Debt and Deforestation: A Tenuous Link

Abstract

This paper examines the hypothesis that heavy foreign debt causes high rates of tropical deforestation. Empirical evidence indicates that no universally valid link exists between debt and deforestation - in either direction. After a brief discussion of the debt and deforestation problems, the paper outlines two different frameworks for understanding the (possible) links between debt and deforestation. It then considers various statistical analyses of the linkage, and review some more detailed country studies. The debt crisis lead up to the widespread adoption of structural adjustment programmes during the 1980s, and the paper also addresses the environmental impacts of the adjustment process.