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economic position. He emphasized that the complexities inherent in these transactions require that the Smithsonian obtain outside expertise and assistance. In discussion it was pointed out that the success of these arrangements depends heavily on the willingness of the host country to honor the debt at full face value.

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An Overview

Smithsonian resources for activities abroad might be significantly enhanced through the acquisition (purchase or donation) and then exchange of discounted Third World dollar debt instruments for local currencies. While this funding technique is relatively new (only three projects have been accomplished in this manner: one in Bolivia by Conservation International, another in Ecuador by the World Wildlife Fund, and a third in Costa Rica by the Nature Conservancy), and it has been applied only by non-profit institutions with no Federal connection, Smithsonian staff would like to explore further its possibilities for the Institution.

Such "debt swaps" negotiated with debtor nations could greatly enhance the dollar equivalent value of research funds. They could result in local currency accounts or endowments to be employed in collaboration with local research or conservation institutions in countries where the Institution has long-term research interests, such as in Brazil, Ecuador, and Madagascar. Reports on the Institution's foreign currency needs in such countries are now in preparation.

In a similar way, it is anticipated that the Smithsonian could receive from U.S. corporations tax-deductible donations of blocked currencies or foreign currency assets that cannot be repatriated, or can be repatriated only at great expense, from such countries as the Philippines and Nigeria. Such donations may be tax-deductible in the United States depending upon the relationship between the American corporation and its foreign branch, and they could be deposited in special Smithsonian accounts that would need to be set up abroad by the Smithsonian Treasurer (and with the Regents' approval) in commercial banks or in an American Embassy account authorized by the U.S. Treasury. Where the Embassy is in a position to buy currencies from U.S. agency local accounts, the dollar equivalent of the purchase could be credited to the Smithsonian's account with the U.S. Treasury.

Both mechanisms could enhance Smithsonian resources significantly, and both have been encouraged by the State Department and the Treasury. One such mechanism for management of blocked foreign currencies was approved for the Smithsonian by the State Department, the Treasury