In June of 2006, world leaders stood with British Prime Minister Tony Blair and pledged their support for debt relief for impoverished African nations. The intent of their principled gesture was to help a select number of countries pull themselves out of the quagmire of debt which prevents them from building infrastructure, schools and hospitals. But, it was also a pragmatic gesture. Poverty breeds insecurity, and as President Bush noted in his State of the Union address, poverty alleviation must be a cornerstone of our foreign policy to create a secure world. For the most part, the world applauded the efforts of the G-8 leaders, and the slow process to full debt relief began. But in the shadows stands a financial creature that threatens the resolve of the G-8 on African debt relief and threatens U.S. foreign policy related to development assistance for Africa and this administration's so-called war on terror.
A vulture is a creature that lurks around waiting for another animal to be near death before it swoops in. The vulture is a cagey bird that hovers over the weak waiting for an opportunity to finish it off. Vulture funds are a group of financial institutions that buy African and Latin American debt from the lending country for a reduced amount and then press the struggling nations into courts as they demand payment of the full loan and interest several times the original value of the debt. This practice is crippling countries that welcomed international debt relief but are now facing the possibility of debt relief from the G-8 being meaningless. They will now have to pay the new owners of their loan.
In the African country of Zambia, over 70 percent of people live in poverty. The average wage is just over a dollar a day, one in five people are infected with HIV/AIDS and life expectancy is merely 37.7 years. Yet, in the midst of qualifying for debt cancellation by G-8 nations, the Donegal Corporation, owned by American businessman Michael Sheehan, bought Zambian debt from Romania. In April, British courts awarded Donegal 15 million dollars, almost five times the value Donegal paid for the debt.
The morally bankrupt actions of vulture funds render the commitments to debt relief made by the U.S. and other wealthy nations meaningless. U.S. taxpayer money, pledged to provided relief and assistance through debt relief, will fall into the hands of these greedy corporations. At the upcoming G-8 Summit President Bush should call for a commitment by world leaders to address debt relief and vulture funds. The U.S. Treasury should follow the lead of U.K. Chancellor Gordon Brown and limit the awards vulture funds can claim for these debts. Congress must examine this practice and its impact on our overall foreign policy interests. The international community must employ effective means to protect countries like Zambia who have fallen prey to these vulture funds, including implementing fair and transparent international mechanisms to resolve these matters.
Vulture funds are aptly named. They present a threat to the end of world hunger. They undermine U.S. foreign policy and increase the possibility of a rise in terrorist organizations in sub-Saharan Africa and Latin America. People of good will and good intentions must join with international civil society and call for the end of this treacherous practice.
Danny Glover is chairman of the board of and Nicole Lee is executive director of TransAfrica Forum.
© 2007 TomPaine.com