Jubilee Debt Campaign has condemned the latest move of vulture fund NML to seize an Argentine naval ship in Ghana in an attempt to get a payout on odious Argentine debt. NML is owned by US hedge fund Elliott Associates, run by Paul Singer, one of Mitt Romney's major donors. The ship has been impounded by a Ghanaian court.
Nick Dearden of Jubilee Debt Campaign said: "This case shows how, despite political progress, vulture fund activity is still thriving. For well-known figures in the financial and political world to be involved in profiteering from economic crises is something which many people find abhorrent. Over 10 years after doing the right thing by its people, and defaulting on unpayable and often odious debts, Argentina is still not free of these hedge
"Leaving financial markets free to make profit at any price has already plunged the world into a deep economic crisis. Vulture funds are a prime example of unregulated finance. If we don't take fundamental action to deter the vultures, the situation faced by Argentina today will be faced by Greece and others tomorrow."
Vulture funds are companies that buy up defaulted sovereign debt cheaply in order to sue the country concerned for the full value of that debt. These companies have blighted countries like Democratic Republic of Congo, Zambia and Liberia for years, threatening to drain their already depleted treasuries in order to make a substantial profit.
The UK government passed a law in 2010 that effectively made such activity impossible against low income countries in UK courts on the basis of old debts, but it does not cover middle income countries like Argentina.
NML is a subsidiary of Elliott Associates, a US hedge fund that pioneered 'vulture fund' activity by winning a case against Peru in the 1990s, getting back 400% what they paid for Peru's debt. It is based in the Cayman Islands.
NML's claim is based on debts which Argentina defaulted on back in 2001. Much of the debt from this time was regarded as illegitimate by Argentina's people, originating in the brutal dictatorship of the late 1970s and early 1980s, a period is known as the 'dirty war' in Argentina, when 30,000 people were 'disappeared' and loans poured into the military, speculation, capital flight and interest payments. At the time of the default, Argentina had experienced three years of recession and over half the population - 20 million people - was living below the poverty line.
Most of Argentina's creditors from this time accepted a restructuring of their debt, but a number of vulture funds such as NML 'held out' against such a deal, even though the company bought the debt for only half of its face value, knowing the country was in economic crisis.
Jubilee Debt Campaign is the UK coalition campaigning for cancellation of unjust and unpayable debts. for more information see: http://www.jubileedebtcampaign.org.uk/