Vulture fund circles over Zambia’s debt
KAI RYSSDAL: If something can be bought or sold, you can bet some clever businessman will try to make a market for it. Everything from stocks to student loans. It might be mortgages. Or derivatives.
Or the Zambian national debt.
Some smart businessman bought part of that. And now he’s trying to collect. From London, Marketplace’s Stephen Beard reports on a lawsuit that could affect Third World debt forgiveness programs everywhere.
STEPHEN BEARD: Having lost the case, Zambia is now bracing itself for the final tab. If it’s anywhere near the $55 million claimed, it will hit the country hard, says Gracewell Mwansa, a Zambian who lives in the U.K.
GRACEWELL MWANSA: What it will mean is 6,000 teachers not recruited. There will be no medicine for health centers, especially in the rural areas. And poverty-reduction program are going to severely suffer.
It wasn’t meant to be like this. Zambia has had vast quantities of its debt written off. The country’s supposed to be benefiting from a high profile and widely-supported campaign.
NELSON MANDELA: There is a unique opportunity for making an impact. Make poverty history in 2005.
Nelson Mandela at a rally organized by Christian Aid in London put his moral authority behind calls to cancel Third World debt. But he and other campaigners may not have reckoned with one of the more colorful characters on the financial scene.
SFX MUSIC: Goldfinger . . .
An American financier Michael Sheehan — who has jokingly used the name of the James Bond villain — has been linked to an investment fund that snapped up some of Zambia’s debt before it could be written off. The fund bought it for just over $3 million, and then sued the Zambian government for $55 million — the full face value of the debt, plus interest and penalties.
TRISHA ROGERS: For a commercial company to come in and try and make a huge profit and take this money away so that it can’t be spent on health and education, we feel is just completely disgraceful.
Trisha Rogers of the Jubilee Debt Campaign says this obviously is a “vulture fund” in action.
ROGERS: For somebody to swoop in and snatch that money away, to feather their nest and making, you know, what is it . . . 1,600 percent profit or something that they were trying to make on their original investment. I think is totally reprehensible.
MANDELA: Our objective here today is crystal clear: Make poverty history!
Campaigners have called on governments to clip the vultures’ wings — to make it illegal for them to buy up deeply-discounted Third World debt. But, says Alan Beattie of the Financial Times, this is a legal minefield. Governments would be advised to steer clear.
ALAN BEATTIE: To change contract law in just in the case of certain countries, of low-income countries, would be enormously difficult. And it might have all sorts of repercussions of which they would be unaware.
He says having different rules for different countries is asking for trouble. But, says Gracewell Mwanza, something must done. He claims other so-called vulture funds are circling. They must be deterred.
MWANZA: It is, you know, totally unacceptable in my view — in a civilized world — to have such arrangements where . . . it’s getting money by extortion.
If Zambia has to cough up $55 million, he says, that would blow all of the money the country would have saved this year by not paying interest on the cancelled debt. Debt forgiveness, he says, was not intended to line the pockets of wealthy financiers.
In London, this is Stephen Beard for Marketplace.
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