13 May 2016

Panda negotiations resemble interest-only mortgages

By George ILIEV

Pandas are China's national treasure: rare and precious. China used to send them as a diplomatic gift to other countries. The first recorded case was in the 7th century when a Chinese empress sent a pair of giant pandas to the Japanese emperor. Between the 1950s to the 1980s China shipped out 23 pandas in total, to great fanfare. However, since the 1980s, China has been giving giant pandas to other countries only under a 10-year loan and usually charging an annual interest of $1 million per animal. After that the panda has to be returned but usually the lease is renegotiated, resembling an interest-only mortgage.

Panda negotiations between a foreign zoo and the Chinese Government can take time. However, on the side, zoos also have to negotiate with domestic environmental campaigners and animal rights groups and convince them that the "panda loan interest" payments will be spent by China for panda conservation programmes. Other interests may get entangled in the negotiations as well, e.g. political and trade lobbying. So most panda negotiations start to resemble an iceberg or, even more aptly, a polar bear: part of it above water and part of it under the surface.

Atlanta Zoo Panda.jpg

When a zoo finds the price of a giant panda too high to bear (no pun intended), it can resort to a favourite tool of the finance industry: hedging. The zoos in Toronto and Calgary decided to hedge their panda exposure by signing a 10-year contract for one specimen and then taking turns to host it for five years each.

I wonder why the zoos that cannot afford a giant panda don't settle for a lesser panda. They are even cuter and need much less bamboo.

1 comment:

  1. Middle Eastern and North African countries have been the source of elephants for "elephant diplomacy" for millennia.
    1. Charlemagne received an elephant as a gift from Haroun-al-Raschid in 801 AD.
    2. Henry III of England received an African elephant in 1255 AD from the King of France. (He had also been given a polar bear by the King of Norway and a camel by the Holy Roman Emperor.)

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