Activists call for international tribunal on foreign debt
Stressing that debtor developing countries must have a fair say in initiatives to tackle the problem of foreign debt, social activists who met recently in Ecuador called for equitable debt restructuring that would strike a balance between debtor and creditor interests, but not before the very legitimacy of the South’s debt obligations is first independently assessed.
by Kintto Lucas
GUAYAQUIL (ECUADOR): Non-governmental organizations and social groups from Africa, Latin America, Asia and Europe meeting in this Ecuadorian city agreed to push for the creation of an international tribunal to judge the legitimacy of the foreign debt owed by developing countries.
No “civilized” legal system allows only one of the parties involved in a lawsuit to have a voice in the decisions, as occurs in the case of the foreign debt, in which “creditors are both judge and prosecution,” said Kunibert Raffer, a spokesman for the Jubilee 2000 international movement’s Austrian branch.
“With the exception of countries from the developing South, no other debtors are forced to leave their children to die of hunger to pay off their creditors,” said Raffer.
Some indebted countries “protect human dignity” through bankruptcy laws that reserve a minimum amount of resources for covering basic needs, observed the activist with Jubilee 2000, an international Catholic church-based movement that lobbies for debt relief for poor countries.
Jurgen Kaiser with Jubilee 2000 Germany recommended that international debt restructuring mechanisms be designed which take into account the voices of debtors, through “an independent study of the damages caused to society and the environment when the creditors’ requirements are met.”
The 9-12 March meeting in Guayaquil, Ecuador’s economic hub, was organized by the Jubilee 2000 international movement, Germany’s Friedrich Ebert Foundation and the Ecuador-based Latin American Social Research Institute, with the support of international NGOs.
Participants proposed the creation of international provisions modelled on US bankruptcy law, which does not force debtor municipalities to stop providing basic services in health and education in order to meet their debt payments.
The law also prohibits municipal governments from increasing taxes “to the point that quality of life is reduced” for local residents in order to cover their debts, Raffer explained.
“With a bankruptcy law of this kind, a balance is struck between the interests of creditors and debtors. Furthermore, the people affected by the debt can express their views on the damages, which is very democratic,” he added.
While the representatives of indebted developing nations can voice their views, they do not actually negotiate, said Raffer, because the supposed “agreements” reached arise from decisions made by creditors in the industrialized North, which does not amount to “a fair negotiation.”
According to the US law cited by Raffer, “both taxpayers and municipal employees have the right to defend their interests, and the creditors receive what can reasonably be expected under the circumstances.”
Kaiser, meanwhile, said it was necessary to create “an impartial institution,” in the form of an international arbitration commission, which would ensure a “fair” solution to the foreign debt problem.
Plain economic “common sense” demands that creditors renounce the control they exercise over debtors, he argued.
Economist Wilma Salgado, a member of Jubilee 2000 Ecuador, said the need to drum up funds to honour a foreign debt that amounts to more than $15 billion has had “devastating social, economic and environmental effects” in this Andean nation of 12.4 million.
“The creditors pressure debtor countries like Ecuador to pay their debts and to open their markets up to exports, but they close their own markets to the exports of the debtor nations,” said Salgado.
Last year, 31% of Ecuador’s revenues went towards servicing the debt, compared to just 17% that went to social spending, according to Central Bank statistics.
Participants at the meeting also said arrangements for writing off foreign debt on condition that the funds be channelled into social investment, as proposed by some European and Latin American governments, would not solve the underlying problem of the heavy burden of the foreign debt on poor countries.
Akoto Ampan, a member of Jubilee 2000 Ghana, said the problem of the foreign debt could only be resolved by measures seeking an in-depth solution, designed with the participation of civil society in the debtor countries.
Kaiser said that in an international arbitration process, the population of the debtor countries should be represented by NGOs, grassroots movements, community groups and trade unions. “Debt servicing should depend on a country’s capacity to take in hard currency revenues, and the debt should be reduced enough to guarantee long-term sustainable development,” he argued.
Driven by creditor interests
The roots of foreign debt crises lay in the policies and interests of creditor countries and multilateral lending institutions, said economist Alberto Acosta with the Latin American Social Research Institute. “It is their interests that condition the processes of indebtedness and structural adjustment in underdeveloped countries,” said Acosta.
“The actions of the multilateral lenders have been aimed at protecting the interests of creditors rather than the needs of impoverished countries, by forcing poor nations, for example, to throw open their capital accounts and markets to products from the industrialized world,” he added.
From 1980 to 1990, Latin America paid $238 billion to the region’s creditors, while the debt grew by nearly $220 billion. The amount transferred from the region to its creditors was “three times the total that went into the Marshall Plan, with which the United States financed the reconstruction of Europe between 1948 and 1953” in the wake of World War II (1939-45), said Acosta.
“The continuous restructuring, the Baker Plan, debt swaps, the Brady Plan or the Heavily Indebted Poor Countries Initiative (of the World Bank and International Monetary Fund) have not resolved the problem, despite the pomposity with which each one was presented at the time as ‘the definitive solution’,” he said.
Due to the failure of previous initiatives, Acosta has joined his voice to those calling for international arbitration as a way to find a real solution. However, he stressed that the first step in any arbitration process must be to hold an independent hearing.
“Not all debts merit similar treatment. Many should simply be ruled out, especially those that fall into the category of ‘corrupt debts’. Thus, the tribunal would also be able to judge cases of corruption related to international finances,” the economist concluded. (IPS)
From TWE No 276 (1-15 March 2002)