How does a country deal with climate disasters when it’s drowning in debt? Not very well, it turns out. Especially not when a global pandemic clobbers its economy.
Take Belize, Fiji and Mozambique. Vastly different countries, they are among dozens of nations at the crossroads of two mounting global crises that are drawing the attention of international financial institutions: climate change and debt.
They owe staggering amounts of money to various foreign lenders. They face staggering climate risks, too. And now, with the coronavirus pandemic pummeling their economies, there is a growing recognition that their debt obligations stand in the way of meeting the immediate needs of their people — not to mention the investments required to protect them from climate disasters.
The combination of debt, climate change and environmental degradation “represents a systemic risk to the global economy that may trigger a cycle that depresses revenues, increases spending and exacerbates climate and nature vulnerabilities,” according to a new assessment by the World Bank, International Monetary Fund and others, which was seen by The Times. It comes after months of pressure from academics and advocates for lenders to address this problem.
downgraded its creditworthiness, making it tougher to get loans on the private market. The International Monetary Fund calls its debt levels “unsustainable.”
nearly $600 billion in debt service payments over the next five years. Both the World Bank and the International Monetary Fund are important lenders, but so are rich countries, as well as private banks and bondholders. The global financial system would face a huge problem if countries faced with shrinking economies defaulted on their debts.s
“We cannot walk head on, eyes wide open, into a debt crisis that is foreseeable and preventable,” the United Nations Secretary General, António Guterres, said last week as he called for debt relief for a broad range of countries. “Many developing countries face financing constraints that mean they cannot invest in recovery and resilience.”
The Biden administration, in an executive order on climate change, said it would use its voice in international financial institutions, like the World Bank, to align debt relief with the goals of the Paris climate agreement, though it hasn’t yet detailed what that means.
flurry of proposals from economists, advocates and others to address the problem. The details vary. But they all call, in one way or another, for rich countries and private creditors to offer debt relief, so countries can use those funds to transition away from fossil fuels, adapt to the effects of climate change, or obtain financial reward for the natural assets they already protect, like forests and wetlands. One widely circulated proposal calls on the Group of 20 (the world’s 20 biggest economies) to require lenders to offer relief “in exchange for a commitment to use some of the newfound fiscal space for a green and inclusive recovery.”
debts soared, including to China, and the country, whose very existence is threatened by sea level rise, pared back planned climate projects, according to research by the World Resources Institute.
The authors proposed what they called a climate-health-debt swap, where bilateral creditors, namely China, would forgive some of the debt in exchange for climate and health care investments. (China has said nothing publicly about the idea of debt swaps.)
sinking under huge debts, including secret loans that the government had not disclosed, when, in 2019, came back-to-back cyclones. They killed 1,000 people and left physical damages costing more than $870 million. Mozambique took on more loans to cope. Then came the pandemic. The I.M.F. says the country is in debt distress.
Six countries on the continent are in debt distress, and many more have seen their credit ratings downgraded by private ratings agencies. In March, finance ministers from across Africa said that many of their countries had spent a sizable chunk of their budgets already to deal with extreme weather events like droughts and floods, and some countries were spending a tenth of their budgets on climate adaptation efforts. “Our fiscal buffers are now truly depleted,” they wrote.
In developing countries, the share of government revenues that go into paying foreign debts nearly tripled to 17.4 percent between 2011 and 2020, an analysis by Eurodad, a debt relief advocacy group found.
Research suggests that climate risks have already made it more expensive for developing countries to borrow money. The problem is projected to get worse. A recent paper found climate change will raise the cost of borrowing for many more countries as early as 2030 unless efforts are made to sharply reduce greenhouse gas emissions.
Honduras has barely begun to recover from two hurricanes that hit late last year. With relatively little disaster relief from the U.S., many are heading for the border.
SAN PEDRO SULA, Honduras — Children pry at the dirt with sticks, trying to dig out parts of homes that have sunk below ground. Their parents, unable to feed them, scavenge the rubble for remnants of roofs to sell for scrap metal. They live on top of the mud that swallowed fridges, stoves, beds — their entire lives buried beneath them.
“We are doomed here,” said Magdalena Flores, a mother of seven, standing on a mattress that peeked out from the dirt where her house used to be. “The desperation, the sadness, that’s what makes you migrate.”
People have long left Honduras for the United States, fleeing gang violence, economic misery and the indifference of a government run by a president accused of ties to drug traffickers.
hit a 15-year high, part of a sharp uptick since Mr. Biden took office.
welcoming policies on immigration have drawn people at a time when they are especially desperate to leave.
recently tapped Vice President Kamala Harris to work with Central American leaders to better conditions in those countries.
Still, Mr. Biden has sent a clear message to anyone considering crossing the border in the meantime: “Don’t come over,” Mr. Biden said in a recent interview.
The warning barely registers in parts of Honduras like Chamelecón, a sector of San Pedro Sula that is overrun by gangs and was pounded by both storms. Survivors of the disaster say they have no choice at all.
Months after the hurricanes, houses remain underwater. Gaping holes have replaced bridges. Thousands of people are still displaced, living in shelters or on the street. Hunger is stalking them.
pushed through nearly a billion dollars for the region in the late 1990s in the aftermath of Hurricane Mitch, which killed more people but wrought a comparable level of damage as the recent storms, aid workers say.
Immediate humanitarian aid could certainly help alleviate hunger, homelessness and other crises spurred by the storms, as it seems to have done after Hurricane Mitch.
undermined efforts to change their economies enough to give the poor a reason to stay at home.
embezzled American aid money through sham nonprofits. Mr. Hernández, the nation’s leader since 2014, has denied the allegations and has not been charged. A spokesman did not provide comment.
“We need to be aggressively addressing the levels of despair that the folks hit by these storms are facing,” said Dan Restrepo, a former top adviser to President Obama. “We need to go big now and we need to be loud about it, because that starts actually factoring into the calculus that people face today, which is, ‘Can I survive here or not?’”
People smugglers are already taking advantage of Mr. Biden’s presence in the White House to win new customers. Moving swiftly and loudly, Mr. Biden undid many of the harsh immigration policies pioneered by his predecessor.
Human traffickers in Honduras are enticing clients by promising a much easier journey north, touting Mr. Biden’s refusal to immediately expel children at the border and making grand promises about how friendly the new administration will be, according to interviews with smugglers.
One trafficker outlined his latest pitch to Honduran families thinking about leaving: “They opened everything back up, now you can get in again,” he said, speaking on condition of anonymity because of the illegal nature of his work. “If they catch you, they send you to Mexico. It’s not like before, where they sent you back to your country.”
He added that since Mr. Biden’s inauguration, he had sneaked 75 people across the American border illegally.
“Because of the new president, they are opening more doors,” he said. “It’s a free market. That’s how we see it.”
But rather than point to Mr. Biden, many Hondurans first blurt out their own president’s name as a reason to leave home.
Mr. Hernández’s brother was recently sentenced to life in prison by an American court for trafficking cocaine into the United States. Prosecutors said the president provided protection to his brother and other traffickers in exchange for cash.
For many Hondurans, the past few months in particular have provided a searing case study in how little they seem to matter to their government.
Jesus Membreño’s house was sheared off the side of a mountain in the storms, but with nowhere else to go, he built a shelter over a piece of the cement floor that was left behind.
“We received nothing from the government, not even a sheet of metal to replace our roof,” Mr. Membreño said.
He said he would head north alone in the coming weeks.
Residents in Canaan, a section of the Chamelecón suburb that was flattened in the hurricanes, say the government never even sent any tractors to clear the mud. So Ms. Flores and her neighbors are trying to feed their children by carving off pieces of their ruined homes and selling them as scrap metal.
“It’s enough to buy some beans or rice,” she said, traipsing through mud punctuated by the tips of children’s bicycles and other rubble. “No one, not one politician or government, has helped us.”
The first time Ms. Flores tried to get to the United States was after her ex-husband broke into her house and slashed her face and arms with a machete, in 2016, she said. She never made it.
The second time was this January, she said, after living with her children under an improvised tent after the storms damaged her home. The few possessions she had spent years accumulating — her stove, her fridge, her beds, her television — were swallowed by mud.
“It’s the sadness, the disappointment that hits you,” Ms. Flores said, “It’s very hard to see your home buried. I had nothing left.”
With six of her children, she joined the first migrant caravan of this year, in January, she said. They walked for miles, but turned back after barely eating for days and then getting tear-gassed and beaten by the Guatemalan police. That’s when she stopped believing Mr. Biden was going to welcome anyone with open arms.
“If that were the case, why would they have sent me home?” she asked.
So Ms. Flores used parts of her old wooden house to build a shelter on top of the earth that devoured everything she had.
Now she’s waiting for the next caravan to leave, driven not by hope but by despair.