I am from Argentina and was only 18 years old when my country fell into the deepest of crises. Back then our economy didn’t make much sense: we were seriously misgoverned, had an expensive currency and phrases like “Country Risk”, “Foreign Debt” or “Default” were heard every day in the news.
Eventually everything crashed down, there were riots in the streets and we ended up having 5 different presidents in just one week. I wish I was kidding but I’m not.
What I didn’t know was that whilst everybody was losing their money, a few others were getting ready to make huge profits. Before the government defaulted, a sizeable part of the debt was bought by a Vulture Fund. If you’ve never heard of Vulture Funds before, it is because they operate mostly in Africa and Latin America, where the economies are weaker and the governments easier to push around.
Vulture Funds are hedge funds that buy debt from companies or countries that are near bankruptcy at very low prices so they can sue them for the full value of the debt later on.
These organizations add no value whatsoever to the world’s economy; they aren’t legitimate investors trying to provide funds that would allow countries to grow. What they do is hinder all efforts to fight against poverty. 1st World nations and international organizations like the IMF spend billions of Dollars and Euros in debt relief plans only to have Vultures take part of that money.
In Argentina, the government is currently appealing a court decision in the US ordering the state to pay their Vulture debt collectors. There are 1.330 billion dollars at stake and it is very likely that other entities will join the “let’s sue Argentina” club causing another economic collapse. To make this situation even more complex, there are other debt holders who were legitimate investors who should be entitled to every dollar they loaned us. Winning this lawsuit would give us the possibility to re-negotiate this debt, and to help the Argentine economy move forward. Losing it would place us dangerously close to another default and another catastrophic crisis.
Fortunately some organizations like the Jubilee Debt Coalition have made some progress at slowing down their actions and the U.K. passed the Debt Relief Act in 2010 placing a limit on the amount of debt they can collect. I hope more countries can follow this example, take things even further and ban Vulture Funds. If we ever want to have a world without poverty we need to protect countries from those who profit from crisis.
Increasingly often the world receives turbulent reminders of what happens when we let financial gamblers follow their hearts. Such dangerous international speculation needs to be stopped. It is preventing genuine beneficial investment, it is keeping the developing world poor.
I just hope that one day we can send the vultures to bed without dessert. As for Argentina, we shall see what the outcome of the appeal is. Growth or collapse, the effect it has will be very obvious.
Federico Marucco is The Libertarian Press’ Argentine correspondent.