Tuesday, May 29, 2012

The DRC: An Inescapable Debt Burden Follows

Staff Writer

The poorest country in the world, according to the latest United Nations’ (UN) development report, is being taking to court for reneging on its financial obligations. The DRC owes $100 million (USD) to FG Hemisphere, an obscure debt servicing company based in Brooklyn, U.S.A. Actually, those are just the “facts” of the case and, as usual, there is more to the story. It is a story filled with villains—no good guys—and their 66 million victims—the Congolese people.

During his 32-year rule, from 1965 to 1997, Congo’s Mobutu Sese Seko (a.k.a., the Leopard) ran up a $14 bn (USD) national debt. Perhaps one of the few genuinely civic ventures he undertook during his reign was an electricity grid he commissioned in his hometown. To underwrite the cost, Mobutu borrowed the money from the Yugoslavian Government, who at the time sort to win favors with the dictator for Yugoslavian companies doing business in the Congo. Overtime, the original sum gained enormous interest and, the Yugoslavian Government believing that the Congolese Government may never repay, cut its losses by selling the debt on the global sovereign debt market to someone with the stomach and patience to collect. In comes FG Hemisphere. It bought the debt at a meagre $3 million (USD), but it is entitled to being paid the full amount—which is now, interest and penalties included, a whooping $100 million (USD). And that’s exactly what it’s going for in the highest court in the Island of Jersey. Due to Jersey’s special legal status under the United Kingdom (UK), though FG Hemisphere cannot pursue this case through the UK courts, it can in Jersey.

You may ask yourself exactly how does FG Hemisphere expects the poorest country in the world to pay a $100 million tab. The answer is that FG Hemisphere knows that the Congolese government has money coming to it and, most importantly, the money is coming from the Island of Jersey, where the island’s court can intervene and make the DRC government pay its debt. The resource-rich country jointly owns a mining company based in Jersey called GTL (Groupement pour le Traitement du Terril de Lubumbashi Ltd.). GTL is owned by three companies—OM Group, an American company; Forest Group; and Gecamines. Gecamines is a Congolese mining company owned by the DRC government. It is from Gecamines’ 20 percent stake of GTL that FG Hemisphere’s suit wants to take its $100 million dollars.  It is for this patient, calculating, and cold tactics of debt retrieval at any cost that is the reason companies like FG Hemisphere are notoriously called “vulture funds.”

Legally, FG Hemisphere is in every right to be paid what it’s owed, excessive gains on investments is not a crime, anywhere. Chances are that the Congolese government will lose the case, based on its merits and the loose financial laws of where its asset—Gecamines—is based. A Jersey court of appeal, last year, upheld the ruling of a lower court, which had ruled in favor of FG Hemisphere’s claims to Gecamines’ assets in GTL. Ironically, the Congolese government put Gecamines in Jersey because it is a tax haven where the black-ops in financial dealings take place far from the prying eyes of accountable, democratic governments.

The world’s poorest country could use $100 million dollars to do something about its ranking on the list. It could build roads to help businesses bring goods to market; or, to deal with a notorious Congolese problem, pay its security personnel so they stop cannibalising on the civilian population. It could also invest the money in maternal programs to put a dent in its abysmal infant mortality rate. As the many options on how the DRC could spend this money would show, its people are in serious need of it. But, the reality is that if the money, by some stroke of luck, escapes the clutches of FG Hemisphere today and, an even daunting probability, the many other vulture funds to come, it stands little chance of escaping Swiss bank accounts belonging to the government officials of the 168th most corrupt country in the world. That’s the DRC, in case you were wondering.

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