World’s Largest Debt Conversion for Conservation of a River and its Watershed Completed in El Salvador

All savings generated by the transaction will be applied over time to support conservation, water security, and ecosystem restoration in the Lempa River (Rio Lempa) watershed. JPMorgan Chase Bank, N.A. acted as sole arranger and lender for the loan and J.P. Morgan Securities LLC acted as dealer manager in the tender offer for El Salvador’s bonds.

DFC, the U.S. Government’s international development bank, is providing $1 billion in political risk insurance (PRI) while CAF is providing a $200 million standby letter of credit (SBLC). The combination of the DFC PRI and the CAF SBLC will provide integral credit enhancements that support the transaction, which in turn catalyzes the additional investment in El Salvador’s conservation and ecosystem restoration efforts in the Rio Lempa watershed. ArtCap Strategies acted as financial advisor and global coordinator for the transaction.

The Rio Lempa watershed is one of the longest rivers in Central America and plays an important role in the well-being of cities, communities and the economy in El Salvador by providing drinking water, as well as supporting industry and hydropower generation, and irrigation. It also supports diverse ecosystems that represent a large portion of the country’s environmental heritage. Projects funded by the savings from the transaction are expected to enhance water quality, quantity, and reliability; strengthen climate resilience; protect the watershed’s natural ecosystem; and mitigate water security risk in the region.

Through this transaction, the Government of El Salvador will realize more than $352 million in lifetime savings through a combination of immediate notional debt savings and material reductions in debt service costs. $350 million of these savings will be applied to the Rio Lempa Conservation and Restoration Program (the “Program”) over the next 20 years in support of the country’s commitment to watershed conservation in the Rio Lempa basin. Specifically, $200 million, or an average of $9.75 million annually over 20 years, will fund the Program directly, while $150 million, or approximately $7 million per year, will fund an endowment. The funds in the endowment will be invested and are intended to become a source of ongoing funding for the Program beyond 2044. This $350 million allocation represents the largest funding commitment a country has ever made for conservation in a debt conversion transaction.

CRS and FIAES will jointly manage the Program and will collaborate with key government water and environmental agencies to enhance water security and watershed health, promote biodiversity, stimulate economic development through regenerative agriculture, and strengthen planning and management capacities in the Rio Lempa watershed. The Program will make grants to non-governmental organizations operating in El Salvador in support of these goals, with initial grants set to disburse in 2025.The Program will be governed by a seven-member Board of Directors that includes one representative from the Government of El Salvador, one representative from the U.S. Agency for International Development (USAID), and five non-governmental representatives.

In addition, the Government of El Salvador has committed to: (i) establish a zonal organization to oversee conservation and restoration of the Rio Lempa watershed; (ii) approve a National Integrated Water Resources Plan; (iii) establish a water resources data monitoring system for the Rio Lempa watershed; (iv) develop protocols for issuing water use permits; (v) establish a public feedback and complaint mechanism for violations of the National Water Resources Law and Environmental Law; (vi) contribute to the decision-making process by developing standards for calculating costs related to drinking water and sanitation services; and (vii) declare 75,000 hectares of protected aquifer recharge zones throughout the watershed by 2044.

White & Case LLP acted as legal adviser to the Republic.

“This debt conversion represents the most ambitious and impactful environmental action in El Salvador's history. It not only reaffirms this government's commitment to economic growth, it also enables us to achieve this growth while preserving one of our most precious natural resources: the Lempa River watershed. With support from international parties, we are executing the largest debt conversion transaction of its kind to date. This debt conversion project promotes sustainable development for our communities, strengthens our water security, and protects our ecosystems to secure the well-being of this generation and those to come. With this debt conversion, we aim to transform the environmental and economic future of El Salvador,” said Nayib Bukele, President of El Salvador.

“Since its inception, DFC has been a pioneer in the field of debt conversions. Today’s announcement presents the world’s first-ever debt conversion for watershed conservation and water security. This transaction will protect critical resources while helping unburden the Salvadoran economy and promoting the growth of a vibrant private sector that will create more opportunities for Salvadoreans to find employment in their communities. DFC is committed to continuing to leverage our unique financial tools in innovative ways in pursuit of our developmental priorities around the world,” said DFC CEO Scott Nathan. 

“At CAF, we are committed to becoming the green bank of Latin America and the Caribbean. Therefore, we are investing $25 billion by 2026 to finance environmental, climate change, and biodiversity initiatives, such as the one we are announcing today in partnership with the Government of El Salvador, DFC, CRS, and FIAES. This historic financing demonstrates that, through joint efforts, we can advance innovative financial mechanisms that accelerate sustainable development,” said Sergio Díaz-Granados, Executive President of CAF. 

“CRS is excited to be part of this transformative program in El Salvador, which sets a new standard for the scale and long-term funding needed to restore and protect critical water resources for current and future generations. This program came together because of bold leadership and collective action by a dynamic and diverse team,” said Carla Fajardo, Regional Director for Latin America and the Caribbean, Catholic Relief Services.

“FIAES is pleased to participate in the Rio Lempa Conservation and Restoration Program, acting as a strategic partner of the Government of El Salvador and the Government of the United States of America, as a fund administrator and program co-manager. The Río Lempa watershed is a valuable natural resource for our country since it covers 49 percent of the territory and supplies 68 percent of the national water needs; therefore, its preservation is essential to guarantee the sustainability of its ecosystem services”, said Jorge Oviedo, Executive Director of FIAES. 

“ArtCap is proud to have spearheaded the coordination of this landmark transaction, uniting public and private stakeholders to help develop a comprehensive financial and conservation strategy. This program will deliver an important source of long-term funding for projects focused on the Rio Lempa watershed.  By acting as a private sector catalyst, ArtCap was able to set a new precedent for collaboration among public and private stakeholders that helped to achieve a program with an impressive scale. We hope the success of this transaction will encourage further innovation in conservation finance,” said Antonio Navarro, Managing Partner, ArtCap Strategies. 

About DFC:

The U.S. International Development Finance Corporation (DFC) partners with the private sector to finance solutions to the most critical challenges facing the developing world today. We invest across sectors including energy, healthcare, infrastructure, agriculture, and small business and financial services. DFC investments adhere to high standards and respect the environment, human rights, and worker rights.

About CAF:

CAF – Development Bank of Latin American and Caribbean – has the mission to promote sustainable development and regional integration by financing public and private sector projects, providing technical cooperation, and offering other specialized services. Established in 1970 and currently composed of 21 countries – 19 from Latin America and the Caribbean, along with Spain and Portugal – and 13 private banks, it is one of the main sources of multilateral financing and a significant knowledge generator for the region. 

About Catholic Relief Services:

 Catholic Relief Services is the official international humanitarian agency of the Catholic community in the United States. The agency alleviates suffering and provides assistance to people in need in more than 100 countries, without regard to race, religion or nationality. CRS works at the nexus of sustainable agriculture, watershed management, and water supply to support governments, partners, communities, and all stakeholders to provide truly sustainable solutions that increase crop production, improve water for human health, and mitigate climate change. CRS has worked in El Salvador for over 50 years, supporting a network of local partners.

About FIAES:

 FIAES was launched in 1993 as a Conservation Trust Fund as a result of a debt-for-nature swap between the Government of the United States of America and the Government of El Salvador to support the restoration and conservation of natural resources in El Salvador. FIAES manages multiple funds including several debt-for-nature swaps, environmental compensation funds from the Government of El Salvador, and several conservation grants from international organizations. Over the past 31 years, FIAES has invested more than $90 million in conservation and restoration of coastal marine and terrestrial ecosystems.

About ArtCap Strategies:

ArtCap Strategies is a private credit fund and a leading financial advisory firm specializing in innovative, sustainable financing solutions for public and private sector clients (among other strategies). With a focus on structuring and investing in deals that address global challenges such as climate resilience, water security, and sustainable development, ArtCap works closely with governments, multilateral institutions, and private investors to create impactful financial strategies. ArtCap’s expertise lies in coordinating complex transactions that not only generate economic value, but also drive environmental and social progress, setting new standards in responsible finance.  

This announcement may contain forward-looking statements. Forward-looking statements are statements that are not historical facts. These statements are based on El Salvador’s current plans, estimates, assumptions, and projections. Therefore, you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and El Salvador undertakes no obligation to update them in light of new information or future events. This announcement is not an offer to purchase or the solicitation of an offer to sell any securities. This announcement is not for release, publication or distribution in or into, or to any person located or resident in, any jurisdiction where it is unlawful to release, publish or distribute such announcement.