From Poverty to Power Green, Oxfam 2008 - weman

FROM POVERTY TO POWER– rather than those responsible for often irresponsible or self-interestedlending that contributed to the crisis in the first place – and debtors aserrant children who need to behave.Nonetheless, debt relief has translated into big money. The totaldebt relief for the 22 countries that had completed HIPC by mid-2007is estimated to be worth $70.7bn in today’s money, combining agreementswith multilateral institutions and bilateral and commercialcreditors. Because it directly frees up funds for governments to spendover many years, debt relief is a very efficient form of aid: the additionaldebt relief agreed in 2005 provided these countries with an estimated$1.3bn of extra funds in 2007 alone. 27It should be remembered, however, that debt relief is oftendwarfed by the amount that poor countries have already paid on theseloans. In 2004, the Nigerian government reported that the countryhad had original loans of $17bn, had repaid $18bn, and still owed$34bn. Its much-trumpeted 2005 debt-relief deal finally led to significantdebt cancellation, but the deal required the country to make adown payment of a further $12bn. 28Indebted countries face new threats in the shape of so-called‘vulture funds’. In 1999, as Zambia was trying to negotiate clearance ofthe debt it owed to Romania, a company called Donegal International,registered in the tax haven of the British Virgin Islands, swooped inand bought up the debt – then valued at around $30m with accruedinterest – for a knockdown price of $3.3m. The company then suedZambia in the UK courts for the full amount of the debt,plus compoundinterest, demanding a staggering $55m in total. In the end the judgeordered the Zambian government to hand over $15.5m.So far at least 40 such lawsuits have been launched by vulture fundsagainst highly indebted poor countries, and many of them are stilloutstanding. The debts known to be subject to litigation amount to$1.9bn. The bad news is that, in many cases, the law is on the side of thevulture funds: $991m has been awarded so far.A few major corporations have attempted similar legal arm-twisting.In 2003 the Big Food Group, at that time owner of the UK-basedIceland supermarket chain and other companies, sued Guyana forover £12m, only to drop the case after an outcry by UK NGOs.308