At the World Cup of Debt, the World Lost

More

For Argentina, so far so good at the World Cup in Brazil.
At the Supreme Court in Washington, however, Argentina suffered a catastrophic defeat that no soccer metaphor can accurately capture.

Debt campaigners hold protest against vulture fund attack on Argentina (Credit: Jubilee Debt Campaign)


On Monday, the Supreme Court announced it would not hear Argentina’s appeal of a lower court ruling in favor of a group of hedge funds suing the country for more than $1 billion.
The dispute is rooted in Argentina’s 2001 debt default. When the country defaulted, amidst economic and political turmoil, nearly 93% of its creditors accepted a deal and took less money than they were owed. But a small group held out. The hold outs included hedge funds that have been nicknamed “vulture funds.” The nickname derives from the funds’ strategy of buying up the debt of economically distressed countries for pennies on the dollar and then suing, targeting debt relief money for collection. That money, of course, is often earmarked for social services like AIDS prevention and school construction.
The court’s decision is a huge blow for Argentina, but it’s also a huge blow to the rest of the world. Here’s why.
Poor countries spend five times as much money paying off old debt than they receive in official aid. Debt is a huge problem, and debt relief is an essential tool in the fight against poverty. Debt relief funds have been used to build schools, cancel fees at rural health clinics and provide access to clean water.
These predatory actors attempt to seize that money by suing countries that are receiving relief through established international debt relief processes. One hedge fund sued the African country of Zambia for an amount equivalent to Zambia’s annual education budget. These hedge funds have sued war-torn Liberia. They sued the Democratic Republic of the Congo, at the time the world’s poorest country. The Supreme Court has handed these “vultures” a precedent they can use to litigate poor countries into submission all over the globe.
The court’s decision also threatens a rare and beautiful example of bipartisan cooperation for the common good. Democrats and Republicans don’t agree on much these days, but for fifteen years, they’ve agreed that heavily indebted countries should have their debt burdens reduced. All of that is in danger now. After all, why would anyone try to relieve the debts of a developing country if the windfall is just going to be taken by a hedge fund?
The problem is rooted in the lack of a system for resolving debt burdens. Here in America, individuals can file for bankruptcy. For a country struggling to pay for social services for desperately poor people, no such process exists. It’s the Wild West, and these hedge funds are exploiting the chaos for profit.
The global reach of this case is illustrated by the World Cup, where country after country has some connection to the case or to these predatory hedge funds. Those countries include France, Mexico, Brazil and the United States (filed briefs on behalf of Argentina); Germany (its courts ruled in favor of Argentina in related suits); Belgium and England (passed laws restricting “vulture funds”); Honduras and Cameroon (sued by “vulture funds”); and Ghana (where this happened). Meanwhile, in terms of institutions lacking in soccer ability but not in influence, the International Monetary Fund, World Bank and United Nations have all openly opposed the actions of these hedge funds.
The case is over, but the struggle to protect vulnerable communities from predatory behavior is not. The time has come to harness international consensus to build an economic system that discourages predation. The alternative is unacceptable.
 
Andrew Hanauer is the Campaigns Director at Jubilee USA, (www.jubileeusa.org).

3 thoughts on “At the World Cup of Debt, the World Lost

  1. Hi. Why do I get an impression that this oh-so-liberal site and publication, and the contributors as well, are avoiding embarassing those funds and their owners by not metioning their names. Is Paul Singer on the board or a benefactor ?

  2. i’m sorry, yet no . some remarkable du as soon as believed like you performed, nevertheless I know much better what to do now they (the Obama people as well as the press attempting to help reelect him) are generally doing. it does not matter what number of taxes kinds Romney secretes; it can be said he / she must release a lot more. they are going to after that cherry-pick items of information about Romney’s fantastic wealthand without a doubt, she has loaded. what exactly? and they’ll fascinate often the exacerbated people who trust Obama’s going to spend all their home finance loan and also place it into the abundant dude. and nI wish to find Obama’s university transcripts. any kind of potential for that will transpiring? I will paraphrase you actually. “Either Obama is definitely hiding some thing, or even he feels pigheadedness can be a far more presidential quality than visibility in addition to trustworthiness. No matter what, she has mistaken. inch and Have you been nevertheless two-timing your own taxation, Mister. Kass? Obviously you will be since you refuses to post your own taxation statements and complete financial certification. Observe how that works?

Leave a Reply

Your email address will not be published. Required fields are marked *