The Jubilee Blog

Banks and Investors Challenge Predatory Funds

Washington, DC - The International Capital Market Association (ICMA), a group of banks and investors, released a new debt framework this morning aimed at reducing the ability of predatory funds and hold-out investors to undermine debt restructurings. The plan was created after meetings convened by the US Treasury Department in the wake of Greece's debt restructuring and comes in the aftermath of the landmark debt case between Argentina and NML Capital.

"The actions of ICMA are impressive," said Eric LeCompte, Executive Director of the religious anti-poverty group, Jubilee USA. "It really shows there is a global consensus to stop this predatory behavior."

The ICMA's plan would use contract clauses to bind all bond-holders to any debt restructuring agreement. Under the plan, the "pari passu" or parity clauses would require would-be hold-outs to accept restructured bonds approved by the majority of creditors. The ICMA plan states that all bondholders must accept a deal approved by 75% or more of a country's creditors, a clause that would have prevented Argentina's hold-outs from litigating for full repayment. The International Monetary Fund is set to propose similar guidelines in late September.

Jubilee USA in Foreign Policy Magazine

by Sophia Har

Jubilee USA's work on predatory hedge funds continues to gain attention in major press outlets. This week, Jubilee's Executive Director Eric LeCompte was featured in an article in Foreign Policy magazine regarding Argentina's ongoing debt dispute with holdout creditors and its global implications. The article is below.

Argentine Default Bad Test Case for Sovereign Debt Negotiations

Foreign Policy

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By Jamila Trindle

Argentina's default three weeks ago, and the ongoing legal battle that led up to it, raises practical, theoretical, and moral questions about the ad hoc process that ensues when a country doesn't repay its creditors.

"We're at a moment where a lot of people have been stopped short and are asking: Is this really the way we want restructurings to go forward?" asked Mark Weidemaier, a sovereign-bond expert at the University of North Carolina at Chapel Hill.

The fight between President Cristina Fernández de Kirchner's government and hedge fund NML Capital, a subsidiary of U.S. billionaire Paul Singer's Elliott Management, climaxed in late July when negotiators couldn't reach a last-minute deal preventing the country from defaulting for the second time in 13 years. But what seemed like a coda was only a crescendo in the saga. Kirchner is now desperately trying to get The Hague to invalidate a 2012 New York court decision requiring the country to pay its holdout creditors.

Continue Reading . . .

Tax Avoidance and its Effects on the Global Poor

By Anya Lewis-Meeks

As Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” Although most of the world has come to accept the former, a recent UK scandal involving 1600 people, including celebrities, businessmen, doctors and other high-profile personnel, aren’t paying their fair share of taxes.

The Times revealed that the tax avoidance scheme called Liberty tax strategy attempted to shelter £1.2 billion from being taxed. As Jubilee USA’s graphic above shows, £1.2 billion could pay the salaries of 22000 doctors, 61000 schoolteachers or 63000 policemen. Although the Daily Mail purports that the Liberty scheme itself is ‘legal,’ a global call to action must arise to ensure that loopholes in the financial system that can be exploited by such tax avoidance schemes are eliminated. The taxes that are lost through these loopholes prevent public services from being provided to the poor and are part of a larger cycle of tax avoidance, immorality and the perpetuation of extreme poverty.

WHY CONDITIONAL DEBT PROVOKED THE 2008 GLOBAL FOOD CRISIS

by Abe Bobb

When the world food crisis of 2008 crashed upon the globe like a giant tsunami, 862 million people were left hungry and starving.[1] In Haiti United Nations (UN) peacekeepers fired on protestors demonstrating against the rising cost of rice, while over 70,000 people took to the streets in Mexico City to protest the price of tortillas. The colossal tragedy, however, was that plenty of food existed to feed the world’s population. In fact, according to the FAO (Food and Agriculture Organization) of the U.N., there were record harvests of grain in 2007. Over the course of twenty years prior to 2008, world food production had risen steadily at over 2% a year, while the rate of global population growth had dropped to 1.14% a year.[2] Yet despite the adequate supply of food on earth, 862 million people were left to suffer.

The looming question naturally becomes- how could this have happened eight years after the 2000 Millennium Summit, when world leaders pledged to reduce extreme poverty and hunger by half by 2015? At the time of the summit, those suffering from hunger amounted to approximately 850 million, which then increased to 862 million by 2008.[3] But perhaps the more disturbing question becomes- how could this have happened 20 years after heavily indebted, developing countries accepted structural adjustment “solutions,” and 60 years after the US first implemented regular food aid programs?

Argentina Sues United States at International Tribunal

Suit Alleges US Court's Debt Decision Violates Sovereignty

by Abe Bobb

Argentina filed suit against the United States at the International Court of Justice (ICJ). The lawsuit argues that the US 2nd Circuit Court decision between Argentina and predatory hold-out funds violates Argentina's sovereignty. The court is a United Nations body and can only hear the case if the United States government agrees to accept the ICJ's jurisdiction.

 

Eric LeCompte, Executive Director of the religious anti-poverty coalition, Jubilee USA Network, releases the following statement:

 

"This case illustrates that we need basic rules of responsible lending and borrowing in place in order to stop predators.

 

"If we had an international bankruptcy process, countries from Argentina to Grenada never would default and predatory actors are forced to sit at the table."

US-Africa Summit Focuses on Trade, Poverty, Growth

by Abe Bobb

Washington, DC -  This week, more than 40 leaders from across Africa gathered in Washington, DC for the US-Africa Leaders Summit. The summit focuses on issues of economic growth and investment, with hundreds of millions of dollars in business deals being announced during the week-long event. Trade is a major topic of the summit, as the US attempts to keep pace with China's increased economic involvement with the African continent.

Eric LeCompte, Executive Director of the religious anti-poverty group, Jubilee USA Network, releases the following statement:

"The summit puts a spotlight on the most important issues facing Africa today, from trade to corporate tax avoidance to poverty.

"Africa is losing billions of dollars a year to illicit financial flows. For every dollar it receives in official aid, Africa loses about $15 to debt, corporate tax avoidance and illicit flows. Money is flowing out far faster than it is flowing in.

"We need to create structures to end the flow of dirty money.

"As World Bank President Jim Kim notes, debt relief and economic growth in Africa are intertwined.

"It's imperative that tax, debt and trade policies benefit the world's poorest citizens."

Argentina, Predators & Jubilee's Voice

Friends,

Argentina defaulted. But that's just the beginning.

Because of the Supreme Court's decision in June, vulture funds are equipped with a new tool to force some of the world's poorest countries into submission. Two of the first two countries that could be impacted are Grenada and the Democratic Republic of the Congo, which have related cases in New York courts.

At Jubilee USA, we are already working on a variety of ways to stop this predatory behavior. We continue to be a part of the global conversation on this story, from the Macon Telegraph to the Wall Street Journal, from the Sacramento Bee to Businessweek and the International Business Times. Due to Jubilee's intensive and round the clock media efforts, even in stories that don't quote Jubilee, we've transformed how the mainstream media is telling this story.

Here's a sampling of Jubilee's views and our media coverage from the past few days:

National Public Radio's Marketplace:
Vultures show Argentina no mercy (July 31)
What happens if Argentina defaults? (July 29)

International Business Times:
S&P Declares Argentina in Default as Final Talks Fail (July 31)
Congo and Grenada to Be Next Victims as Argentina Braces for Default (July 30)

Bloomberg Businessweek:
Argentina’s Default and the Melodramatic Cult of Evita (July 31)

Wall Street Journal:
Argentine Bond Standoff Puts U.S. Judge in Focus (July 29 and July 30)

Miami Herald, Charlotte Observer, Wichita Eagle, US Web Daily, Sacramento Bee, Macon Telegraph, Modesto Bee, World News Network:
Argentina is declared in selective debt default after talks fail (July 31)

Sacramento Bee, Centre Daily Times, Miami Herald, Modesto Bee, Charlotte Observer, Macon Telegraph, The News and Observer, Columbus Ledger-Enquirer, Fresno Bee, Bradenton Herald‎, Wichita Eagle, Fort Worth Star Telegram, Belleville News Democrat, Merced Sun Star:
Argentina is declared in selective debt default after talks fail (July 30)

The Guardian:
Argentina hits back over default as stock market slides (July 31)

Commonweal:
Cracking the 'priesthood' of people who speak money (July 31)

World Finance:
Don’t cry for d(efault) Argentina (July 30)

Nearshore Americas:
Argentina Defaults on Debt and Inches Closer to Economic Crisis (July 31)

Common Dreams:
Argentina in Default as 'Vulture Funds' Demand 'Predatory Payment' (July 31)

Value Walk:
ISDA Makes It Official: Argentina In Default (Aug 1)
Nations Watch Argentina As IMF Likely to Scold US Courts (July 30)

Het Financieele Dagblad:
Argentijns bakroet is juridisch wespennest (August 1)

Die Welt:
Greiser US-Richter Spielt Schicksal fur Argentinien (July 30) 

Wall Street Journal Americas - La Nacion: 
En Su Pelea Con Los Fondos, Argentina Encuentra En El Juez A Su Villano Favorito(July 30)

Wall Street Journal Portuguese:
Divida Argentina Coloca Juiz Dos EUA Sob Holofotes (July 30)

Thank you for your continued suppport.

Best,

Eric LeCompte
Executive Director