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Vultures over Zambia
by Dr Christopher Rowan
The
vulture, seen throughout Africa, may not be considered by many as
noble a bird as the Fish Eagle, the symbol of Zambia, but it is
recognised worldwide and generally associated with imminent death or
at least serious injury.
The
vulture is usually depicted as hovering around the defenceless
target looking down on the defenceless victim or patiently hopping
closer and closer to eventually get what it has spied from afar.
In
the natural world this may be the nature of life and death but in
the world of international finance, vultures prey on defenceless
countries and cause many more problems to innocent people, unlike
the bird that helps to clear the land of carrion. Highly Indebted
Poor Countries (HIPC’s) may have financial problems for a variety of
reasons but they are not carrion to be disposed of by circling
vultures and neither are the innocent ordinary people struggling to
survive on wages of around $1 a day.
Vulture Funds
Vulture funds, as defined by the International Monetary Fund and
Gordon Brown, the current British Chancellor of the Exchequer and
possibly the next British Prime Minister, are companies or
businesses that buy up the debt of poor countries when the debt is
about to be written off and then sue for the full value of the debt
plus interest on the sum. Five years ago, Gordon Brown told the
United Nations that vulture funds were perverse and immoral: He
said, ‘We particularly condemn the perversity where vulture funds
purchase debt at a reduced price and make a profit from suing the
debtor country to recover the full amount owed : a morally
outrageous outcome.’ Yet these funds are still operating around the
world.
After great efforts by many to get debt relief for many HIPC’s such
as Zambia, it is distressing to see human vultures leaping on the
opportunity to bring more distress to poverty-ridden countries and
people. Many are concerned that these vulture funds are wiping out
the benefits that international debt relief was supposed to bring to
HIPC’s.
Preying Closer to Home
This
story is timely because on 15 February, a London high court judge
ruled on whether a vulture fund can take around $42 million from
Zambia that was purchased for less than $4 million. The $42 million
is equivalent to the debt relief received in 2006 according to
Martin Kalunga-Banda, a presidential advisor and consultant to
Oxfam. Mr. Kalunga-Banda claims that the $42 million equates to
30,000 children being able to go to school free and that the
medicines that would have been available to over 100,000 people may
now not be available.
A
spokesperson from the Jubilee Debt campaign has said ‘Profiteering
doesn’t get any more cynical than this. Zambia has been planning to
spend the money released from debt cancellation on much-needed
nurses, teachers and infrastructure; this is what debt cancellation
is intended for, not to line the pockets of businessmen based in
rich countries.’
This
particular episode began in 1979 when the Romanian government lent
Zambia the money to buy Romanian tractors; however Zambia was unable
to keep up the repayments on this loan and in 1999 the two countries
negotiated and agreed to liquidate the debt for just $3 million. At
this point a company called Debt Advisory International (DAI) had
one of its vulture funds step in and purchase the debt from Romania
for less than $4 million. This DAI vulture fund has now sued the
government of Zambia for the original debt plus interest which has
been calculated at around $42 million.
History
Some
have claimed that the billionaire Paul Singer virtually invented
vulture funds, obviously to his own massive profit. In 1996 one of
his companies bought $11 million of Peruvian debt and threatened
Peru with bankruptcy unless it paid $58 million. They are also suing
Congo Brazzaville for $400 million which was bought for only $10
million. The former head of Citibank, Walter Wriston, once remarked
that countries don’t go bust but according to Anne Krueger of the
International Monetary Fund in El Pais in January of 2002,
more than 90 countries have defaulted on their debt over the last
two centuries and a few have done so more than once. In the recent
case of Argentina, vulture funds bought a large part of public debt
at low prices (as low as 20% of their value) and then tried to cash
in during the Argentine economic crisis of 2002.
According to the Wikipedia entry on vulture funds ‘a single fund
run by Kenneth B Dart claimed $700 million in a law suit against the
Argentine government’. Similar actions have been taken against
Panama, Ecuador, Poland, Cote d’Ivoire, Turkmenistan and the
Democratic Republic of Congo and whilst it may just be a piece of
business to the vulture funds, Liana Cisneros, the head of Jubilee
2000’s Latin America Campaign, has said ‘These people are trading in
human misery. Elliot Associates L.P. (the fund involved) are picking
over the bones of the Peruvian economy like a pack of vultures. It
may be just business to them, but to the Peruvians it represents
schoolbooks, medicine and clean water.’
Political vultures
The
smell of money seems, inevitably, to lead to politicians. Many
vulture funds raise their money through proceedings in the courts in
the United States of America though the actions taken against
foreign governments can be stayed by the President of America and
here the link to politicians comes in. Paul Singer, the billionaire
noted previously, was the biggest donor to George Bush and the
Republican cause in New York City, apparently having given around
$1.7 million since Bush started his first presidential campaign.
Rudi Guiliani, the ex mayor of New York, is one of the favourites to
be the next Republican presidential candidate and it seems that,
according to the BBC, a leaked memo from his campaign shows that
Singer has pledged to raise $15 million for Guiliani’s campaign.
It
has been alleged by the Zambian legal team (led by William Blair QC,
brother of Tony) in the UK High Court that a $2 million bribe was
offered to the former Zambian president in order to smooth the way
for the vulture funds to claim their money. An email was shown in
the court stating that a payment had been made to the ‘president’s
favourite charity’ allowing them to do a more favourable deal.
The
Judgement
On
15 February, a high court judge ruled that Zambia must pay a
‘substantial sum’ to the vulture fund. The fund, based in the
British Virgin Islands, paid less than $4 million for the debt but
sued Zambia for a $42 million repayment. According to the BBC, the
judge ruled against Zambia’s application to dismiss the claim of the
vulture fund but did propose ending the freeze of Zambian assets
secured by the fund. The fund will get a chance to argue for the
continued freeze of these assets.
The
BBC economics reporter, Andrew Walker, suggested that people
familiar with the case believe the judge will order Zambia to pay
somewhere between $10 and $20 million. The lawyers for Zambia
however believe the judgement was a victory for Zambia and Janet
Legrand of DLA Piper (British legal organisation) said the ruling
was “fantastic news for both the government of Zambia and its
people.”
So,
whilst the vultures are still circling around the injured prey, it
seems that the victim is not quite ready to be sacrificed on the
altar of pure capitalism. There are friends in the first world as
well as scavengers.
Dr
Chris Rowan is our overseas development correspondent and will be
reporting on development issues as they pertain to Zambia. |
March
2007