The U.S. International Development Finance Corporation (DFC), the Government of El Salvador, the Development Bank of Latin America and the Caribbean (CAF), Catholic Relief Services (CRS), the Environmental Investment Fund of El Salvador (FIAES), and ArtCap Strategies have successfully completed a $1 billion debt buyback deal. The agreement involves repurchasing $1.031 billion of El Salvador’s bonds at a discount, with savings directed toward the conservation and restoration of the Lempa River watershed.
DFC is providing $1 billion in political risk insurance, while CAF is offering a $200 million standby letter of credit, both of which enhance the transaction’s credit risk. This innovative financial structure will support efforts to improve water security and restore ecosystems in the Lempa River basin.
The Lempa River, one of Central America’s longest, is vital to El Salvador’s communities and economy, providing drinking water, supporting agriculture, and sustaining ecosystems. This historic transaction will generate $352 million in savings for the government, with $350 million earmarked for conservation over the next 20 years. This includes direct funding for the Lempa River Conservation Program and a trust fund to ensure ongoing support beyond 2044.
CRS and FIAES will manage the program, collaborating with key governmental agencies to enhance water security, biodiversity conservation, and sustainable development. The initiative will grant funds to NGOs in El Salvador, with the first grants expected in 2025.
President Nayib Bukele called the debt conversion “the most ambitious and impactful environmental action in El Salvador’s history,” emphasizing the nation’s commitment to economic growth and environmental preservation.