Debts Fund Scholars

Creative approaches to educational opportunity range from aid for students who complete school to funds for third-world residents

INDEBTED parents struggling to finance a college education for their children should take notice: If your debt balloons to $11 billion you might have a chance of negotiating a ``debt-for-scholarship'' agreement with Harvard University in Cambridge, Mass. The university recently agreed to extend a helping hand to the debt-burdened government of Ecuador in South America. In an unprecedented agreement, the university will help convert a portion of Ecuador's $11 billion debt into scholarships for Ecuadorean students to attend Harvard.

The debt-for-scholarship agreement is an economic development scheme modeled on past ``debt-for-nature'' swaps in which Central and South American debt was exchanged for conservation of rain forests or other natural resources. In this case, the investment is in human-resource development. Foreign debt is being exchanged for educational opportunities. Ecuador has passed special legislation making the agreement possible.

``Harvard is putting up the original money to purchase the debt and then the Ecuadorean government is basically financing the rest through the debt swap. Everybody's putting up some money,'' says Ned Strong, area director of the Harvard-based Latin American Scholarship Program of American Universities (LASPAU), which played a role in laying the groundwork for the Harvard-Ecuador agreement.

Unlike debt-for-development arrangements in the past, the money involved in this debt-for-scholarship plan will be converted into dollars, Mr. Strong says.

Harvard plans to buy $5 million in Ecuadorean debt at the market price. The current rate is 15 percent of face value, therefore, the school would invest $750,000.

That debt will be given to Fundaci'on Capacitar, an educational foundation in Ecuador that will exchange the debt for Ecuadorean government bonds worth 50 percent of the debt's face value, or $2.5 million.

``The national government obviously much prefers to have half as much debt outstanding,'' says Robert Scott, vice president for finance at Harvard.

The government bonds, issued in sucres, the local currency, will be sold in Ecuador by the foundation. Income from the sale of these bonds will be converted to dollars and invested in the United States to create an endowment providing scholarship funds for the Ecuadorean students.

The first students are expected to enroll in the fall of 1991. Over the next decade, 70 students from Ecuador will be supported by the project, according to Scott. Four Ecuadorean students attended Harvard during this past year.

The arrangement also provides funds for Harvard students and professors to conduct research and internships in Ecuador. For the Ecuadoreans, the debt-reduction is simply a mechanism by which to bring educational opportunities to their citizens. ``The main purpose is the capacity for studying at Harvard,'' says Miguel Falconi, president of Fundaci'on Capacitar.

``It's definitely a two-way street,'' says Strong of LASPAU. The foreign student gets advanced training and enriches the university community, he says.

But what kind of Ecuadoreans will qualify for an opportunity to attend Harvard?

The urban-rural split in Ecuador is such that opportunities may not reach beyond the middle and upper-middle classes who inhabit the cities, says Eric Ehrmann, a journalist who writes on Latin American affairs.

``The rural oligarchy has had a vested interest in keeping status quo in the rural areas especially with regard to education,'' says Mr. Ehrmann. ``It's a real tough call as to whether this will be a substantive program that will help cure poverty ... or whether it's a symbolic effort to show goodwill.''

``This is mainly addressed to students without economic resources for studies,'' says Mr. Falconi of Fundaci'on Capacitar. The foundation will be offering the opportunity to middle- to low-class students in both urban and rural areas, he says.

Students from rural areas of Ecuador may not be equipped to handle an opportunity for education at Harvard. ``When you have people that really don't know any other system except a post-feudal system of large land-holding interests it's very difficult to pick those people up and put them in a culturally different area like Harvard Yard and say, `Go for it,''' Ehrmann says.

Other American universities are currently negotiating debt-for-scholarship agreements in Ecuador. ``We're putting together a pooling arrangement of universities who have smaller amounts of money to put up front,'' says John B. Ross, president of the Debt-for-Development Foundation, an international development group in Washington.

More than eight universities are expected to be involved in an exchange program that will focus on financing opportunities for US students and professors to study, teach, and conduct research with cooperating institutions in Ecuador.

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