The sailing Frigate Libertad is being held at a Ghanaian port by a US-based investment (vulture) fund in dispute over Argentinean debts.
The Ghanaian high court has ruled on the case to determine whether the Libertad is allowed to sail on, that Argentina had waived sovereign immunity when it contracted the sovereign debt being enforced. Therefore Libertad may be forced to stay in Tema until the Argentinean government pays up $1.6bn claimed by US-based investment fund NML Capital, a subsidiary of New York Elliott Associates based on Cayman Islands Tax Haven and one of the many “vulture funds”.
The fund had already obtained rulings in New York and London awarding it more than $1.6bn (£1bn) from Argentina on the basis of debts arising from the country’s defaulted bonds bought from the heavily indebted Argentinean government in 2000, a year before the country’s $100bn sovereign default saw most of its debt restructured. But no assets have been available to “recover” or force Argentina to pay the debt. Until now, that is.
Vulture Funds, rich lawyers and poor countries
A vulture fund is a private equity or hedge fund that invests in debt issued by an entity that is considered to be very weak or dying, or whose debt is in imminent default. The name is a metaphor comparing these investors to vultures patiently circling, waiting to pick over the remains of a rapidly weakening company or, in the case of sovereign debt, debtor country. Market practitioners prefer to refer to them as “distressed debt” or “special situations funds”. (Wikipedia)
Impoverished, debt stricken countries lose control of their power to restructure or renegotiate their debts when private funds buy them at a much reduced rate and demand full repayment on later years – challenging in this way the economic recovery of the country in question – and pursuing those country assets through British and USA courts, with extremely highly paid specialist lawyers doing their dirty work. Greece is just another example of vulture funds profiteering from this type of human disaster. (The Guardian). In addition to impeding debt relief they also discourage aid to and investment in poor countries as the litigation includes any new money flowing into them.
Although some countries, under pressure from Oxfam and the Jubilee Debt Campaign, have started to restrict the use of their Courts by vulture funds (the UK passed a bill in 2010 banning such use of their courts, but applying to only 40 Heavily Indebted Poor Countries and to cases before 2004), the eminently international quality of these financial giants make such restrictions next to impossible. For a timeline on some of their activities see Pressenza.
The Problem is Speculation
Whilst effective campaigning against vulture funds is difficult given the structure of the present financial system, we must applaud all efforts to restrict such practices. A more basic change is, however, essential, to stop the activities of groups which have become so dehumanised that they are completely impervious to the untold suffering they bring about. They can do so because the basic mechanism of the present system is speculation. This is what has brought about the crash in 2007, this is what maintains the “recession” (in reality concentration, I restate) and justifies the “austerity measures” (euphemism for the shrinking of the state according to neoliberal ideological orthodoxy).
If we concentrate our sights on a training ship stuck in an African port, far, far away from home, we may lose the big picture, and that would be a lost opportunity indeed.