Liberia is the most recent country to fall into the talons of a “vulture fund.” Last week, British courts ruled that Liberia has to pay $20 million to two vulture funds, Wall Capital Ltd. and Hamsah Investments, for a debt that dates back to 1978.
Vulture funds are private companies that buy up impoverished countries’ old debt, usually for pennies on the dollar. They wait until a country receives international cancellation of its other debts – a process that is intended to enable governments to engage in desperately needed education and health spending – and then sue the country in U.S. or European courts for the full face value of the debt, plus extra charges, for a huge profit.
For Liberia, as for many impoverished countries, $20 million can mean life or death.
Twenty million roughly equals the country’s entire education budget or 150% of its health spending last year. With life expectancy at a shocking average of 45 years and with one of the lowest standards of living in the world, the country’s democratic government has had the Sisyphean task of fighting extreme poverty while struggling with huge debt.
If there was ever a case for debt cancellation, Liberia is it. Most of its debts were accumulated over the last 30 years, often by despotic leaders, beginning with the autocratic regime of Samuel Doe from 1980-1989 and continuing through the brutal civil war. Under Charles Taylor’s power, the war killed an estimated 270,000 people and displaced almost 1 million Liberians.
Not only are the majority of Liberia’s debts illegitimate, the new democratic government run by Ellen Johnson-Sirleaf is doing everything it can to start a new chapter in the country’s history. In 2007, Liberia paid off its backlog of debts to the World Bank and African Development Bank, and in April of this year reached an agreement to buy back – at a steep discount — 97% of its private debt.
The scandal deepens, however, as Wall Capital Ltd. and Hamsah Investments were the only two private creditors that did not participate in this year’s debt cancellation negotiations. Instead, they waited until the deal was complete before swooping in and suing. The two companies had bought the debt years before; it dated back to 1978 and was worth only $6 million. They are perfect examples of how a vulture fund’s only reason for existence is to manipulate the U.S. and U.K. court systems that favor creditors in order to take impoverished countries’ precious resources and finance their own coffers.
For almost 15 years, the Jubilee movement has worked around the world to call for debt cancellation as an effective way to fight poverty and the morally right step toward restoring right relationships between peoples. The vulture funds’ actions are one of the most audacious attempts we have seen to undermine these worldwide efforts.
Liberia’s case shows how critical the fight against vultures is. We must work to end their predatory practices before any more countries have to suffer – and before any more bankers get rich off the backs of the world’s most impoverished.
The Stop VULTURE Funds Act is a bill currently in the House of Representatives, which would take away the ability and incentive for vulture funds to make exorbitant amounts of money off of the most impoverished by limiting the interest rates they can charge. The bill would also require private creditors to disclose much more information about their own business practices before they can sue a poor country in U.S. courts – including how much they paid for the debt in the first place. Liberia’s story is extreme, but also representative of the struggle of many countries around the world who are trying to do everything they can to succeed, but who continue to be pushed back down the mountain.
Hayley Hathaway is operations & communications coordinator for the Jubilee USA Network.
