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Tuesday, December 6, 2016
Vulture funds prey on poorest countries
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 World debt campaigners have discovered that bankers are making even greater profits than previously thought from third world countries. Under a new scheme, 'vulture funds' are buying up the debts of impoverished countries at bargain rates on the secondary market, and then suing for full repayment plus interest - even from countries which are getting debt relief from other creditors. Jubilee 2000 is calling for tougher controls to prevent private investors from using 'vulture funds' to make millions out of the debt crisis in developing countries. Jubilee gave as an example the New York-based hedge fund Elliott Associates LP. The firm bought 20 million dollars of Peru's debt for just 11 million dollars in 1996. Their intention was clear: Paul Singer, a general partner at Elliott Associates, said: "Peru would either pay us in full or be sued." Elliott Associates then pursued the Peruvian government through the courts for full payment of the debt plus capitalised interest, finally receiving a payment of 58 million dollars on 7 October this year. In the process, Elliott Associates blocked Peru from paying other creditors first, nearly forcing a default on its debt payments, which would have thrown the country further into economic chaos. The hedge fund was the only one of Peru's creditors to operate outside a package designed to help Peru manage its 3.7 billion dollar Brady bond debt (a mechanism for restructuring unpayable commercial debt). If the New York hedge fund had opted to participate with all the other Brady bond holders, it still would have made a hefty profit, realising about 10 million dollars. But Elliott Associates LP sued the Peruvian government for full payment and pushed through a change in New York law to claim capitalised interest on the repayments. The hedge fund then used court injunctions in Canada, Belgium, Luxembourg, Holland, Germany and the UK to prevent the Peruvian government from repaying other creditors until the hedge fund had received payment in full. Had Peru not paid the 58 million dollars to Elliott Associates LP, they would have been forced to default on their Brady plan, rocking market confidence. The individuals involved in the Peru case, Singer, adviser Jay Newman and attorney Michael Straus, have carried out similar practices with debts from Panama, Ecuador, Poland, Cote d'Ivoire, Turkmenistan and the Democratic Republic of Congo.
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