The Jubilee Blog

Landmark Debt Case Headed for Supreme Court is All About Poverty

by Andrew Hanauer

(A version of this blog was originally published at The Global Citizen, a blog of Global Solutions)

Last Tuesday, Argentina appealed to the US Supreme Court in its landmark case against predatory hedge funds seeking to collect more than $1 billion in old debts.  With phrases like “bondholder” and “sovereign debt restructuring” peppered throughout the news coverage of the filing, following this case may not be as easy as following some of the other high profile proceedings before the court.  And that’s a shame.  Because for millions of people living in extreme poverty, the implications of this case are enormous.

In 2001, Argentina defaulted on its obligations and reached agreement with around 92% of its creditors to restructure the country’s debts.  Some creditors held out, however, including a number of hedge funds that had bought Argentine debt for pennies-on-the-dollar before the default, hoping to cash in later on.  These funds were participating in a calculated global strategy of speculative profit seeking that threatens the ability of poor countries to emerge from the burden of high levels of debt - behavior that has earned them their colorful nickname: “vulture funds.”

Jubilee USA's Views Covered in Wall Street Journal

Yesterday, Argentina filed its appeal to the US Supreme Court in its landmark debt case against predatory hedge funds.  Jubilee has been actively involved in the case from the beginning, arguing that a victory for the hedge funds would set a global precedent that will encourage the type of harmful, speculative behavior that has made it more difficult for poor countries to get out of debt and fight poverty.  Yesterday, Jubilee Executive Director Eric LeCompte was able to share our view on the case in the Wall Street Journal's coverage of Argentina's appeal, pasted below:

Argentina Files US Supreme Court Bondholder Appeal

by Shane Romig

Article initially published here

BUENOS AIRES--Argentina asked the U.S. Supreme Court to reverse lower-court judgments ordering it to pay over one billion dollars to holdout creditors, marking an important step toward the endgame in its legal clash with hedge funds.

In a petition submitted to the court Tuesday, lawyers for the Argentine government argued that it deserves a chance to explain why lower courts have misinterpreted a clause in defaulted bonds and trampled on the country's sovereign immunity. The case is being closely watched by global bond markets for its implications on future debt restructurings and the possibility that it may lead Argentina to default for the second time in just over a decade.

Argentina Appeals to US Supreme Court in Landmark Debt Case

by Arielle Retrosi

Yesterday, Argentina officially requested that the US Supreme Court hear an appeal in a debt case that will impact people living in extreme poverty around the world. The case dates back to Argentina's 2001 default, after which 92% of all Argentine bond holders restructured their defaulted debt. Predatory hedge fund, NML Capital leads a small group of holdouts who won judgments for payment in lower US Courts. NML Capital never invested in Argentina and bought the debt cheaply after Argentina's default. Because sovereign lending is contracted in the United States, the precedent the case sets impacts some of the poorest economies around the globe and allows these hedge funds to target assets that benefit poor people. The International Monetary Fund, the Paris Club, legitimate investors, the US and most governments oppose this predatory behavior because it cancels the benefits of debt relief, makes sovereign debt restructuring more difficult and limits credit to poor countries.

"This particular legal case will have some of the most significant impacts on global poverty in our lifetimes," shared Eric LeCompte, Executive Director of Jubilee USA Network, a religious antipoverty organization. "It's encouraging that there is a global chorus that decries this harmful predatory behavior."

The religious community and antipoverty advocates continue to monitor the case because it impacts those living in extreme poverty. In late April, the US Supreme Court is hearing a separate but related case between Argentina and the same holdouts led by NML Capital. The Supreme Court will determine when and where certain Argentine assets can be targeted for payment collection. The United States government has filed in support of Argentina for the April hearing.

For a timeline on the Argentina/NML Capital case visit here. Read an in-depth press update here. 

 

Youth Unemployment Imperils Development

by Jacqueline Kayeba

This past month, Liberian president Ellen Johnson Sirleaf addressed the 2014 World Economic Forum on the issue of youth unemployment. Her report acknowledged the massive debt relief Liberia received in 2010 but also emphasized other pressing issues like poverty and unemployment, which need to be addressed. For this year’s theme, “Reshaping the World: Consequences for Society, Politics and Business Especially through Entrepreneurship, Education and Employment,” President Sirleaf proposed strategies for tackling the unique problem of youth unemployment.

Youth unemployment affects countries around the world but greatly affects those who are already living in poverty. President Sirleaf said, “While formulating the millennium development goals in 2000, the Civil Society Forum identified youth unemployment as a major challenge of development, particularly for developing countries with high population growth.”[i]  With this in mind, one can see the impact unemployment has on third world countries that already have higher levels of debt, higher levels of poverty, health issues and rapid population growth.  The effect is obviously exacerbating the already dire conditions.

Haiti, Four Years After the Earthquake

by Andrew Hanauer

(This article was published at Tikkun Daily on February 6, 2014)

Last month marked the fourth anniversary of Haiti’s catastrophic earthquake, an event CBS News labeled the “worst natural disaster in the history of the Western hemisphere.”  The extent of the devastation is well chronicled at this point, as is the fact that Haiti was hardly a prosperous nation before the ground shook in 2010.  After the quake, aid money and help of all kinds flowed in to the country from caring people and institutions around the world.

But even as money flowed in, other money flowed out.  At the time of the earthquake, Haiti owed roughly one billion dollars to international creditors despite having just received roughly an equivalent amount in debt relief prior to the quake.  This meant that in the aftermath of the earthquake, Haiti was sending money in debt payments each month that could have been spent rebuilding the country, providing clean water, and mitigating the cholera epidemic that followed soon after.  Today, a sadly similar situation has presented itself in the Philippines, which has now sent almost $2 billion in debt payments to creditors in the aftermath of Typhoon Haiyan.  Much of the Philippines’ debt is derived from the Ferdinand and Imelda Marcos regime, which spent borrowed funds on repressive instruments of the state, a nuclear power plant built on an earthquake fault at the foot of a volcano that did not produce a single unit of energy for the country, and, of course, on a spectacular collection of shoes. 

Event at UC Berkeley Works to Foster Unity

by Andrew Hanauer

This month, Jubilee is working with student and community groups around the UC Berkeley campus to hold a remarkable event.  This event, a discussion of poverty and the need for responsible solutions to the global financial crisis, will be co-hosted by Christian, Muslim, and Jewish groups on and around campus, as well as Democratic and Republican campus organizations. 

It is, of course, in general a wonderful thing to bring together groups of people from various backgrounds, ideologies, and faiths, but it is particularly important given that many of the differences between such groups are based on perceptions that may or may not be true.  Said Berkeley College Republican President Brendan Pinder during a Jubilee event this past December: "Conversations never occur because of the divisions on campus that are, in large part, perceived and not real."  The end result of such conversations is often that people who might disagree on some issues realize where they have common ground and might work together, which is one of the end goals of this particular event.