VATICAN CITY (CNS) The Vatican supports international efforts to prevent speculative investors from exploiting heavily indebted poor countries, said a top Vatican official. Archbishop Silvano Tomasi, the church’s representative to U.N. organizations in Geneva, said so-called vulture funds are taking advantage of current international debt-relief measures.
A vulture fund is any company that buys up defaulted debts very cheaply, then tries to make a profit by attempting to recoup the original amount of the debt, often by suing the impoverished country in U.S. or European courts, or by seizing a country’s assets or applying political pressure, he said.
"Vulture-fund activities complicate sovereign debt restructuring by causing inequitable burden-sharing among creditors and undermine trade and investment relations of the countries that they target," he said in an address June 2 to the Human Rights Council in Geneva.
Countries need to accept a sense of "co-responsibility for the causes and solutions relative to international debt," and they must rebuild trust between creditors and debtors so that ethical solutions to the burden of debt may be found, he said in his talk, which was sent to Catholic News Service.
The archbishop said the Vatican delegation supported the solution proposed by an independent expert’s report, yet the delegation wanted to receive more information concerning "what form of state control and preventative measures in the financial market could impede the emergence of manipulative strategies that damage the heavily indebted poor countries."
Poor countries benefiting from debt cancellation are vulnerable to vulture funds because a vulture fund company tries to seize the newly freed-up resources that follow from debt relief, according to the Jubilee USA Network.
The fund can hire a law firm to sue the country in a foreign court for the original worth of the debt plus high interest and legal fees, it said on its website.
Great Britain recently passed a measure that prevents funds from bringing heavily indebted poor countries to court in the United Kingdom to extract payment in excess of what was already agreed upon by other creditors in international negotiations.
Legislation against vulture funds has been introduced in the U.S. House of Representatives, according to the Jubilee USA Network, a coalition of more than 75 religious denominations and faith communities, human rights, environmental and labor organizations focusing on the biblical concept of debt forgiveness.
The legislation would prevent vulture funds from receiving more than the amount for which they bought the debt, and it caps annual interest at 6 percent.