One of the most deplorable and, to some extent, unkown elements of the world financial system created by globalisation are the so-called ‘vulture funds’. These scavengers are investment funds based usually in the US or tax-havens like the Virgin Islands, which use different mechanisms to exploit the poorest countries.Renaud Vivien y Gaspard Denis describe their method : «this consists of buying on the secondary debt makets, at a discount price, developing countries’ debt, without their knowledge, and then to force these countries, via judicial decisions, to pay back the debt at a higher price, this is the initial amount plus interests, sanctions and the costs of the proceedings».
Benefitng from the financial needs of developing countries, often involved in costly civil wars, private banks lend money, which then these vulture funds recover (plus interest), using the judiciary systems of developed couentries. African countries, like DRC have suffered this, according to Vivien and Denis. Thus in 2004 the vulture fund FG Hémisphere, based in Delaware (USA) bought an $18 million debt from SNEL (the public electricity company in DRC). Hemisphere took DRC to court and was awarded ¡$104 million!, an amount that will only be repaid through the seizing of the next 15 years’ profits made by SNEL.
The most recen case begins today at London’s High Court. There two vuture funds, Hamsah Investments and Wall Capital – based in the Caribbean – are recaliming $20 million from Liberia. This amount equals 5% of the total budget of the country, which only in 2003 ended a 14-year-long civil war. Although details are unclear, according to the BBC, the debt refers to an agreement signed between Lineria and the US’ Chemical Bank in 1978, for a total of $6.5 million.
Vulture funds are but a manifestation of the inequalities that characterise the global economic sytem, and of the degree to which the international institutions established during globalisation answer only to the needs of the most powerful actors. Thus it is only because European and US courts accept these cases, whilst returning Pinochet to Chile (UK), or refusing to sign the Rome Treaty (US) that vulture funds exist.
Countries like Belgium – victim in the past of vulture funds herself – have already outlawed vulture funds in ther countries. Similar initiatives have appeared in the United Kingdom, and in the US, but have not become legislation yet.
The only way of ending this despicable actions, which probably will grow as a result of the current economic crisis, is through international cooperation. Eitther through the adoption of the Calvo Doctrine, as Vivien and Denis propose, according to which » all goods, material and immaterial, are under the Sovereign State’s law and where a dispute may arise, will be judged by national courts», which would make vulture funds’ actions illegal. Or through a concrete action of the international community which would outlaw vulture funds in all countries at once.