe our government approximately $15 billion.
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These debts were incurred to three agencies, USAID, the Department of Agriculture, and the Eximbank. The bill authorizes the President to forgive a portion of that debt, some $400 million over a 3-year period. In return, the recipient governments are going to be able to establish endowments that will support conservation projects supervised by international boards representing the United States, the host governments, and local organizations.
This bill has been done before, beginning with EAI. So we now have a substantial body of information of what works and how to accomplish our goals to protect the world's environment. There is a general agreement that the first rounds of EAI debt relief and projects were solid successes for Latin America.
Now it's time to apply the lessons learned in these debt-for-nature swaps to other regions in the world where critical habitats are under siege.
I want to thank the chairman of our Subcommittee on International and Economic Policy and Trade, Ms. Ros-Lehtenin, for her gracious cooperation in permitting expeditious consideration of this bill by our full Committee.
It is our intention to schedule a markup for the bill for March 11 and to seek the Speaker's support in scheduling the bill for early consideration by the full House.
I now recognize one of the drafters of this legislation, our Ranking Democrat Member, Mr. Hamilton, for any remarks that he may have. Mr. Hamilton.
Mr. HAMILTON. Mr. Chairman, first I want to thank you for not only having the hearing but moving expeditiously toward a markup. Mr. Portman and I and Mr. Kasich very much appreciate your willingness to do that. I want especially to commend Representative Portman today who is the principal author of the legislation for the outstanding work that he has done. It has been a privilege for me to have the opportunity to work with him and to be supportive of his efforts.
Mr. Chairman, if it is OK, I think what I will do is yield to Mr. Portman to testify, then perhaps when he is through, you would permit me to make a few additional observations. But since he is the principal sponsor of the bill, I think he should set it out. I've seen his statement. It's an excellent statement and after that I request that I have the opportunity to say a few words in support of the legislation.
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Chairman GILMAN. Thank you, Mr. Hamilton. We are fortunate to be joined by the prime mover of this legislation, the Congressman from Ohio's Second District, Rob Portman. I understand that we also will be joined by your partner, Mr. Kasich, but he's holding a hearing at the moment with Mr. Greenspan.
Before recognizing Mr. Portman, does anyone else have any opening comments?
[No response.]
If not, Mr. Portman, you may proceed.
STATEMENT OF THE HONORABLE ROB PORTMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
Mr. PORTMAN. Thank you very much, Mr. Chairman and other Members of the Committee, for giving me the opportunity to talk about the legislation today, H.R. 2870. I did introduce it with John Kasich and your Ranking Member, Mr. Hamilton.
And, Chairman Gilman, you've been a pioneer in this area. Back in the 1980's, you led efforts on debt-for-nature and I want to thank you for your early assistance in drafting this legislation; your good ideas to improve it, some of which we'll talk about in a moment; and as Mr. Hamilton just said, your willingness to move it expeditiously through the Committee process.
The purpose of the legislation is to preserve and protect tropical forests worldwide on a sustained basis. This morning I will briefly discuss the problem, its underlying causes, and how we think this bill addresses them. The Committee has also asked for recommendations that Mr. Hamilton, Mr. Kasich, and I might have as how to improve the bill and I'll offer a few this morning.
As the Committee knows, tropical forests provide a wide range of benefits, literally affecting the air we breathe, the food we eat, and the medicines which cure disease. Forests which include the rain forest, so-called moist forests, and dry forests in tropical areas, harbor between 50 and 90 percent of the Earth's terrestrial biodiversity. They also act as carbon sinks, absorbing massive quantities of carbon dioxide from the atmosphere, thereby reducing greenhouse gases. They regulate rainfall on which agriculture and coastal resources depend, which is of great importance to regional and global climate. And they, of course, are the breeding grounds for new drugs that can cure disease.
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Tragically, just since 1950, it is estimated that we've lost half of our tropical forests. The most comprehensive survey of global deforestation shows that both the area deforested and the annual rate has increased considerably between 1980 and 1990. During that decade, we lost forests equal to about 30 million acres every year. Unfortunately it continues at a rapid pace in the 1990's. We believe we are now losing tropical forests annually in an area larger than the State of Pennsylvania.
Tropical deforestation and degradation, of course, are driven by poverty and economic pressures. Such pressures on the populations of developing countries have resulted in the clearing of vast areas of forest, for conversion to agriculture which is often unsustainable in the poor soils, of course, that underlie these tropical forests.
Less-developed countries with urgent needs for investment and capital for development have allocated a significant amount of their forests also to logging concessions. Many of these less-developed countries that contain some of the most globally important tropical forests also have significant amounts of U.S. debt outstanding, some of which is unlikely to be repaid fully or on a timely basis. In fact, approximately half of the world's tropical forests are located in four countries—Indonesia, Peru, Brazil, and the Congo—and these countries alone in the aggregate have over $5 billion of U.S. debt outstanding.
Building on the successes, Mr. Chairman, you talked a moment ago of President Bush's Enterprise of the America Initiative in the 1990's, this bill links these two very important facts of life. First, the important tropical forests are disappearing at a very rapid rate, and second, they are located in less-developed countries that have a very hard time repaying their debts to the United States.
The legislation gives the President authority to reduce or cancel USAID, P.L. 480, the ag debt you talked about, and Eximbank debt owed by an eligible country to the United States in exchange for the creation of a fund in the local currency that preserves, maintains, and restores tropical forests.
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It is different than the EAI in a few ways. First, of course, it enables every country in the world to participate, not just Latin America and the Caribbean. Second, it targets the resources in the initial years to specific countries, I think it is 11 countries we have identified initially, to ensure that we are maximizing conservation efforts, so it is a more targeted effort. And, third, it narrows the criteria of EAI so that the protection of tropical forests is a primary focus.
These debt-for-nature exchanges achieve two important goals. First, of course, they relieve some of the economic pressure that is fueling deforestation we talked about earlier, and, second, they provide the funds for conservation efforts in those eligible countries. There is also the power of leveraging—and this is what is really exciting to the proposal to me, its $1 of debt reduction, in many cases, could buy $2 or many more dollars in environmental conservation.
Let me just give you one very simple example. In 1990, U.S loans Brazil $100, let's say. In 1998, because of worsening economic conditions and an inability to repay that debt fully and on a timely basis, that debt is scored on our books by CBO as having an asset value of $50. The United States enters into a debt-for-nature exchange under this bill to reduce the debt from $50 to $40 in exchange for Brazil's agreement to put $25 worth of local currency into a fund to preserve tropical forests.
The cost to the U.S. taxpayer then is $10, the difference between the old instrument of $50 and the new one of $40, and yet we get $25 worth of environmental conservation. That's more than 2-for-1 leveraging. Some of the models I've seen, the Treasury Department has some very sophisticated modeling, I must admit I don't understand it all, but some of the modeling I've seen has shown leverage rates of as high as 10 to 1.
So again, that's what I think is so exciting about this proposal and the possibilities here for real environmental protection using the dollar very efficiently.
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Thanks to our colleague, John Kasich, this legislation takes a more targeted approach, as I said earlier. Trying to be fiscally conservative here in the first 2 years, the bill gives the President authority to enter into those transactions with these 11 specific countries I spoke about a moment ago who have the most globally important and biologically diverse forests and ones we think are under the most severe threat. In the third year, the President has the authority to designate any eligible country. So we broaden it after the third year.
In all 3 years, the President must give Congress advance notification of his intention to designate a country as being eligible.
My first suggestion I might have this morning for possible improvement would be giving the President some emergency authority in the first couple of years to designate a country that is not on that targeted list, if circumstances so merit. I think this strikes a pretty good balance between the need to target our resources, which we all acknowledge, but also we need to provide the Administration some flexibility.
For any country to qualify, of course, it must meet the same criteria established by Congress under the EAI, including that the government has to be democratically elected, it has to be cooperating on international narcotics control matters, not supporting terrorism, or as Chris Smith who was here a moment ago, feels so strongly about, and other Members of this Committee of course, that the country not be violating internationally recognized human rights.
Furthermore, to ensure the eligible country meets minimum financial criteria to meet its new obligations under the restructured terms, the bill includes the EAI criteria requiring some progress on economic reforms.
In preparing this legislation, we looked carefully at the issue of accountability—how these funds would actually be used. And, as the chairman indicated, we have a track record under EAI. It has facilitated debt-for-nature exchanges in seven Latin American and Caribbean countries, providing up to $154 million, at this point, in local conservation funds.
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They have been used for reforestation, soil and water conservation, biodiversity, and other conservation projects. A specific example would be reforestation of over 3,000 acres and soil and water conservation efforts on another 2,780 acres in El Salvador, reforestation and protection of highland forests in Colombia, sustainable tree harvesting and forest management in Chile, training indigenous populations on alternative uses of tropical forest resources, and developing eco-tourism programs on the Pacific Coast of Colombia.
Some of the local administering bodies set up under EAI to monitor the use of the funds hired outside consultants such as Price Waterhouse and Peat Marwick to evaluate and audit the operations of the funds, which provides an additional level of comfort.
Although the EAI legislation did not provide a cap for administrative expenses, the individual framework agreements establishing the local boards typically do limit them to a certain percentage. Usually it's around 10 percent of the total annual interest payment made into the account by the eligible country.
As another suggestion, this morning I might suggest Mr. Chairman, at least in the Committee language, congressional intent be made clear that administrative expenses should generally be capped at 10 percent, or perhaps that it is the intent of Congress it will be 10 percent, just so that a vast majority of the funds do go toward conservation.
Other than problems that have been identified, I've been told with the operation of programs in Bolivia due to oversight and implementation difficulties, but I understand are being addressed, we believe that those involved on the EAI board and others who have been active in these operations believe that the program is going quite well.
We do think we have a good model in place, Mr. Chairman, as mentioned earlier.
To ensure that funds are used for the purposes that relate directly to the preservation and protection of tropical forests, however, we did, as I said earlier, narrow the EAI criteria. Eligible activities include establishment, restoration, protection, and maintenance of parks and reserves; development and implementation of sound systems of natural resource management and restoration; and protection and sustainable use of diverse animal and plant species.
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In the event a country participating in EAI also wants to participate in this program, I think the Committee might want to consider providing some flexibility, Mr. Chairman, to coordinate the implementation and oversight of the two efforts to avoid unnecessary administrative costs and duplication of effort.
I think flexibility there would make sense.
The legislation authorizes $400 million over 3 years to cover the budget-scored so-called cost of this debt reduction, which we have to do, as you know, under our rules. At the suggestion of the Budget Committee, we have provided a smaller amount of funding in the initial years to get the program up and running properly so it will start small so that we will have the program up and running before we enter into these debt-for-nature swaps.
Because USAID and P.L. 480 loans have been the subject of EAI transactions and probably hold the most promise for exchanges in the future, we have provided most of the funding to offset these specific costs.
Since the time we introduced the bill, the United States has actually entered into an exchange transaction with Peru. We understand that exchange took place just last week. As part of the Department of Defense Appropriations Bill for Fiscal Year 1997, the President was given authority to engage in so-called debt buy-back transactions, where an eligible country pays the U.S. Government the full asset value, we talked about earlier, of the debt outstanding, and then contributes an additional amount, equivalent to 40 percent of the total purchase price over several years to a local fund for environmental and child survival programs.
If countries can afford to pay back that debt fully, I think this is a nice option and it really has no cost to the U.S. taxpayer and I think ought to be encouraged. We have drafted an additional amendment to this legislation, H.R. 2870, to give the President this additional authority for conservation purposes only. And, again, I would recommend, Mr. Chairman, that the Committee consider adding such a provision to this bill to ensure that we are not discouraging these debt buy-back arrangements. The benefit, again, of course, is that it doesn't cost the U.S. taxpayer a dime.
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This legislation this morning is really a product of a lot of different people's thinking. Lee Hamilton has been key to this. We came to Mr. Hamilton early, knowing of his interest. John Kasich, as I said earlier. Also a lot of outside groups. Conservation International (CI) has given a lot of expertise on this as well as The Nature Conservancy (TNC), World Wildlife Fund (WWF), and many others. Many of these organizations have worked on this issue for years and believe that this is the right way to go. I believe they will be addressing that themselves later.
We have strong bipartisan support in the House and companion legislature is ready to go in the Senate. It is my understanding that Senators Lugar, Biden, Chaffee, and Leahy are introducing it shortly in the U.S. Senate and Senator Lugar is quite interested in it, wants to move it, Mr. Chairman, as soon as possible following the House.
Again, I want to commend you, Mr. Chairman, and Mr. Hamilton, and other Members of the Committee for all of their support and for their efforts to improve this bill. I think it can be improved in certain respects as I mentioned today. And I want to thank, particularly, all of the Members of the Committee who cosponsored it and a number of Members have. I look forward to working with you to improve the legislation that preserves and protects these important tropical forests worldwide in a fiscally responsible manner.
[The prepared statement of the Mr. Portman appears in the appendix.]
Chairman GILMAN. Thank you, Mr. Portman, for your extensive testimony and for your good work in bringing this before the Committee at an early date and I hope we can move it to the floor at an early date.
And while the bill has widespread support, it certainly is not cheap. I believe the CBO will score the measure at $400 million over a 3-year period. And of course you and Mr. Kasich are famous budget cutters. How does the program fit into our overall plan of spending restraint?
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Mr. PORTMAN. Well, I think it fits in fine so as long as we find the offsets. We have been strongly advised by the appropriators not to include offsets in the legislation. However, Mr. Hamilton, Mr. Kasich, and I have all been concerned about that, as you have, I know. We are doing, one thing I mentioned this morning, which is again we are attempting to amend the bill to insert these debt buy backs which would be cost free.
But also, first, we have to make a point that Mr. Kasich is committed himself to look into the international operations area of the budget and determine where we can find some appropriate offsets.
Second, I'll say, you know the taxpayer really isn't going to get repaid on this debt and just as commercial banks do all the time, we ought to get something for it. The commercial banks tend to discount it. We tend to have the debt hanging out there and get nothing for it. We are talking about discounting it, but then, as I said earlier, getting this very exciting leveraging you get in these countries to be able to get something for it, which is a significant environmental benefit, conservation benefit. So, I think it is a fiscally responsible way to go. We looked at a lot of other options, and, in the end we believed this was the best way to go and in the end the taxpayer is going to get a deal here because we are going to get some debt repaid and we are going to get some benefit for it.
Chairman GILMAN. Mr. Portman, how would you monitor the funds that are supposed to be set up in trust in each country?
Mr. PORTMAN. Well, that's a good question. As I said earlier, we want to be sure that this is accountable. The way we set it up is that there will be an NGO, nongovernmental organization, in these foreign countries that will be heading up these individual funds, they will be using local currency. Also there will be a U.S. representative on all of these committees. We think that's important to have the direct accountability. We think there is more accountability in this program, for example, than in the existing EAI, as good as it is. And, again, as I said earlier, I think there have been very few examples of any problems with EAI. But we take that into account and again I think our accountability measures here are sound, to be sure that we have the money going to the right places and that there is some monitoring by U.S. Government officials.
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Chairman GILMAN. Pleased to hear that. Some groups would like for us to weaken the condition requiring an open investment regime by recipient country. What do you think of that proposal?
Mr. PORTMAN. I will be honest with you. I don't have the expertise to be able to comment as to whether we can loosen that up a bit. Your committee would be better equipped to do that. I think it is important that we keep to the criteria that we have in existing facilitation through EAI so I would hesitate to do it, considering we have a good track record, without careful consideration.
Chairman GILMAN. What's the prognosis for the Senate?
Mr. PORTMAN. I think it is pretty good. We have a lot of interest over there. I think to be honest they are waiting for you. I think they want to be sure that this committee takes the lead, that they know it is a House project, that it is something that we've been working on for 6 to 9 months now but Senator Lugar is eager to move forward with it.
I've talked personally to a couple of other Republican Senators who would like to assist him on that and I know that he has the support of a couple of Democrats on the Foreign Relations Committee in the Senate, so I think prospects are very good, particularly if we can expedite the process as you have suggested in your statement earlier and get it to the floor this spring.
Chairman GILMAN. Thank you, Mr. Portman.
Mr. PORTMAN. Thank you, Mr. Chairman.
Chairman GILMAN. Mr. Hamilton.
Mr. HAMILTON. Mr. Chairman, I just ask unanimous consent, first of all, to include my full statement in the record.
Chairman GILMAN. Without objection, Mr. Hamilton. Mr. HAMILTON. And, Mr. Chairman, I also would like unanimous consent to include a document from the U.S. Treasury titled ''Fiscal Year 1999 Budget Justification for the Global Environment Facility.'' I think probably the appropriate place for that to appear will be after the Treasury's witness, Ms. Chaves, and I ask that that be included in the record at that point, after her testimony.
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Chairman GILMAN. Without objection.
[The information referred to appears in the appendix.]
Mr. HAMILTON. Mr. Chairman, I will not try to go through my full statement because I think Mr. Portman has done an excellent job in setting out the environmental concerns that led to this bill and describing the bill.
What I think I will try to do is just to summarize very quickly what I think the advantages of the bill are, and there are many of them.
First of all, economic development. It's going to bolster economic development in the beneficiary countries, it is going to help reduce those countries' debt burden, it's going to create sustainable agricultural development, and it will reduce the economic pressure to destroy the tropical forests for short-term economic gain.
Second, it will help preserve the tropical forests, reducing the buildup of greenhouse gases, and protect crucial rainfall patterns. The bill would preserve global biodiversity and the potential for medical and ecological innovations to improve people's lives. That's becoming increasingly important as these tropical forests are seen as reservoirs of great promise for many new agricultural and medical initiatives.
Third, the cooperative agreements would create a very strong incentive for eligible nations to cooperate with the United States on environmental protection efforts and that will improve their management of local natural resources.
Fourth, the targeted approach of the bill is on the countries that have tropical forests at risk. It is limited to those countries whose debt to the United States can be renegotiated at a minimal cost to the U.S. budget.
Fifth, as Mr. Portman has said, there are good management practices built in here. The bill focuses on the establishment, restoration, protection, and management of tropical forests to ensure a well-planned and well-managed program.
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Sixth, there is accountability. The bill ensures accountability and results by establishing strict oversight controls with full participation of the U.S. Government, the foreign government involved, and U.S. and local environmental experts.
Seventh, I think the bill promotes U.S. foreign policy objectives by requiring that beneficiary countries have good human rights records, counter narcotics programs, and counterterrorist policies, among others. The bill protects U.S. economic interests by establishing rigorous, though fair, economic criteria for eligibility.
And finally, I think the bill helps build partnerships between the United States and the beneficiary countries, demonstrating in action, not just words, that the U.S. commitment to improving economic and environmental conditions in the beneficiary countries is real.
I want to join Mr. Portman in thanking a number of groups for their support. I don't know that I know all of them but there are a good many. Several are testifying today, we have, of course, the Administration witnesses, but we also have representatives of the TNC, CI and WWF testifying in support of the bill.
I join with Mr. Portman in saying that we are open to improvements to the bill; he's mentioned several of them. I am supportive of those. On the one question you raised, Mr. Chairman, I know that the eligibility criteria includes a requirement that the beneficiary have an open investment regime. That provision is meant to ensure that benefits do not go to countries that cannot pay back the new loans or which would discriminate against U.S. businesses.
Some groups have raised some concerns about the requirement and think that it might possibly be used to limit local environmental protections. That, of course, is not our intent and I think the sponsors of the bill would be quite prepared to work to clarify the position as the bill moves through the process.
So, I think we have a good bill here. I am enthusiastic about it. Mr. Portman has done marvelous work on it to date. We have really had support across the board in both the Senate and the House and both political parties, and I am quite encouraged that we can move this bill forward quickly and make a significant contribution this year.
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Thank you very much, Mr. Chairman. I don't have any further questions.
Chairman GILMAN. Thank you. Mr. Chabot has asked to make a 1-minute statement since he has another meeting.
Mr. CHABOT. Thank you, I'll be very brief. I have a markup in Judiciary. I want to compliment Mr. Portman for his excellent work on this very important issue. And I think that the Tropical Forest Conservation Act is a sound free-market approach to a very serious global and environmental program, and again, I commend you for your excellent work on this. I am pleased to be a cosponsor, and one of 11 cosponsors on this committee.
The tropical forests provide a wide range of benefits to the world. These forests help to reduce greenhouse gases, and house many of the species used as a basis for developing pharmaceutical products. As developing countries continue to allow the tropical forest to be exploited for agriculture, logging, and other interests, the need to save these forests becomes more urgent.
And, in response to the Chairman's comments about the budget and the implications, I also share the concerns, but I know that both Mr. Portman and Mr. Kasich are serious budget cutters, as am I, and I look forward to working with Mr. Portman and Mr. Kasich to find the budget offsets so this is paid for. I think this is an excellent bill and I once again want to commend Mr. Portman on his good work on this.
Mr. PORTMAN. Thank you for your support.
Mr. CHABOT. I yield back the balance of my time.
Chairman GILMAN. Thank you, Mr. Chabot. Mr. Ballenger.
Mr. BALLENGER. Thank you, Mr. Chairman. Mr. Portman, I've got personal questions I may ask you about because my wife and I have been involved in trying to plant trees all through Central and South America. And when you say ''tropical,'' I read somewhere in there it says the Caribbean area. Along with CARE International, we've already done a million and a half trees in Haiti and we're trying to do two million more trees that I just shipped the equipment to do about a month ago. Is Haiti included in all of this? Especially when you say open investment regime, the ability to pay it back, I just wonder if it fits them or not.
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Mr. PORTMAN. First of all, you are kind of a one-man debt-for-nature swapper without any debt involved so that is the best deal of all. I know you and your wife have been very involved in this and I commend you for it. Haiti is already included of course in the Caribbean so under the existing EAI, Haiti could qualify geographically. I'm not sure why we haven't done that debt-for-nature swap yet in Haiti. Maybe there is a witness who will testify later who will give us more information on that.
Maybe it is something to do with the criteria that we've set out. What we tried to do, Mr. Ballenger, with this legislation is for the first 2 years anyway, focus on the 11 countries where there is the greatest need, where they have the most tropical forests that are the most endangered. And then we open it up to other countries. The notion here is to try to get at these countries, like Brazil, Indonesia, the Congo, where you have the forest being devastated at such rapid rates.
Mr. BALLENGER. Let me ask you a question, because I don't know who is included in the 11. I missed the beginning of your statement.
Mr. PORTMAN. Yes.
Mr. BALLENGER. But, in El Salvador and in Nicaragua, where the war was on and it turns out that anytime the troops settled down at night, they cut down all the trees around them so they wouldn't get overrun by rebels, or vice versa, and I've been working with USAID in Nicaragua and the Celesian Order in El Salvador. Are those included? I'm trying to look for a free ride if I can find a way to get back down there.
[Laughter.]
Are they included at all?
Mr. PORTMAN. We'll help you. First of all, with regards to El Salvador, there is actually some great reforestation going on already, along the lines of debt-for-nature, in addition to what you've done. I mentioned that in my testimony but there have been 47 reforestation projects resulting already in thousands of acres being protected in El Salvador so they are already included in EAI because they are a Latin American country and meet the criteria there. Let me give you just quickly the list of the 11 for your purposes and others who are interested.
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I mentioned the Congo earlier. It's not in the original 11 although they do have a lot of tropical forests that have been cut down in recent years. It is Bolivia, Brazil, Ecuador, Guyana, Ivory Coast, Liberia, Madagascar, Indonesia, Papua New Guinea, Peru, and the Philippines and that assumes they meet the other criteria in the legislation.
After 2 years, it goes on to that. Congo apparently does not meet some of the political criteria we have in this legislation so it starts with the 11 countries where there is the most need, but it should be expanded beyond that if it works. And we said earlier, although, as the Chairman said it is not inexpensive, $400 million, if we can find the offsets, which we are all committed to do, and if we can get this debt actually repaid with some money coming back to the U.S. Treasury, it is a good deal for the taxpayer. In addition, of course, we get this conservation benefit.
Mr. BALLENGER. Let me just offer, if I may, what we've done with everybody else and I don't like to deal with the government but generally speaking, I don't try to sell anything to the government, but it turns out that the cheapest way to do this is to have a little plastic bag, punch a hole in it, put dirt in the bottom, put in a seed and let it grow, you fill all the area up and spray it once a day and it grows and grows, then you give the trees away to be planted.
That's what we've done in all of these other places. It just so happens my company makes the plastic bags and we eat the cost of them and, like I said, the 2 million that I just sent to Haiti personally hurt financially and I would be glad to assist in any way, shape, or form that I can but I don't want to give the government money.
It's my money that they are using anyhow, so I just thought I'd offer the opportunity if my past experience would help anything and I'd love to be a cosponsor of your bill. I don't know whether I am or not.
Mr. PORTMAN. That would be great. We'd love to have you.
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Mr. BALLENGER. I am still going to help the ones that I've got, but if you need some help on those others, I would be glad to help out.
Thank you very much.
Mr. PORTMAN. Thank you, Cass.
Chairman GILMAN. Thank you, Mr. Ballenger. Mr. Campbell.
Mr. CAMPBELL. Mr. Chairman, I just wish to commend my colleague, Mr. Portman. I think it is a fine bill and I want to say that your leadership is very much appreciated and I would also like to cosponsor your legislation and I look forward to working with you on it. Thank you, Mr. Chairman.
Mr. Portman. Thanks, Tom.
Chairman GILMAN. Thank you, Mr. Campbell. Mr. Blunt.
Mr. BLUNT. I have no comments at this time, Mr. Chairman. Thank you.
Chairman GILMAN. Thank you, Mr. Blunt. Mr. Portman, again we thank you for taking the time to be with us, and for your support of this measure and for your leadership and we hope we can at an early date mark it up and report it to the floor. Thank you.
Mr. PORTMAN. Thank you, Mr. Chairman, and thank you for the help of your staff as well.
Chairman GILMAN. We now call on our next witness, Mr. Thomas Fox, Assistant Administrator, Policy and Planning Bureau, Agency for International Development.
Mr. Fox, you may put your full statement in the record or summarize it. Also joining you is Ms. Mary Chaves, Director, International Debt Policy, U.S. Department of the Treasury. Ms. Chaves, would you be kind enough to join us?
Mr. Fox, you may proceed.
STATEMENT OF THOMAS FOX, ASSISTANT ADMINISTRATOR, POLICY AND PROGRAM COORDINATION BUREAU, AGENCY FOR INTERNATIONAL DEVELOPMENT
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Mr. FOX. Thank you, Mr. Chairman. I, too, would like to commend Congressman Portman for his leadership in developing this idea. I would also like to thank the whole Committee for inviting me to testify on the Tropical Forest Conservation Act. My comments today will focus on USAID's perspective on the bill as currently drafted. We look forward to working with you and with the rest of the executive branch to finalize our position on the bill.
A key element in USAID's Government Performance and Results Act strategy is a large, carefully designed environmental program in which forestry is an essential component. We welcome and support the objectives and intent of H.R. 2870 as an additional tool to achieve our objectives and as an indication of this committee's continuing support for international environmental issues.
However, we are concerned with the possible implications of an authorization for appropriations. Perhaps the EAI model of no cost to the U.S. taxpayer would be an extremely useful approach for supporting the purposes of this bill as Congressman Portman has suggested. USAID would be pleased to work with this committee to further explore this approach as well as to develop other specific suggestions for improving legislation.
USAID has extensive experience with the EAI, the model for this bill. We have learned that national environmental endowments provide long-term stable financing for sustainable development activities, lessen dependency of nongovernmental organizations on donor organizations, build the capacity of local groups, promote civil society and democracy, and leverage funds from other donors. Through the EAI program and other endowment and debt-swap programs, USAID has found that in certain circumstances, endowments are viable and creative options for development. They are worth the considerable time, often years, technical assistance, and funding required to develop the institutional capability of a newly endowed organization to plan and carry out effective grant-making programs aimed at supporting environmental conservation.
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The proposed Tropical Forest Conservation Act would provide valuable support to USAID key objectives and core values in three essential ways. First, for the past two decades, forestry programs have been a principal element in USAID's program for managing the environment for long-term sustainability. These forestry programs are now a major part of our overall environmental objective in our new GPRA strategy.
Our overall environmental portfolio for Fiscal Year 1998 is estimated to be approximately $516 million and in 1999, is estimated to rise to approximately $578 million.
Through our valued partnership with nongovernmental organizations (three of whom are here), the U.S. Forest Service, universities, and private companies, we have achieved impressive and tangible results toward all of the benefits forests provide including mitigating global climate change, preserving biodiversity, conserving soil, increasing economic productivity, and protecting watersheds and drinking water supplies.
The findings on the importance of tropical forests outlined in section 802 of H.R. 2870 provide an eloquent summary that is completely congruent with USAID's own often-presented rationale for why forestry is such an essential element of our environmental programs and is a building block for both a sustainable economic development and protecting the world's environment.
Second, USAID has extensive experience with the EAI, both as a member of the President's EAI Board here in Washington and as the principal implementation agency in the field. We have learned that in addition to reducing debt and improving the environment, child survival, and child development, strengthening civil society and governments is an equally important result of this program.
Governmental and nongovernmental organizations working hand in hand on a board of directors is a novel and dynamic model for achieving practical democracy and civil society goals. Establishing a structure whereby governments and nongovernmental groups must work as mutually respected partners to manage a significant resource on behalf of their society, brings a government and their people closer together in the common cause of solving their country's problems.
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Third, from USAID's perspective, we have found that programs to address the debt burdens facing countries where USAID works have made important contributions to our sustainable development activities. This is an important element of our programs, toward which H.R. 2870 could make an important contribution. I understand that my colleague from the Treasury Department will be offering testimony on the debt aspects of this bill in greater detail today, so I will defer to her testimony.
USAID does have some concerns about the potential implications of this bill for our carefully designed programs and our GPRA strategic goals, which could result in an authorization to appropriate up to $400 million over 3 years for tropical forestry purposes within the international affairs budget, that is the function 150 account. We've worked long and hard with our partner nongovernmental organizations and other Federal agencies, universities, companies, other donors, and host countries, to develop our current forestry portfolio. Within the tight funding constraints we work under, our program represents a jointly designed best effort and our highest priority to achieve our ambitious strategic targets.
However, the timing for the consideration of this bill is awkward, as our bill is currently pending, and we need to review our environmental and debt programs in the context of this legislation. Our experience with the EAI is that it creates useful trust funds for the environment, child survival, and child development through debt reduction at no cost to the U.S. taxpayer, as Congressman Portman has said.
Whether using the debt buy back, or debt swap provisions, no U.S. Government appropriation is involved, an obvious benefit in these cost-cutting and budget-balancing days.
We would be very pleased to suggest a number of additional specific revisions to H.R. 2870 based on our extensive experience with forestry, biodiversity endowments, nongovernmental organizations, and civil society and governments.
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Thank you for allowing me to present our strong support for the purposes and objectives of H.R. 2870. We look forward to seeing how best to integrate these possible authorities with our environmental and debt forgiveness programs.
I'd also like to take advantage of this opportunity, Mr. Chairman, to thank the Committee on behalf of USAID for your past and future bipartisan support for full funding for the Administration's function 150 account. Your championing of our work is greatly appreciated. We look forward to working with you further on this bill.
[The prepared statement of Mr. Fox appears in the appendix.]
Chairman GILMAN. Thank you, Mr. Fox. Ms. Chaves. Mary Chaves is the Director of the International Debt Policy, U.S. Department of the Treasury. We welcome Mary Chaves to our Committee and you may put your full statement in the record and summarize or give the full statement at this time, whichever you deem appropriate. Please proceed.
STATEMENT OF MARY CHAVES, DIRECTOR, INTERNATIONAL DEBT POLICY, U.S. DEPARTMENT OF THE TREASURY
Ms. CHAVES. Thank you, Mr. Chairman, I appreciate the opportunity to be here to testify on the Tropical Forest Conservation Act of 1998. I will try to summarize my testimony somewhat and ask that the full testimony be included in the record.
Chairman GILMAN. Without objection. Please proceed.
Ms. CHAVES. This legislation would protect tropical forests in developing countries through a combination of U.S. debt reduction and debtor government creation of local funds to preserve, maintain, and restore tropical forests. The fundamental objectives of this legislation are highly laudable. The Treasury Department supports both efforts to preserve tropical forests and the concept of linking debt reduction to environmental objectives within a specific legislation.
The original EAI and our current buy-back swap program encompass such linkage. H.R. 2870 closely follows that of the EAI, through which the United States has provided $875 million in debt reduction to 7 countries within Latin America and the Caribbean. This program generated $154 million in local currency funds for the environment and child survival, with over 700 grassroots projects funded to date, ranging from reforestation projects and the rehabilitation of critical watersheds to environmental projects for homeless children.
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One of the U.S. environmental nongovernmental organizations has called the EAI the best-kept secret in Washington. We're glad it is good work and this hemisphere is being recognized. The local funds created through the debt reduction that we did in the early 1990's will continue to generate funds for the environment and child survival for many more years.
Recently, in an effort to continue the EAI program, the Administration proposed, and Congress approved, a debt buy-back and swap program for the region. Under this program, USAID debt is sold at its government asset value, based on its expected net present value.
The sale can occur either to the debtor country through a buy back or to a third party through a swap. No U.S. budget cost is incurred through these transactions. The debtor country receives a debt-reduction benefit and in turn provides local currency resources to support environmental, child survival, development, or investment programs.
We have received expressions of interest in this program from Jamaica, the Dominican Republic and Guatemala and have just completed a debt buy back for Peru. Peru's transaction permitted it to repurchase USAID debt for one-third of its face value while generating $23 million for local environmental and child survival programs. We believe authority for buy backs or swaps would be a useful addition to H.R. 2870 and that it could significantly reduce its budget costs.
The Administration's Fiscal Year 1999 budget request focuses primarily in the debt restructuring area on programs for the poorest countries. This includes up to 67 percent debt reduction under Naples terms within the Paris Club of Creditor Governments.
For those countries requiring additional relief, the Paris Club will provide up to 80 percent of debt reduction, in combination of that relief by other multilateral institutions, including the IMF and the World Bank. This initiative is known as the Heavily Indebted Poorest Country Initiative, or HIPC as we call it.
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In addition, the Administration is seeking appropriations to support full forgiveness of confessional debt for poorest African countries, which qualify with strong reform efforts under the President's Africa initiative. In considering this legislation, the Administration will want to review how this legislation might compliment existing debt-reduction programs. We are also concerned that support of the legislation not take resources from existing debt and environmental programs which we believe are a priority.
In particular, the Administration is seeking $300 million in Fiscal Year 1999 appropriations for the Global Environment Facility, known as the GEF. This includes $192.52 million to clear GEF arrears, and $107.5 million for a first contribution to a new replenishment.
The pilot phase of the GEF and the negotiations for the first independent GEF occurred during the Bush Administration. It has continued to receive strong bipartisan support during the Clinton Administration. The GEF is the foremost international organization helping developing and Eastern European countries conserve the world's remaining forests and their biological diversity.
The GEF also assists in addressing degradation of international waters and fisheries, pollution from inefficient energy use and destruction of the ozone layer.
The GEF is our top environmental priority internationally and our top arrears clearance priority among the multilateral banks for Fiscal Year 1999. Its arrears are the highest of any of the international financial institutions. We believe it is crucial to clear all of the GEF arrears and to authorize and contribute to the second GEF replenishment this year.
We therefore encourage strong congressional support for our funding requests for the GEF as a key element of U.S. international environmental program.
In closing, Mr. Chairman, I would like to mention that we believe that the current legislation you have proposed could attractively compliment our current programs in future years. We will want to work with this committee as the legislation moves forward to consider a number of issues, including whether to continue to focus attention on concessional debt, as we have in the past, or to also include action on other debt as suggested in this legislation.
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The Administration could conceivably use this legislation to top up action under existing programs for poorest countries and as a new benefit for lower middle-income countries with heavy debt burdens in all regions of the world. However, we believe the Administration should have the flexibility to adjust the degree of debt reduction and to utilize debt buy backs or swaps where appropriate for more credit worthy countries.
Finally, some of the proposed eligible countries for Fiscal Years 1999 and 2000 are already receiving benefits under our existing debt-reduction programs, or have little remaining U.S. debt. A broader scope for action would permit the Administration to take into account both the relative need for debt reduction and the potential for tropical forest benefits in individual countries in designing a final program.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Chaves appears in the appendix.]
Chairman GILMAN. Thank you, Ms. Chaves. And I thank you for your testimony. While this measure is pending, I understand that our nation recently concluded an innovative debt buy-back transaction with the government of Peru at no cost to the U.S. taxpayer.
Mr. Fox could these types of transactions be used to support our environmental programs?
Mr. FOX. Mr. Chairman, that particular transaction is one that I don't know very well, but it is the existing EAI model where our own appropriated funds were not called into question and the buy back came from sources in the developing country itself. So it is this kind of an example that we very much want to include in the bill as it goes forward and not have it be dependent entirely on appropriated funds.
I do, however, have some question about how an individual developing country might view the bill if there appears to be a choice between using appropriated funds and funds that only come from their own treasuries. I would need to think through this interesting and important question.
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Chairman GILMAN. And we'd welcome any opinion you might have at a later date, in regard to it.
In your statement, Mr. Fox, you expressed concerns about the funding for this bill. Could you elaborate a little more on that, what programs might be cut to accommodate this?
Mr. FOX. It certainly has to do, sir, with a question about where would the offsetting funds come from. Our budget, as you are well aware, is already a combination of a number of special provisions and directives and so forth, in addition to the conclusions about programming and budget that come from our own strategic planning process; so that there is a question of tradeoffs that we would need to understand before we would know exactly what the cost would be to our existing plans.
Chairman GILMAN. Can you suggest any areas of tradeoff?
Mr. FOX. Not now, sir. Thank you.
Chairman GILMAN. If you do have some thoughts, again we would welcome your submitting them to the Committee.
And, Mr. Fox, you also noted you would be suggesting some changes to the bill. Given that our markup is scheduled for March 11, can you tell us what changes you have in mind and can you get those to us before our markup?
Mr. FOX. I'll give you some sense of the things that we are considering. As I've said, we have not yet completed our review of the bill with the rest of the Administration but some of the questions have already been raised. First is adding very specifically the question about buy backs in the legislation.
A second would be to consider adding a criterion for the eligible countries, a criterion that would in some way assess the policy framework by which forests are managed in the country. In other words is there a policy framework that itself gives some chance for forests to be protected, in addition to what our legislation might do?
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That would be an important provision, I think.
A third would be, perhaps greater flexibility in the list of eligible countries. There certainly are some countries that are not now on the list of 11 that we would consider to be potentially important—ones where we are already working as in, for instance, the central part of Africa. Finally, it might be worth considering broadening the definition of the forests to be conserved. We know, for instance, that the benefits to be accrued from temperate forests rival those for tropical forests; and there is also a scientific question, when does something cease being tropical and when is it temperate? We'd like to explore that definition as well.
Chairman GILMAN. So do you intend, then, to submit these suggestions in writing?
Mr. FOX. We will get these suggestions to you.
Chairman GILMAN. We need them before March 11.
Mr. FOX. I understand.
Chairman GILMAN. We'd appreciate that. Ms. Chaves, have you worried that you will fund Mr. Portman's bill at the expense of the GEF? I note the President wants to increase GEF funding from some $30 million to $300 million in 1 year.
Ms. CHAVES. Mr. Chairman, the request for the GEF for Fiscal Year 1999 includes in the first instance substantial arrears which have arisen over the last several years in our funding obligations to the GEF. Those currently are $192.5 million and it is also a request for the second replenishment of the GEF which would basically be funding needed for the next several years of operation.
So, what we are looking for is substantial funding for the GEF, we think this is a very high priority for the Administration and its international environmental programs and encourage you to fully fund our GEF request.
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Chairman GILMAN. Ms. Chaves, will you support an amendment to the bill which would give the Administration flexibility to offer debt relief to other countries outside the 11 specified in the bill if unique leveraging opportunities existed?
Ms. CHAVES. Yes. We would support that flexibility within the current legislation. We have to look at the legislation in the context of our current debt programs, as well as the tropical forest objectives, and we think the flexibility of a broader list of countries would be useful.
Chairman GILMAN. And one last question of you, would you be able to use a full $400 million authorized by the bill to support conservation projects?
Ms. CHAVES. The $400 million that is suggested as authorization for appropriations is a number that we would have to work within, I think, in the debt-reduction context there is plenty of debt that we have to these countries. The exact cost of the debt reduction will depend upon whether or not we are using buy backs for the middle income countries, which could have no cost to it or swap similarly, would have no cost.
The debt-reduction costs are something that we are assessing at this point and we don't have a final estimate of what a final debt-reduction legislation in this area would cost.
Chairman GILMAN. Would you be able to provide that to our Committee before we mark up next week?
Ms. CHAVES. We will work with OMB and OBM, CBO, and the Budget Committees are currently looking at the scoring of debt reduction and we will do our best to have information for you.
Chairman GILMAN. Thank you. We'd welcome that. Mr. Hamilton.
Mr. HAMILTON. Thank you, Mr. Chairman. I want to extend my congratulations to Mr. Fox. I understand you have just taken over your position in the last couple of months, I'm not sure of the date, as the Assistant Administrator for Policy and Program Coordination and we wish you well.
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Mr. FOX. Thank you.
Mr. HAMILTON. Now, let's see. You are not endorsing this bill today, is that correct?
Mr. FOX. We're not formally endorsing it, sir.
Mr. HAMILTON. You're not opposing it?
Mr. FOX. No, sir.
Mr. HAMILTON. You are reviewing it?
Mr. FOX. That is correct.
Mr. HAMILTON. Where is the review in the Administration hierarchy? How far has it gone? Who has been consulted, who has not been consulted, and when are we going to have an answer as to the Administration position?
Mr. FOX. To the best of my knowledge, sir, the review has so far involved Treasury, OMB, ourselves, and the State Department. Perhaps some others, but I believe those have been the principals. We have been in quite active communication. Knowing now that you have a markup, I'm sure we will accelerate that process rather substantially.
Mr. HAMILTON. Are we going to have the Administration's position prior to markup?
Mr. FOX. I personally can't guarantee that, sir, but I understand that that will make a big difference to you. I will certainly work for it.
Mr. HAMILTON. Well, I urge you to push for that very, very hard. Who makes the decision, finally?
Mr. FOX. As you say, I am brand new to USAID, so I am not sure I can answer that question. Right now it appears that the coordinator is OMB.
Mr. HAMILTON. I've been dealing with USAID for 30 years and I don't know who makes the decisions.
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[Laughter.]
Of course, it involves just more than USAID, I mean Treasury is involved, I imagine some other groups too that I don't even know about but in any event, let me urge you to convey to whoever does make the decision that if the Administration wants to get on board here, they'd better get on board. This bill is going to move. And we'd like to know whether the Administration is going to be for it or against it or straddle it. And we would like to know by the 11th of March.
Mr. FOX. I understand the timetable.
Mr. HAMILTON. I think you have made some constructive suggestions here as to improvements. I am sure Chairman Gilman, Mr. Portman, and I will be glad to look at those very, very carefully.
Now, there isn't anything in this bill that causes you heartburn is there?
Mr. FOX. Only the open question about what is going——
Mr. HAMILTON. Money. But everything else looks OK. I mean the technical aspects of the bill, the structure of the bill, the criteria, you've made a suggestion with respect to that, but there really isn't anything in this bill that really looks bad to you?
Is that correct?
Mr. FOX. That's correct.
Mr. HAMILTON. Basically, the bill looks pretty good. Your primary concerns are budget and how it fits in with your overall program, is that correct?
Mr. FOX. Yes.
Mr. HAMILTON. Do I understand that the money that is sought in this bill would fit in under the GEF request? Is that where it would come?
Mr. FOX. I have to defer to Ms. Chaves.
Mr. HAMILTON. It's not inconsistent with that program.
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Ms. CHAVES. The appropriations for this legislation would be complimentary to the GEF appropriations.
Mr. HAMILTON. Complimentary meaning it could come out of that fund?
Ms. CHAVES. We would hope that it would not come out of the GEF funding request.
Mr. HAMILTON. Because that's fully committed?
Ms. CHAVES. Because that is a very high priority and it is an ongoing program which we have internationally. It is already in place.
Mr. HAMILTON. So this figure that we put into this bill, I think it is $400 million now, would have to be, what, extra? Add-on?
Ms. CHAVES. This would be a debt-reduction cost, is the way that it would probably be presented in the budget. At this point, as you know the Administration has requested specific amounts for Fiscal Year 1999 and we are not in a position to say that this should be an additional amount at this point.
Mr. HAMILTON. Are you going to be in a position to give us the budget analysis of this prior to March 11?
Ms. CHAVES. That is primarily an OMB issue, in working with the Appropriations Committees on the Hill. I think we are very interested in seeing where the 602-B allocations come out from a budgetary perspective and in working with the Appropriations Committee as this legislation moves forward.
Mr. HAMILTON. Do you have to have the approval of all of that before the Administration can endorse the bill?
Ms. CHAVES. We are currently addressing the concepts in the bill. On the budget side, we do have to work with the appropriators in terms of how this fits.
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Mr. HAMILTON. So, you do endorse the concept of the bill? Is that correct?
Ms. CHAVES. That's correct.
Mr. HAMILTON. You're able to say that much this morning, well that is helpful. Thank you very much, Mr. Chairman.
Chairman GILMAN. Thank you very much. Mr. Ballenger.
Mr. BALLENGER. Thank you, Mr. Chairman. We are talking $400 million that we write off against what other countries do? I am trying to understand better and in my efforts in Central America. Planting trees. This is, basically, what the whole idea is. In the town of Messiah, the Peace Corps was doing it and I helped them out. Then in Puerta Cabasas, it was USAID that we worked with to plant trees. And then in Kelale, it was an NGO TechniServe. How in the world do you figure out what it costs?
Ms. CHAVES. We have scoring mechanism within the U.S. Government that is governed by OMB in coordination with the Congressional Budget Office. Basically we have a cost mechanism for debt reduction which looks at what we expect the country to be able to pay before we do debt deduction and then what we then expect them to pay after debt reduction.
It is a net present value calculation that takes into account the country risk for the country, we look at the difference between those two calculations before and after debt reduction and that gives us a budget cost figure for debt reduction.
For the buy-back and swap program, we basically would sell the debt either to a country or a third party at our budget asset value so there is no cost incurred. And those are the two different mechanisms.
Mr. BALLENGER. In other words, would the cheaper that the country could do this reforestation, would that mean that they would have to—does it behoove them to do it as cheaply as possible, or, since it is Federal money they are talking about, why be efficient because we are going to get a debt buy back?
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Dealing with the government, I just wonder is that question sensible?
Ms. CHAVES. The local currency funds that actually benefit the environment in the country again depend on the instrument that is used. But under our debt-reduction structure, the interest payments that would otherwise come due to the U.S. Government on the remaining debt, after debt reduction, would go into these funds, these tropical funds, and those would be used by an organization locally that includes environmental NGO's and academic experts in the country, they would make the primary decisions on how the funds would be used. The government participates in that but it doesn't decide the use.
Mr. BALLENGER. Thank you, ma'am. Thank you, Mr. Chairman.
Mr. GILMAN. Thank you, Mr. Ballenger. Mr. Sherman.
Mr. SHERMAN. I'd like to focus on one provision of the bill and I know we have one of the cointroducers of the bill right next to me. The one provision I would like to get a better understanding of is the discussion of open investment regime.
Mr. Fox, can you elucidate that term for me?
Mr. FOX. I'm afraid I can't, Congressman. It is not a part of the bill I have particularly studied nor sought any opinion on.
Ms. CHAVES. Perhaps I can assist, if you would like.
Mr. SHERMAN. Go ahead.
Ms. CHAVES. In looking for an open investment regime, under this legislation, we are looking for measures that would help to encourage new investment and open up the environment for investment, to make it one that the U.S. businesses can compete in and participate in, along with national firms within the government. Traditionally, we have a list of nine different objectives that we look for in this area. And we have also, under the EAI, specifically worked with the InterAmerican Development Bank to develop investment sector loans and we've used that as basically the point that would check if they have moved to improve their investment regime.
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Mr. HAMILTON. Would the gentleman yield?
Mr. SHERMAN. Yes.
Mr. HAMILTON. I don't think you were here when Mr. Portman and I discussed that in broad outline. The reason that criteria is in the bill really is in order to make sure that U.S. businesses are not discriminated against. Now there have been some questions raised about that decision and, I think, Mr. Portman, I don't want to try to speak for him, he is still here in the room, but I think both he and I have indicated a willingness to work with people who have some objection.
I know it has been construed that it could limit local environmental efforts and there may be some other constructions on it. That obviously is not the intent of the sponsors of the bill so I am quite sure we are prepared to work with you to try to sharpen and improve that language. The basic principle that is involved is we don't want discrimination against American businesses, I think you would subscribe to that as would others.
So perhaps it would be sufficient if we just make an assurance that we will work with you on it.
Mr. SHERMAN. Thank you. Just to get an understanding of the concept. Does it focus on open investments in and around the forests that we are protecting, or would this relate to whether you could build a hotel in the capital city of the country? It could be that it is best to work this out later, but if you want to address that it might be OK.
Mr. HAMILTON Well, the language in the bill as it is now drafted is broad. It is in the section that talks about eligibility for benefits and there are a number of provisions under that. It says there must be put in place major investment reforms in conjunction with the loan of the appropriate international development bank for the region in which the country is located, or else that country is implementing or is making significant progress toward an open investment regime. So it is quite broad language and I don't think the words ''open investment'' are defined in the bill. If there are concerns there, we will look at language there to refine it.
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Mr. SHERMAN Thank you, Mr. Hamilton. I am concerned about two things. First, I don't want this provision to undermine the pro-environment effect of the bill and then, second, I am concerned that the weight of the U.S. Government in international economics tends to be ''Please open up your country to our investors,'' rather than ''Open up your country to our exports.''
Exports provide jobs for American working people and investment opportunities may actually undermine those jobs. They may create products that can be reimported into the United States. If this bill is trying to achieve some U.S. economic objective, I hope that it would be one of interest to our working families, rather than just to our investors.
Thank you, Mr. Chairman.
Chairman GILMAN. Thank you, Mr. Sherman. Mr. Houghton. No questions?
Then I want to thank our panelists for being here today and we hope that you will provide us with the information we requested before our markup.
Our next panel consists of Ms. Tia Nelson, Mr. Ian Bowles, and Mr. James Resor.
If they would be kind enough to come to the witness table.
Mr. HAMILTON. Mr. Chairman, before our Administration witnesses depart, may I just make a comment here?
Mr. Portman has reminded me—may I have the attention of the Administration witnesses, just a moment please? He reminded me that he went to the Treasury Department specifically, Mr. Summers, in mid-1997 on this bill, and I'm pleased to know that because what it indicates is that you have had quite a bit of time now to work through this and we would urge you to do everything you can to give us by markup time a firm position on it.
Chairman GILMAN. Well, we welcome our three distinguished private sector witnesses. Ms. Tia Nelson is here representing The Nature Conservancy. TNC is one of the largest, maybe the largest, private landowner in the United States and abroad, dedicated to conservation, and Ms. Nelson is currently a senior policy advisor for the Latin America and Caribbean Division and is responsible for developing the TNC's innovative joint implementation projects, a part of the Kyoto protocol that I strongly supported.
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I'm told by staff that Ms. Nelson is responsible for much of the international environmental legislation that was passed by the Congress in the late 1980's and early 1990's, including the EAI and we welcome you back to the Hill, Ms. Nelson.
Also, appearing before us is Ian Bowles, of Conservation International. CI is one of the premiere concentrations of scientists from around the world, dedicated to protecting the world's environment. Prior to service with CI, Mr. Bowles served in the office of one of our colleagues, Congresswoman Claudine Schneider of Rhode Island, whom we had the pleasure of working with on a number of environmental issues. Staff informs me you also have a strong interest in the environment and other key issues of concern to the people of eastern Massachusetts and we wish you success in all of your environmental endeavors.
And we also hear from a gentlemen described as one of the world's foremost experts on debt-for-nature swaps, James Resor, the director of World Wildlife Fund's Conservation Finance program. Before joining WWF, Mr. Resor received a solid business grounding as a management and banking consultant. We welcome our experts and you may summarize your statements which we hope you will do because our time is short, your full text will appear in the record, and Mr. Bowles, you may proceed.
STATEMENT OF IAN BOWLES, VICE PRESIDENT OF CONSERVATION POLICY, CONSERVATION INTERNATIONAL
Mr. BOWLES. Thank you very much, Mr. Chairman, and let me note at the outset your leadership on these issues over the last 15 years, and thank you for the opportunity to testify here today in support of this legislation.
As you said, I represent Conservation International, a nongovernmental, nonprofit organization focused on the conservation of biological diversity and, in particular, tropical forests. We were founded in 1987 and currently have a staff of more than 500 and conservation programs in more than 20 developing countries.
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The Congress and this committee have a distinguished track record in support of tropical forest conservation. Starting in the late 1980's, the Congress authorized the USAID to fund international programs. Since that time, USAID has become a global leader among development agencies in this field.
Congress has also been a critical leader in international efforts to reform the multilateral development banks, the World Bank, and the InterAmerican Bank and others and key supporter of the GEF.
Congress has also been a leading advocate of innovative mechanism such as a debt-for-nature swap to finance international conservation efforts.
As you note, I worked before for Congresswoman Claudine Schneider who worked with you, with Congressmen Porter, Hamilton, and many others on early legislation to promote debt-for-nature swaps through U.S. development assistance.
This support was broadened out to include support for the EAI, something my colleague, Tia Nelson, was a key architect of when it was passed in the early 1990's.
Essentially, under the EAI, qualifying Latin American countries' governmental debt to the United States was reduced in exchange for a program of dedicating local currency resources to local conservation programs. This is a very positive step that we are supportive of.
Debt restructuring under the EAI tapered off as the Credit Reform Act of 1990 came into effect. Effectively, the Credit Reform Act raised a number of hurdles to further debt restructuring. We can get into that in question and answers if that is something you'd like to do.
Essentially, this legislation builds on the positive experience of the EAI by targeting additional countries for debt reduction and for transactions that would allow for new funds to conservation.
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I have three additional observations before I close about this legislation. First that we should view it, in my opinion, in the context of overall U.S. efforts and congressional support for international conservation of tropical forests. Two programs in particular are very important, one is USAID's bilateral program for biodiveristy in tropical forests, the second is the GEF which the United States is currently in arrears to, as was noted in the earlier panel.
Our support for this legislation is conditional that no funds be taken away from these existing programs which are very important.
Second, we're concerned about the debt buy-back program and the amendment being put forth by the Treasury Department. Not that this is a bad idea, but rather that it could serve as a distraction away from the main business at hand, which is the Treasury Department working with the Congress and with organizations like ours to find the most efficient ways to free up new funds for conservation in key countries.
I can get into that issue, if you would like in question and answer.
The third is this legislation doesn't tackle the broader point about the credit reform act and the debt scoring mechanisms there. And I just want to note that and we can answer questions about that.
In conclusion, congratulations to you, Mr. Chairman, for this hearing. I would also like to recognize Congressman Portman for his leadership and interest, also Congressmen Kasich and Hamilton for their leadership in putting this legislation forward. I will be glad to answer any questions.
[The prepared statement of Mr. Bowles appears in the appendix.]
Chairman GILMAN. Thank you, Mr. Bowles.
Ms. Nelson, you may put your full statement into the record and summarize it, whichever you may deem appropriate.
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STATEMENT OF TIA NELSON, SENIOR POLICY ADVISOR FOR LATIN AMERICA AND CARIBBEAN DIVISION, THE NATURE CONSERVANCY
Ms. NELSON. Thank you, Mr. Chairman. I appreciate the opportunity to be here this morning and your kind words. I would also like to echo Ian Bowles' compliments to your for your leadership. It is much appreciated.
Chairman GILMAN. Thank you.
Ms. NELSON. I am Tia Nelson, senior policy adviser at the TNC. We have over 900,000 members, about 1,300 corporate sponsors, and our mission is the protection of biological diversity.
Less known is that we have an international program working in 24 other countries, Latin America, Caribbean, in the Asia-Pacific region, there we have worked with local conservation NGO's to help protect about 75 million acres of key biological diversity.
Before I get into my prepared remarks, which will be quite brief, I assure you, I wanted to share with you a personal experience. It was about 10 years ago in Costa Rica. Alvero Omana, then minister of the environment in Costa Rica, an honorable leader early on in the environmental movement, he and I were discussing the good deeds of a recent debt-for-nature swap and Alvero said to me that he thought that it was important now that we took the opportunities for conservation finance exemplified in commercial debt-for-nature swaps and expanded them to include bilateral government to government debt.
In my naivete I had no idea the kind of challenge we would face in doing such a thing. It sounded rather simple to me. I didn't know that it required an amendment to the Foreign Assistance Act; I didn't know that it was against foreign policy at the time. And in any case, the Conservancy endeavored then to promote the idea in all the appropriate fora—USAID, U.S. Treasury, State Department, and Congress. Suffice it to say, we faced a lot of obstacles. Eventually, with the support of Congressmen Bereuter, Torticelli, you, Mr. Chairman, and others, we began to gain some momentum, and the Bush Administration included this idea in a package of initiatives that was announced prior to the President's trip to Latin America.
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Working with a number of NGO's, including my distinguished colleague sitting with me here today, we crafted the environmental provisions of the EAI. It is my proudest professional accomplishment, unquestionably.
Collectively, working with CI and WWF, we have managed to link the issue of debt and its adverse effects on rapid resource depletion. EAI is still a fine idea, and Congressman Portman has revitalized it. His bill has provided us a new opportunity to protect tropical forests and the vital biological and economic wealth contained within them. The Congressman has well described for you the importance of tropical forests.
One of the keys to success from our perspective is long-term funding. Debt-for-nature swaps like those that will be made possible by the Portman-Kasich-Hamilton bill, can be an important—indeed critical—tool for ensuring long-term viability of tropical forest protection in developing countries.
The proposed funds under H.R. 2870 would operate quite similar to the original EAI but extend the eligibility now to include Africa and Asia. It has great potential to boost forest protection and we, at the TNC, strongly support it.
Very significantly, U.S. money will be leveraged. It will both enable and motivate local governments to do more for themselves to create long-term funding mechanisms to protect forests. It's the sort of results-oriented, sensible effort the TNC likes.
I will just briefly share with you a success story from the original EAI. You've heard some from Congressman Portman about the efforts in El Salvador and elsewhere. In Chile, the $19 million which will be dispersed between the year 1992 and the year 2002 have, to date, benefited 54 local communities, many, many local NGO's, with an average grant size of about $75,000. It has trained local farmers and fisherman in habitat improvement in forest conservation. It has helped protect unique local rainforest and provided innumerable other benefits.
In Jamaica, the fund of $12 million has approved 220 projects since 1993. The current focus is on improving community capacity to manage resources in or near protected areas. It has been quite successful.
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TNC would like to thank Congressmen Portman, Kasich, and Hamilton, and all the cosponsors who are rapidly signing on for the reasons I have outlined. Tropical forests are important; they are threatened; and this legislation has the potential to help mobilize significant sums to restore them.
Thank you.
[The prepared statement of Ms. Nelson appears in the appendix.]
Chairman GILMAN. Thank you very much, Ms. Nelson.
Mr. Resor of the World Wildlife Fund.
STATEMENT OF JAMES RESOR, DIRECTOR OF CONSERVATION FINANCE, WORLD WILDLIFE FUND
Mr. RESOR. Mr. Chairman, and Members of the Committee, thank you very much for the opportunity to appear here today.
I am James Resor of the World Wildlife Fund. WWF currently supports conservation efforts in more than 100 countries around the world.
Today my testimony will focus on H.R. 2870, the Tropical Forest Conservation Act. I'd like to provide WWF's perspective on why this legislation is truly vital to strengthening the short- and long-term capacity to reverse the loss of tropical forests in key countries.
Mr. Chairman, you and Congressman Portman already have done a nice job of summarizing the importance and benefits that these forests provide. So, I'll move into the particulars directly.
This bill can provide urgently needed resources for forest conservation in tropical countries by allowing restructuring of existing bilateral debt owed to the United States in exchange for local currency funds to conserve tropical forests. The U.S. Government has already played a leadership role in supporting debt-for-nature swaps and conservation trust funds. For example, in the early 1990's, USAID funds permitted WWF to purchase more than $30 million of commercial debt in the Philippines and Madagascar. The proceeds from these swaps continue today to provide ongoing support to conservation efforts in those countries in addition to having leveraged other funds from European bilateral aid agencies and commercial sources to help conservation.
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The EAI, upon which this bill builds, restructured bilateral debt owed to the United States by seven Latin American countries and has provided about $154 million from environmental funds, as others have already testified.
H.R. 2870 can be another example of true global leadership by the United States.
Based on WWF's experience with debt conversions and trust funds in more than a dozen countries, we think that H.R. 2870 offers some of the following benefits. First, urgent and leveraged funding for conservation for some of the world's biologically richest forests. Second, U.S. leadership can serve as a model for some European and Asian nations to do the same thing with the debt owed to them by some of the world's poorer countries. Third, a proven means to get funds to local conservation groups that are really trying to protect their forests from going up in smoke or ending up as wood pulp to make chop sticks or other kinds of things without much thought to the environmental destruction. Fourth, is the strengthening of democracy in nongovernmental organizations in these particular developing countries by promoting accountability and some kind of consensus building, and often bringing governments and nongovernmental organizations together for the first time. Fifth, we feel there is strong accountability to the U.S. taxpayer. Delivering U.S. international assistance via these kinds of environmental funds for the purpose of forest conservation is really targeted to issues that we think Americans really care about.
On behalf of WWF's 1.2 million members, I really want to reiterate our enthusiastic support for this legislation. Any fears or skepticism that U.S. taxpayer funds might be misappropriated by distant third-world bureaucracies, I think, can really be put to rest, because these environmental funds are independent of governments and allocate their funds to nongovernmental organizations through a very open and competitive selection process. Furthermore, the U.S. Government always has a representative overseeing that.
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Again, WWF offers its support for the legislation, however, this is as long as the funds for its implementation do not come at the expense of important existing programs, most notably, USAID's bilateral support for biodiversity conservation, and the GEF.
Last, I'd like to comment on the timing of this legislation because I think it offers opportunities for the United States to exercise leadership in two different crises. The first is the current financial crisis in Asia, where Indonesia is a dramatic case-in-point. H.R. 2870 offers a basis for the United States to open a dialog with other bilateral creditors and the International Monetary Fund (IMF), to require that the IMF programs be linked to more sustainable and less destructive forestry practices and also include long-term provisions for conservation funding and greater participation of nongovernmental organizations and local citizens in general.
The second opportunity is for the United States to encourage other bilateral creditors, the IMF and the World Bank, to actively look for opportunities to apply the debt-for-nature mechanism as outlined in the EAI and this legislation, H.R. 2870, to countries that will participate in the World Bank's Highly Indebted Poorest Country Initiative—better known by its acronym, HIPC. However, under its current implementation procedures, the HIPC initiative seems to be missing the broader opportunity to help highly indebted countries to achieve both debt sustainability and improve environmental conservation.
We think that U.S. taxpayer investments can be multiplied severalfold with the enactment of this legislation and the further leadership of the Administration to apply the legislation broadly as these two examples suggest.
And again, thank you very much for the opportunity to appear before the Committee today. Mr. Chairman, I would be happy to answer any questions.
[The prepared statement of Mr. Resor appears in the appendix.]
Chairman GILMAN. Thank you, Mr. Resor, for your testimony.
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Ms. Nelson, are there critical parks and habitats outside the 11 countries designated in the bill that would need some attention? Could you mention any of those for us?
Ms. NELSON. Yes, there are. I think the point of the effort to focus on those countries was to try to leverage in some high biodiversity tropical forest areas—some special focus in the first couple years of this program. But, indeed, there are other countries and other tropical forests equally in need of assistance.
Chairman GILMAN. Do you want to mention any of those for us?
Ms. NELSON. There are lots of them. The entire Andean region of Latin America—Latin America being the area which I am most familiar with, so I'll defer to my colleagues on Africa and Asia. There are some areas in Central America, the Maya Corridor from Mexico to Guatemala to Belize.
Chairman GILMAN. Did you want to add something, Mr. Resor?
Mr. RESOR. Yes, Mr. Chairman, I think we would point out two areas that are omitted at this point from the legislation. They are, for example, countries in the Congo Basin in Africa and also Indochina. And we hope that when conditions permit that they might be eligible because they certainly have globally significant forests.
Chairman GILMAN. Thank you.
And, Ms. Nelson, given your extensive experience with these kinds of transactions, what are some of the do's and don'ts you would want our committee to keep an eye out for?
Ms. NELSON. Well, we've had a good bit of success with the original structure under EAI which has local NGO participation and a U.S. Government vote—and I believe, if I recall correctly, veto power over disbursements if there are any questions. And I think, you know, I'd emphasize that strong NGO participation on those boards, and civil society participation, transparency in the process by which proposals are reviewed and moneys are disbursed are key.
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Chairman GILMAN. Thank you.
And, Mr. Bowles, as I understand, your organization was founded by scientists for scientists. Should we emphasize more scientific values in this legislation?
Mr. BOWLES. I think the legislation as crafted addresses scientific issues. I might return to your original question to Tia Nelson about the——
Chairman GILMAN. Other areas.
Mr. BOWLES. —critical habitats. It's in some ways a scientific question. This legislation focuses on those tropical forests that are most rich in biological diversity and facing the greatest threat and, as such, includes implicit prioritization that we support. And I think it in essence brings a science parameter into this legislation that you are trying to focus resources. But in terms of the body of the legislation, I think that it's good as it stands.
Chairman GILMAN. I noted that the boards of organizations to be established under this bill must have some scientific representation. Should a majority of the members on the board be comprised of scientists?
Mr. BOWLES. I think I'm going to be best off to defer to my colleague, Tia, who has more direct experience in the functioning of the boards under the EAI, if I might.
Chairman GILMAN. Ms. Nelson.
Ms. NELSON. Thanks, Ian. I don't know the correct answer. I think it's important to have a structure that allows some flexibility in determining who's on a local board—with each area and each country and each fund being slightly different. Having a good mix of policy folks, local NGO's, and available scientists is important. But I wouldn't suggest that you need to necessarily prescribe the number of scientists that would be on a local governing board.
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Chairman GILMAN. Thank you.
Mr. Resor, given your experience with these transactions, what have we learned from the first debt-for-nature swap in Bolivia's Bene biosphere reserve to date?
Mr. RESOR. Well, I think in general, looking back to the first swap which actually CI helped broker in Bolivia—but we've had experiences in Africa, Latin America, and Asia—is that what's very important at the beginning is to get the right balance of participation and oversight. And this legislation requires a majority NGO representation as to how the funds will be spent and monitored. Because, I think, as you know, in some of these countries democracy is very fragile, and it's very important that there is real transparency and accountability as to how the funds are spent. And so, investing the time and effort at the beginning to make sure that apparatus is set up is critical to the long-term success.
Chairman GILMAN. As we move forward on H.R. 2870, do you anticipate some other countries will be likely to join in our efforts to support conservation?
Mr. RESOR. Other? From the other bilateral—for example in Europe or Asia? I mean, from the donor side?
Chairman GILMAN. Yes.
Mr. RESOR. Yes, I think there are a lot of possibilities. We've had, for example, good success getting support along similar lines from the Netherlands, the Swiss, to cite a couple of examples. In Madagascar we were able to arrange the donation of commercial bank debt from Deutsche Bank and from Bank of America in several American countries from the commercial side. But I think there's a lot of interest, and I think that if the U.S. leadership can be fashioned in a way that leaves it somewhat open and encourages them to come along, I think there are a lot of opportunities.
Chairman GILMAN. In your statement, you noted the fortunate timing of the legislation in relation to the Asian financial crisis. Could you elaborate on that?
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Mr. RESOR. Yes. As you know right now, the IMF is very busy trying to put together various reform packages—I guess particularly in Indonesia, South Korea, and Thailand. And using Indonesia as an example, which I think we would all agree is a very high priority from a tropical forest perspective, and there are a lot of problems with conversion of forests to agriculture and unchecked logging practices, as well as problems with what happens to funds. For example, their reforestation fund in Indonesia. And it seems to me that in the context of the IMF programs that the conditionality of some of these issues be addressed in addition to resolving the financial picture but really looking at the longer-term economic and environmental stability.
Chairman GILMAN. Thank you very much.
Mr. Sherman.
Mr. SHERMAN. Thank you, Mr. Chairman. I'd first like whichever panelist feels they have the most cogent comments to address this issue that I have brought up before of open investment regimes. Do you see this as a small provision in the bill that could undermine its conservation purposes?
Mr. BOWLES. Why don't I speak to that. I think that if you step back from what's been happening in tropical forests in the last decade, there is certainly some evidence that unfettered investment is not necessarily going to help conservation. In Latin America, mineral exploration investments have more than doubled since 1990; log exports have more than doubled since 1990. Clearly there is some linkage between macroeconomic investment climate and conservation issues.
I guess my overall comment is that it's not a main part of this legislation. Essentially this legislation is setting up a system to allow new funds to get created for environmental conservation. I think if the Congress wants to tackle the implications of investment reform, that might be better done in the context of the authorization for the IMF and the World Bank. I think there are some legitimate policy issues, but this legislation, this is really a relatively minor part of the overall thrust of the legislation. I hope that answers your question. Thank you.
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Mr. SHERMAN. With these debt-for-conservation swaps, does title and ownership of the land vest in the U.S. Government if our government is giving up the debt, or would it instead be transferred to one of the organizations that you represent?
Mr. RESOR. Let me answer that. Actually, in the debt-for-nature swaps, what usually happens is there's a reduction in foreign debt and a generation of local funds to carry out the conservation projects in these developing countries. There is rarely a transfer of land ownership. In other words, we're not purchasing land through these mechanisms, which is, unfortunately, the image that the title conjures up. So really, the U.S. Government would not be taking title to any assets. If there was any purchase of lands, it would likely go to an NGO in that country that would hold it like you would have a land trust in the United States that might hold an easement, or land that is acquired for conservation purposes.
Mr. SHERMAN. So we would cancel debt, and the host country would fund its equivalence of the EPA or the National Park Service, or——
Mr. RESOR. Not exactly, no. The local country, and again, under this legislation, the release of funds would be to an entity that is separate from the host government. It would have participation of the host government, but it would have a majority of NGO's. And it would be that administrating panel which would then decide which project merited support. The idea is not merely to put support into operational line items of the host country government, because then we really haven't added any new funds. But really the idea is to get it to local grassroots groups that are doing conservation.
Mr. SHERMAN. When you say, ''doing conservation,'' do you mean acquiring and permanently owning land, or——
Mr. RESOR. Not necessarily acquiring land; it may be, for example, trying to change forestry practices, or ways to manage forests in a way that's more conducive to conservation, training; it could be a whole host of activities. And sometimes it may be strengthening a policy that supports a particular park or reserve.
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Mr. SHERMAN. But you have a preference to having NGO's use the funds rather than the regular agencies of the governments involved.
Mr. RESOR. Yes, very much, and I think the spirit of the legislation really requires that, and I think that's where we can take more comfort that there really is going to be accountability to the U.S. taxpayer that the funds won't essentially disappear into a black hole of a government. A finance ministry might just merely subtract what it was going to give to the local EPA.
Mr. SHERMAN. I mean we run into this problem just as much, I think, with NGOs, or almost as much, in that the country could reduce its own programs while giving funds to NGOs. And while there is some skepticism as to the honesty and effectiveness of government agencies in the Third World, nongovernment agencies can also be sources of ineffectiveness and corruption as well. So, I can see those who've spent their lives in the nongovernmental sector preferring nongovernmental organizations abroad—but I don't know if they're any more effective than government.
Ms. NELSON. I think it's——
Mr. RESOR. Clearly, we can't be the most objective to comment on the value of NGO's, however, I think in this case, what is very helpful is they are a panel which includes the U.S. Government. So, you are having a very open and competitive process. So if there are problems, you can't hide them, basically. I think that's a big advantage for all of us.
Mr. SHERMAN. You're right, if it's an NGO, then the U.S. Government can be represented and that does give us at least an eye to what's happening with them.
Thank you.
Chairman GILMAN. Thank you, Mr. Sherman.
Again, I want to thank our witnesses, Ms. Nelson, Mr. Bowles, Mr. Resor, and our other witnesses who were kind enough to appear before us today.
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Ms. NELSON. Thank you, sir.
Chairman GILMAN. Our committee stands adjourned.
[Whereupon, at 11:44 a.m., the Committee adjourned subject to the call of the Chair.]
A P P E N D I X
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