Zambia loses 'vulture fund' case

Discussion in 'Politics, Religion, Social Issues' started by Stella, Feb 15, 2007.

  1. Stella macrumors 604

    Stella

    Joined:
    Apr 21, 2003
    Location:
    Canada
    #1
    http://news.bbc.co.uk/2/hi/business/6365433.stm

    This is really sad. Sad that a few profiteering people deprive the poorest nations out of so much money - money that could be used to help its citzens.

    Zambia should just 'ignore' the ruling, if possible.


    Zambia loses 'vulture fund' case

    Child in Zambia
    Zambia's infrastructure plans could be threatened

    See Newsnight's Vulture Funds report
    A High Court judge has ruled that Zambia must pay a substantial sum to a so-called "vulture fund".

    British Virgin Islands-based Donegal International paid less than $4m for a debt the African nation owed, but sued Zambia for a $42m repayment.

    It said its bill was the result of interest and costs, but the judge will decide how much Zambia should pay.

    The ruling has angered anti-debt campaigners, who say it will undermine Zambia's plans for poverty reduction.

    Concerns

    Vulture funds - as defined by the International Monetary Fund and UK Chancellor Gordon Brown among others - are companies which buy up the debt of poor nations cheaply when it is about to be written off, then sue for the full value of the debt plus interest.

    There are concerns that such funds are wiping out the benefits which international debt relief was supposed to bring to poor countries.

    A Zambian presidential adviser and consultant to Oxfam, Martin Kalunga-Banda, said $42m was equal to all the debt relief it received last year.

    "It means 30,000 children who would have benefited from going to school free will not be able to do so," he told the BBC.

    "It also means the treatment, the Medicare, the medicines that would have been available to in excess of 100,000 people in the country will not be available."


    Martin Kalunga-Banda
    The Zambians at that time did not even have the capacity to know this was happening
    Martin Kalunga-Banda

    Mr Kalunga-Banda added that while the repayment might be legal, it arose from debts accrued when the country was under "an undemocratic system".

    "The consequences of the debt are impacting on the people of Zambia," he said.

    "The Zambians at that time did not even have even the capacity to know this was happening and that is probably what brings in this issue of unfairness."

    'No comment'

    In 1979, the Romanian government lent Zambia money to buy Romanian tractors.

    Zambia was unable to keep up the payments and in 1999, Romania and Zambia negotiated to liquidate the debt for $3m.

    But before the deal could be finalised, Donegal International, which is part owned by US-based Debt Advisory International (DAI) stepped in and bought the debt from Romania for less than $4m.

    DAI founder Michael Sheehan was confronted by the BBC's Newsnight programme before the court ruling, but said only: "No comment. I'm in litigation. It's not my debt."


    Profiteering doesn't get any more cynical than this
    Caroline Pearce
    Jubilee Debt Campaign

    In 2002, Gordon Brown told the United Nations that the vulture funds were perverse and immoral.

    "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."

    Jubilee Debt campaigner Caroline Pearce said that vulture funds "made a mockery" of the work done by governments to write off the debts of the poorest - a key theme of 2005's Live8 concert.

    "Profiteering doesn't get any more cynical than this," Ms Pearce said.

    "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."
     
  2. Swarmlord macrumors 6502a

    Swarmlord

    Joined:
    Sep 18, 2006
    #2
    Poverty reduction plans? The country is a professional poverty creator. What they need to do is look back at how they've done things there for the past 3,000 years and start doing the opposite.

    I want to see what they've done with those tractors mentioned in the story. Every one of those tractors could have created enough wealth to pay them off and bought at least two more like them. It don't take free public schools to teach 30,000 kids how to use a tractor. They're trying to jump from a third world country to a first without making the necessary steps along the way to get there.
     
  3. miloblithe macrumors 68020

    miloblithe

    Joined:
    Nov 14, 2003
    Location:
    Washington, DC
    #3
    What on earth are you talking about. Primary education, immunization, and debt relief = trying to jump from a third world country to a first?

    And please, tell us what Zambia has been doing for the last 3,000 years, since you seem to know so much about it.
     
  4. nbs2 macrumors 68030

    nbs2

    Joined:
    Mar 31, 2004
    Location:
    A geographical oddity
    #4
    I'm assuming that this High Court is a British High Court. I don't understand the British court system well enough, but how many more channels of appeal remain (and how do you interact with the EU system)?

    If the debt is Romanian and the debtor Zambian, what authority does the British court have? And short of killing their already junk bond rating (I assume) or getting the tractors repo'd, is there any downfall to not paying?

    On the flip side, what was Romania doing selling the debt when it was about to be forgiven? Shouldn't we assail those selling the debt of the poorest before going after the collection agency?
     
  5. Swarmlord macrumors 6502a

    Swarmlord

    Joined:
    Sep 18, 2006
    #5
    Obviously not wealth creation.
     
  6. miloblithe macrumors 68020

    miloblithe

    Joined:
    Nov 14, 2003
    Location:
    Washington, DC
    #6
    What point are you trying to make? Zambians deserve to be poor? That they don't need education or medical care? That you're pleased when US companies can take advantage of poor countries?
     
  7. nbs2 macrumors 68030

    nbs2

    Joined:
    Mar 31, 2004
    Location:
    A geographical oddity
    #7
    I this case they're from the BVI - the US holding was mentioned, I think, just to draw a bit of "Hey look at the American's" attention.
     
  8. Ugg macrumors 68000

    Ugg

    Joined:
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    Location:
    Penryn
    #8
    Just another racist, knee jerk reaction, should we be surprised anymore?
     

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