Saturday, August 29, 2009

NAACP supports bill to outlaw financial exploitation of African and other nations by "Vulture Funds" which target highly indebted poor countries

A "vulture fund" is a private company that buys up the debt of poor countries at a big discount from the original owner with the purpose of suing the indebted country in court once it has some money (often after debt cancellation). This practice comes at the expense of the citizens of these indebted countries — some of the most impoverished people in the world — as well as taxpayers in countries like the United States, who bear part of the cost.

There are a number of countries that continue to face crippling debt in Africa and throughout the world. For example, in Sub-Saharan Africa, the approximate number of people living on less than a dollar a day has actually increased since 1990. If current trends are not reversed, Africa will be the only region in the world where there will be more poor people in 2015 than there were in 1990. Debt cancellation gives impoverished countries a chance to start fresh and spend more money on health, education, and other essential social services. But while countries and international organizations have been giving some countries debt relief, "vulture funds", which make huge profits at the expense of the citizens of these indebted countries often undermine any benefits that debt relief may have brought.

The actions of several unethical vulture funds are threatening to undo some of the hard-won gains of the international campaign for impoverished country debt cancellation. In 2007 one such vulture fund won $15 million from Zambia, money that was freed up by debt relief and should have been used for the fight against HIV/AIDS and poverty. Zambia was not alone: a 2007 report on vulture funds by the International Monetary Fund showed that 11 out of 24 heavily indebted poor countries (HPIC) were involved in litigation worth a total of about $1 billion on original claims of $427 million. Now Liberia, a country emerging from decades of devastating civil war, faces the possible threat of vulture lawsuits as it tries to clear up its illegitimate debt with the international community. HIPCs are particularly vulnerable to vulture funds which purchase the defaulted debts of HIPC countries at much reduced prices and litigate against the debtor for inflated sums, often in U.S. or English courts, making huge profits on the backs of the world's poorest citizens.

The United States must work to help the world's poorest countries eliminate debilitating debt which undermines their ability to provide basic human needs such food, housing, education, health care and infrastructure development for their people. To assist in this struggle, Congresswoman Maxine Waters (CA) and others have introduced H.R. 2932, the "Stop Very Unscrupulous Loan Transfers from Underprivileged Countries to Rich, Exploitive Funds Act" or the "Stop VULTURE Funds Act". This legislation would prohibit any U.S. person from engaging in debt profiteering at the expense of another nation and would prohibit any U.S. Court from issuing a judgment which would further sovereign debt profiteering.

If you have any questions, call Hilary Shelton at the Washington Bureau at (202) 463-2940.

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