6 June 2007
Jubilee Zambia * Jubilee USA Network * Jubilee South * Erlassjahr.de * Jubilee Australia * Eurodad * Afrodad * Oil Change International * PAPDA * CADTM
Campaigners Demand Immediate G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. Action to Declare Vulture Fund Profiteering Illegal
Rostock, Germany - On the opening day of the G-8 summit, leading international debt cancellation advocacy groups declared that the debt deal G-8 leaders negotiated 2 years ago has not solved the debt crisis and issued a strong call to the G-8 to stop the activities of so-called “vulture funds”.
“Vulture funds” are companies that seek to profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. by buying distressed debt belonging to companies or countries on the secondary market Secondary market The market where institutional investors resell and purchase financial assets. Thus the secondary market is the market where already existing financial assets are traded. at a steep discount, then seek to make a profit by claiming the original and more.
In late April, a UK court ruled that Zambia must pay Donegal International, a vulture fund officially located in the British Virgin Islands but mostly owned by Debt Advisory International, $15 million for debt acquired for just over $3 million from the Romanian government. This year, Zambia expects to save $40 million from debt relief. Paying Donegal $15 million would severely limit the relief’s impact.
“These vulture funds are eroding the limited gains of debt relief approved at the 2005 G-8 summit, and they further threaten the prospects of meeting the MDGs,” said Sitali Muyatwa, Acting Coordinator of Jubilee Zambia. “The G8 leaders should explicitly reprimand these vulture funds in the same way they reprimand debtors who slide off the austere conditionalities required for debt relief.”
In response to pressure mobilized by civil society from Africa, Europe, and North America, G-8 Finance Ministers stated in their recent communiqué: “we are concerned about the actions of some litigating creditors against Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.
The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.
Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.
List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. . We have agreed to work together to identify measures to tackle this problem, based on the work of the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.
http://clubdeparis.org .” But campaigners demand concrete and immediate action.
“The US is stonewalling on this issue, just like it is on climate change,” said Neil Watkins, National Coordinator of Jubilee USA Network. “We are very concerned by reports that the Bush administration is resisting to specific proposals to deal with vulture funds put forward by the UK and German governments in the G-8 process. We call on the G-8 to immediately stop vulture fund profiteering.”
Lidy Nacpil of Jubilee South said further: “The G8 governments claim to support calls for responsible behaviour by lenders like vulture funds. But The G8 must recognise that the issue of irresponsible lending and illegitimate debt begins first and foremost with themselves. We call on the G8 to acknowledge their co-responsibility in the accumulation of illegitimate debts and to cancel these claims immediately. Illegitimate debts include loans extended to non-democratic regimes and not used in the peoples’ interests; loans which involved corruption, fraud or unfair terms and conditions; loans for white elephant projects or harmful to people and the environment.”
Debt campaign groups in Germany for the G-8 summit point to the situation with vulture funds as just one example of the failure of the 2005 G8 debt deal to solve the debt crisis. As Eurodad pointed out in its new report this week, One Step Forward. How Many Back?, while the 2005 debt cancellation deal cancelled US$ 39bn for African and Latin American countries, but debt claims this year from Sub-Saharan Africa alone amount to over US$ 215.6bn and from Latin America over US$ 723.6bn. According to Oxfam, the most impoverished countries in the world continue to pay $100 million each day.
Sitali Muyatwa, Jubilee Zambia, +49 (0) 1628 316 498
Neil Watkins, Jubilee USA, +49 (0) 1520 284 8293, +1 202 421 1023
Jurgen Kaiser, erlassjahr.de, + 49 (0) 173 2919 374
Sylvain Dropsy, CADTM : + 49 163 40 649 45
Eric Toussaint, CADTM : + 32 486 74 47 52