Puerto Rico’s religious leaders have called for debt relief of the Caribbean U.S. territory in the face of the 72 billion dollar liability that represents 20,000 dollars of debt for every man, woman and child.

In a statement issued Aug. 31, the clergy called on the U.S. Federal Reserve to intervene if Congress fails to pass bankruptcy protection to the financially-strapped island.

“This debt crisis threatens to push more of our people into poverty and put people out of work,” said San Juan Archbishop Roberto González Nieves, leader of Puerto Rico’s mostly Catholic population.

“The religious community stands with vulnerable people and we call for the crisis to be resolved in a way that protects the poor and grows our economy,” he added.

At a press conference in San Juan, leaders of the major religious groups laid out six principles to resolve the crisis.

“Puerto Rico’s religious leaders are fighting for the lives of their people,” stated Eric LeCompte, executive director of the faith-based development coalition Jubilee USA Network.

Jubilee USA Network is an alliance of more than 75 U.S. organisations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable.

LeCompte visited Puerto Rico in mid-August to advise religious and political leaders on solutions to the crisis.  “We need to get Puerto Rico’s debt back to sustainable levels and ensure that the island has a path for economic growth,” he said

Some of the hedge funds, arguing for cuts in Puerto Rico’s economic growth, were or are currently involved in debt disputes in Greece, Argentina and Detroit, Michigan.

Two recent reports, one commissioned by a group of hedge funds which purchased the island’s distressed debt and the other authorised by Puerto Rico’s own government, suggest new austerity plans to pay off portions of the debt.

The reports note a range of “fiscal adjustments”, including reducing the minimum wage, education resources and healthcare costs. One of the principles promoted by the coalition of religious leaders is that any resolution to the financial crisis prevents further austerity plans.

The religious leaders raised concern over predatory hedge fund activity in their statement. Beyond the Catholic Church, other religious groups signing the statement include Methodists, Lutherans, Evangelicals, Pentecostals and the Disciples.

“As religious leaders, we see how desperate the situation is for Puerto Rico’s people,” said Reverend Heriberto Martínez Rivera, secretary-general of Puerto Rico’s Biblical Society and the leader of the religious coalition confronting the debt crisis.

“Too many of our people are already suffering from austerity policies and many brothers and sisters have left for the United States hungry for work and a better quality of life,” he added.

Beyond calling for debt relief and criticising austerity policies, the religious leaders’ statement asserts the need for greater Puerto Rican budget transparency and participation in future debt negotiations by people negatively affected by the crisis.

Edited by Phil Harris   

Secretary-General Ban Ki-moon (left) addresses a press conference before departing from Addis Ababa, after attending the Third International Conference on Financing for Development. At his side is Wu Hongbo, UN Under-Secretary-General for Economic and Social Affairs. Credit: UN Photo/Eskinder Debebe

By Thalif Deen
UNITED NATIONS/ADDIS ABABA, Jul 15 2015 (IPS)

Despite high expectations, the third International Conference on Financing for Development (FfD) ended on a predictable note: the United Nations proclaimed it a roaring success while most civil society organisations (CSOs) expressed scepticism over the final outcome.

Hours after the conclusion of the conference in the Ethiopian capital, the United Nations trumpeted the Addis Ababa Action Agenda (AAAA) as a “ground-breaking agreement that provides a foundation for implementing the global sustainable development agenda that world leaders are expected to adopt this September.”“The outcome will not deliver the reforms we need in areas like tax, that most in civil society had hoped for and, that are needed to increase the resources available for development." -- Dr. Danny Sriskandarajah

U.N. Secretary-General Ban Ki-moon sounded optimistic when he said the agreement was a critical step forward in building a sustainable future for all since it provides a global framework for financing sustainable development.

He added, “The results here in Addis Ababa give us the foundation of a revitalized global partnership for sustainable development that will leave no one behind.”

But Dr. Danny Sriskandarajah, Secretary-General of the Johannesburg-based CIVICUS, was blunt: “This week we saw a further sign that we are at the beginning of the end of the post-World War II (WWII) development world order.”

Rich countries seem unable or unwilling to increase official aid flows, which stand at a fraction of what they themselves promised years ago, he said.

“We are disappointed that the FfD process has not yielded new resources to fund the investments needed to end poverty or taken meaningful steps to address problems in the international financial system,” he said at the conclusion of the conference Wednesday.

He added: “The outcome will not deliver the reforms we need in areas like tax, that most in civil society had hoped for and, that are needed to increase the resources available for development.”

Asked about the failed proposal for the creation of a global tax body, ActionAid’s international tax power campaign manager, Martin Hojsik, told IPS: “The decision is an appalling failure and a great blow to the fight against poverty and injustice.”

He said it means that developing countries, which are losing billions of dollars a year to tax dodging, are not being given an equal say in fixing unjust global tax rules.

“This lost money could have gone to the provision of education, healthcare and other poverty-reducing public services. While the multinationals prosper, the poor and marginalised will suffer,” he said. “The fight for a fair global tax system should not and cannot falter.”

In a statement released here, Oxfam International said unresolved rigged tax rules and privatised development are the major drawbacks of the FfD outcome.

However, after such tense negotiations there can be no doubt that developing countries’ determination to call for true global tax reform and tax cooperation has been noted, and cannot go unheeded for long.

Oxfam International Executive Director Winnie Byanyima said: “Today, one in seven people live in poverty and Addis was a once in a decade chance to find the resources needed to end this scandal. But the Addis Action Agenda has allowed aid commitments to dry up, and has merely handed over development to the private sector without adequate safeguards.”

She said developing countries held firm in Addis on the need to set up an intergovernmental tax body that would give them an equal say in how the global rules on taxation are designed.

“Instead they are returning home with a weak compromise meaning rigged rules and tax avoidance will continue to rob the world’s poorest people.”

Byanyima said fair taxation is vital in the fight against poverty and inequality.

“Citizens must be able to depend on their own governments to deliver the services they need. But it is just not logical to ask developing countries to raise more of their own resources without also reforming the global tax system that prevents them doing this,” she added.

Eric LeCompte, executive director of the Jubilee USA Network, told IPS “while compromised language on a tax committee was reached, we have the first global agreement that notes the harm of illicit financial flows and calls to stop them by 2030.”

Right now the developing world is losing a trillion dollars a year to corruption and tax evasion, he said, pointing out, “those are resources we need to end poverty.”

In a joint statement released late Wednesday, Global Financial Integrity (GFI), the Africa Progress Panel (APP) and Jubilee USA applauded the global commitment to reduce the massive flow of illicit funds from developing country economies.

For the first time international consensus was reached on the importance of an issue that has been at the forefront of efforts by hundreds of research and development organisations for the last 10 years.

Specifically, the FfD3 Outcome Document requires member states to “redouble efforts to substantially reduce illicit financial flows (IFFs) by 2030, with a view to eventually eliminate them, including by combatting tax evasion and corruption through strengthened national regulation and increased international cooperation.”

Additionally, the final text calls on “appropriate international institutions and regional organizations to publish estimates of IFF volume and composition”

The statement said the ability to measure illicit flows was at the heart of significant disagreement during the FfD3 preparatory negotiations in New York earlier this year with the 132-member Group of 77 developing countries calling for country-level estimates of illicit flow volumes.

In its statement, the United Nations said the Addis Ababa Action Agenda contains more than 100 concrete measures.

It also addresses all sources of finance, and covers cooperation on a range of issues including technology, science, innovation, trade and capacity building.

The Action Agenda builds on the outcomes of two previous Financing for Development conferences, in Monterrey, Mexico, and in Doha, Qatar.

Wu Hongbo, the Secretary-General of the Conference, said, “This historic agreement marks a turning point in international cooperation that will result in the necessary investments for the new and transformative sustainable development agenda that will improve the lives of people everywhere.”

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

A major donor conference in Nepal’s capital, Kathmandu, came to a close on Jun. 25 with foreign governments and aid agencies pledging three billion dollars in post-reconstruction funds to the struggling South Asian nation.

An estimated 8,600 people perished in the massive quake on Apr. 25 this year, and some 500,000 homes were destroyed, leaving one of the world’s least developed countries (LDCs) to launch a wobbly emergency relief effort in the face of massive displacement and suffering.

Two months after the disaster, scores of people are still in need of humanitarian aid, shelter and medical supplies.

Speaking at the conference Thursday, Nepal Prime Minister Sushil Koirala assured donors that their funds would be used in an effective and transparent manner.

Rights groups have urged the government to focus on long-term rebuilding efforts rather than sinking all available monies into emergency relief.

In a statement released ahead of the conference, Bimal Gadal, humanitarian programme manager for Oxfam in Nepal, warned of the impacts of unplanned reconstruction and stated, “The Nepalese people know their needs better than anyone and their voices must be heard when donors meet in Kathmandu. They have been through an ordeal, and now it is time to start rebuilding lives.”

“This conference is a golden opportunity to get people back on their feet and better prepared for the future,” he said.

“This can only happen if the government of Nepal is supported to create new jobs, build improved basic services like hospitals and clinics, and to ensure all new buildings are earthquake-resilient.”

Despite a huge thrust from civil society organisations, the International Monetary Fund (IMF) has announced that the country does not qualify for debt relief under its Catastrophe Containment and Relief (CCR) Trust, which recently awarded 100 million dollars in debt relief to Ebola-affected countries in West Africa.

The Jubilee USA Network, an alliance of over 75 U.S.-based organisations and 400 faith communities worldwide, has been pushing for major development banks, including the IMF, the World Bank and the Asian Development Bank (ADB) to ease debt payments from Nepal, one of the world’s 38 low-income countries eligible for relief from the IMF’s new fund.

According to Jubliee USA, “Nepal owes 3.8 billion dollars in debt to foreign lenders, including 54 million dollars to the IMF and approximately three billion dollars to the World Bank and Asian Development Bank.

“According to the most recent World Bank numbers,” said Jubilee USA in a statement, “Nepal paid 217 million dollars in debt in 2013, approximately 600,000 dollars in average daily debt payments, or more than 35 million dollars since the earthquake.”

Considering that the earthquake and its aftershocks caused damages amounting to about 10 billion dollars – about one-third of the country’s total economy – experts have expressed dismay that the country’s creditors have not agreed on a debt-relief settlement.

“This is troubling news,” said Eric LeCompte, a United Nations debt expert and executive director of Jubilee USA Network. “Given the devastation in Nepal, it’s hard to believe that the criteria was not met.”

“This fund was created for situations just like this and debt relief in Nepal could make a significant difference,” said LeCompte.‎ “Beyond the IMF, the World Bank and Asian Development Bank who hold about three billion dollars of Nepal’s debt have unfortunately not announced any debt relief plans yet.”

Edited by Kitty Stapp

A family stands beside a damaged house near Naglebhare, Nepal. The housing sector bore the brunt of the April earthquake, accounting for three-fifths of all damages. Credit: Asian Development Bank/CC-BY-2.0

By Zhai Yun Tan
WASHINGTON, Jun 17 2015 (IPS)

The 7.8 magnitude earthquake that shook Nepal in April, and the numerous aftershocks that followed, left the country with losses amounting to a third of its economy.

As this South Asian nation of 27 million people struggles to get back on its feet, a major donor conference scheduled for Jun. 25 promises to bring some relief, but the extent of the disaster means that Nepal will be dealing with the fallout from the quake for a long time to come.

“The economy of Nepal took a huge hit from these earthquakes and there is a danger that many of the country’s impressive gains in overcoming poverty could be reversed." -- Annette Dixon, vice president for the South Asia Region at the World Bank
The country’s post-disaster needs assessment reported damages of 5.15 billion dollars, losses of 1.9 billion dollars and recovery needs of 6.6 billion dollars. The housing sector bore the brunt of the disaster, accounting for three-fifths of the damages and half of the country’s most pressing needs.

Nepal Finance Minister Ram Sharan Mahat has called this the worst disaster in Nepal’s history. Over 8,000 lives were lost, 22,000 people were injured and over 1,000 health facilities were destroyed, according to government data.

“One in three Nepali people have been affected by the earthquakes. One in 10 has been rendered homeless,” the foreign minister said. “Half a million households have lost their livelihoods, mostly poor, subsistence farmers.”

An additional three percent of the population, which amounts to roughly a million people, has been pushed into poverty because of this disaster, according to the World Bank.

The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) said on its website that 8.1 million people are in need of humanitarian support and 1.9 million require food assistance.

Only 129 million dollars of the 422-million-dollar humanitarian appeal by United Nations have been raised.

Nepal, a developing country saddled with debts up to 30 percent of its gross domestic product (GDP) and dependent on external aid, had nonetheless been making developmental and economic gains before the disaster struck.

For instance, government data indicate that the percentage of people living in poverty fell from 42 percent to 23.8 percent within the last 20 years.

“The disaster has dealt a severe blow to our aspirations,” Mahat said.

The donor conference later this month, to be held in Nepal’s capital, Kathmandu, is expected to tackle strategies for reconstruction and the provision of financial support.

“The economy of Nepal took a huge hit from these earthquakes and there is a danger that many of the country’s impressive gains in overcoming poverty could be reversed,” said Annette Dixon, vice president for the South Asia Region at the World Bank.

“The country needs resources to pay for the recovery that can be channeled through credible programmes to make itself more resilient to the next natural disaster and ensure that those most in need receive the help they deserve.”

The conference will be jointly conducted by the Nepal government, the Asian Development Bank, the European Union, the government of India, the Japan International Cooperation Agency, the United Nations and the World Bank.

More challenges lie ahead for Nepal as the annual monsoon season approaches, potentially displacing thousands more people. Charity groups such as CARE are scrambling to provide iron sheeting to households and those in temporary shelters to keep them dry, according to the group’s recent update.

“Our biggest priority now is to make sure we get people through the monsoon safe and dry,” said CARE shelter expert Tom Newby in the Jun. 5 release. “Families want to know how to rebuild their homes safer and better and our job is to help them do this.”

Orla Fagan, public information officer at OCHA’s Asia Pacific regional office, said in an email to IPS that providing shelter is a key concern.

“There were around 500,000 families affected and left without homes after the two earthquakes,” Fagan said, adding that greater relief efforts are needed before the country can move on to reconstruction.

Rupa Joshi, communications manager for the United Nations Children’s Fund (UNICEF) in Nepal, is concerned about the country’s fragile hillsides.

“The monsoon is already upon us,” Joshi said in an email to IPS. “We feel when the rain comes in, or pour like it did last week in eastern Nepal, our mountains will see numerous large landslides.”

Agencies like UNICEF and the World Food Programme (WFP) are working to help children return to school, provide safe birth-centers and deliver food to people in Nepal’s hard-to-reach mountainous areas.

Meanwhile, groups like Jubilee USA Network, an alliance of over 75 U.S.-based NGOs and 400 faith communities, are fighting to help Nepal obtain debt relief from the World Bank, the Asian Development Bank (ADB) and the International Monetary Fund (IMF), to which Nepal owes about 54 million dollars.

“The country pays 600,000 dollars a day [to its creditors],” Eric LeCompte, executive director of the coalition, told IPS. “It is a significant amount that can be freed up for relief efforts.”

Nepal could also qualify for assistance under the IMF’s Catastrophe Containment and Relief Trust (CCR), which aims to relieve debt burdens of low-income countries like Nepal.

To qualify for the trust, Nepal will have to demonstrate that the natural disaster has directly affected at least one third of its population and destroyed more than a quarter of its productive capacity.

Jubilee USA Network has succeeded in securing similar debt-relief schemes for several Ebola-stricken countries by applying pressure on the IMF.

LeCompte said the Jun. 25 conference is crucial for Nepal.

“The Nepal government is expected to ask for debt relief at the conference,” LeCompte said. “It will push the decision-making process onto the banks.”

Edited by Kanya D’Almeida

School children in Nepal’s Matatirtha village practice an earthquake drill in the event of a natural disaster. A 7.8-magnitude earthquake in Nepal on Apr. 25, 2015, has endangered the lives of close to a million children. Credit: Department of Foreign Affairs and Trade/CC-BY-2.0

By Kanya D'Almeida
UNITED NATIONS, Apr 27 2015 (IPS)

The death toll has now passed 3,300, and there is no telling how much farther it will climb. Search and rescue operations in Nepal entered their third day Monday, as the government and international aid agencies scramble to cope with the aftermath of a 7.8-magnitude earthquake that struck this South Asian nation on Apr. 25.

Severe aftershocks have this land-locked country of 27.8 million people on edge, with scores missing and countless others feared dead, buried under the rubble.

“Nepal owes 3.8 billion dollars in debt to foreign lenders and spent 217 million dollars repaying debt in 2013.” -- Jubilee USA Network
With its epicenter in Lamjung District, located northwest of the capital, Kathmandu, and south of the China border, the massive quake rippled out over the entire country, causing several avalanches in the Himalayas including one that killed over 15 people and injured dozens more at the base camp of Mt. Everest, 200 km away.

The United Nations says Dhading, Gorkha, Rasuwa, Sindhupalchowk, Kavre, Nuwakot, Dolakha, Kathmandu, Lalitpur, Bhaktapur and Ramechhap are the worst affected areas. In total, 35 out of 75 districts in the Western and Central regions of the country are suffering the impacts of the quake and its severe aftershocks.

Questions abound as to how this impoverished nation, ranked 145 out of 187 on the United Nations Human Development Index (HDI) – making it one of the world’s Least Developed Countries (LDCs) – will recover from the disaster, considered the worst in Nepal in over 80 years.

One possible solution has come from the Jubilee USA Network, an alliance of over 75 U.S.-based organisations and 400 faith communities worldwide, which said in a press release Monday that Nepal could qualify for debt relief under the International Monetary Fund’s (IMF) new Catastrophe Containment and Relief Trust (CCR).

The IMF created the CCR this past February in order to assist poor countries recover from severe natural disasters or health crises by providing grants for debt service relief. Already, the fund has eased some of the financial woes of Ebola-impacted countries by agreeing to cancel nearly 100 million dollars of debt.

Quoting World Bank figures, Jubilee USA said in a statement, “Nepal owes 3.8 billion dollars in debt to foreign lenders and spent 217 million dollars repaying debt in 2013.”

Nepal owes some 1.5 billion dollars each to the World Bank and the Asian Development Bank, as well as 54 million dollars to the IMF, 133 million dollars to Japan and 101 million dollars to China.

“In order for Nepal to receive relief from the IMF’s fund, the disaster must destroy more than 25 percent of the country’s ‘productive capacity’, impact one-third of its people or cause damage greater than the size of the country’s economy,” Eric LeCompte, Jubilee USA Network’s executive director, told IPS. “It seems clear that Nepal will qualify for immediate assistance from the IMF.”

According to Jubilee USA Network, Nepal is scheduled to pay back 10 million dollars worth of loans to the IMF in 2015 and nearly 13 million dollars in 2016. Relieving the country of this burden will free up valuable and limited funds that can be redirect into the rescue and relief effort.

Strong emergency response – but is it enough?

“Time is of the essence for the search and rescue operations,” Under-Secretary-General of Humanitarian Affairs and Emergency Relief Coordinator Valerie Amos said Monday.

“The actions of the Government of Nepal and local communities themselves have already saved many lives. Teams from India, Pakistan, China and Israel have started work, and more are on their way from the U.S., the UK, Singapore, the United Arab Emirates, the European Union and elsewhere.”

Early on Sunday morning the United States’ department of defense confirmed it had dispatched an aircraft to Nepal carrying 70 personnel and 700,000 dollars worth of supplies.

But it is unclear whether or not the immediate response will prove equal to the mammoth task ahead.

The U.N. Children’s Fund (UNICEF) estimates that 940,000 children from areas severely affected by the quake are in desperate need of humanitarian aid.

The World Food Programme (WFP) has been supplying emergency food rations, while the World Health Organisation has sent in enough medical supplies to meet the needs of 40,000 affected people, yet experts say much more will be needed in the weeks and months ahead.

Tens of thousands of people are sleeping in the open air in makeshift tents; almost all are in need of better accommodation, clean water, sanitation, tents and blankets, and improved medical supplies.

A situation report released over the weekend by the U.N. Office for the Coordination of Humanitarian Affairs (OCHA) revealed, “In Kathmandu Valley, hospitals are overcrowded, running out of space for storing dead bodies and lack medical supplies and capacity. BIR hospital [one of the country’s leading medical facilities] is treating people in the streets.”

Scenes of devastation all around the country highlight the need for emergency relief, but do not do justice to the massive reconstruction effort that will be needed in the months and years to come.

“Nepal’s rebuilding efforts will take years and debt cancellation is a recipe for long-term financial stability,” LeCompte stressed.

“Since the IMF has clear rules in place and the financing available with their trust, aid [to Nepal] should come relatively quickly,” he added. “Unfortunately, with the bulk of the debt owed to the World Bank and Asian Development Bank, the rules for debt relief are less clear.

“It’s unfortunate that the World Bank, as a development institution, still has not yet released a plan similar to the IMF to respond rapidly to humanitarian crises. In the short term, the World Bank must offer a plan for grants and debt relief. I hope this crisis also motivates the World Bank to release their plans for a rapid response mechanism,” LeCompte concluded.

Edited by Kitty Stapp

The Caribbean Debt Network meets in Grenada. Credit: Bernard Lauwyck

By Eric LeCompte
WASHINGTON, May 5 2014 (IPS)

Last Fall, I witnessed the Grenada Council of Churches insert themselves into negotiations between their government and the International Monetary Fund (IMF) around the island’s debt restructuring and presumed austerity policies. Religious leaders called from pulpits across the tiny island for a “Jubilee” or national debt cancellation.

When I recently returned to the Spice Isle, I was awed by what I saw – the religious experiment in Grenada was spreading like wild fire to other Caribbean countries."Our churches are on the front lines of fighting poverty in the Caribbean. We see how the debt crisis is hurting the poorest people on the islands." -- Presbyterian Minister Osbert James

At Blessed Sacrament Catholic Church, overlooking the Caribbean Sea, the Caribbean Council of Churches, four Catholic Dioceses and various religious leaders from across the region gathered to launch the Caribbean Debt Network.

They came from St. Vincent’s and The Grenadines, Barbados, Dominica, Trinidad and Tobago, Jamaica and Grenada, knowing their unity is more vital than ever.

Out of the 20 most heavily indebted countries in the world, six are Caribbean countries.

The islands are dotted with makeshift shacks, where depending on the island, 20 percent to 50 percent of the population lives in poverty. Various islands see high unemployment rates from 30 to upwards of 50 percent.

Like dominoes, island after island is going through International Monetary Fund IMF debt restructurings that demand austerity policies that hurt millions of people living in extreme poverty.

Among most Caribbean tourist areas, you can’t avoid the working poor.

In fact, the plight of the vulnerable along with infrastructure challenges are so palpable on the small islands, you scratch your head wondering why the IMF calls these countries “Middle Income.” When a poor country is defined as Middle Income, they cannot apply for existing debt relief processes such as the Heavily Indebted Poor Countries Initiative or HIPC.

The process by which economists define a country as Middle Income is by averaging the total income of everyone in the country (per capita). In other words if 99 people make one dollar and one person makes 100,000 dollars, the average income per person is 1,001 dollars.

In a place like Grenada, where the poverty rate ranges from 38 to 50 percent, the income levels are skewed. The religious community uses the words “social sin” to describe how income inequality is hidden from us as struggling Caribbean economies are denied relief because of what they are called.

Even with HIPC, any poor country will tell you it’s not a walk in the park. The IMF and other international financial institutions acknowledge that the process offers too little debt relief, too late, with too many benchmarks. However, when struggling economies go through the painful act of debt restructuring without even the framework of HIPC, it’s wrangling a hurricane.

And real hurricanes are real threats. In 2004, 200 percent of Grenada’s GDP was wiped out in three hours by Hurricane Ivan. With powerful hurricanes landing every 10 years and financial crises in other parts of the world impacting the Caribbean’s primary industry of tourism, countries across the region seem destined for never-ending cycles of austerity and debt.

“Our churches are on the front lines of fighting poverty in the Caribbean. We see how the debt crisis is hurting the poorest people on the islands,” notes the new chair of the Caribbean Debt Network, Presbyterian Minister Osbert James.

James’s historic cathedral, among many structures unrepaired since the 2004 Hurricane, still lacks a roof.

While it’s still too early to assess Grenada’s debt restructuring, we can see that the Jubilee model is opening up shop on other Caribbean islands.

At Blessed Sacrament Catholic Church, the regional Caribbean religious leaders launched the new coalition in a conference room aptly named The Upper Room. For Christians, it evokes Pentecost when the Holy Spirit empowered religious leaders to inspire others. Pentecost is derived from the more ancient Jewish holiday, Shavuot, which celebrates the gift of our covenant with God and God’s abundance.

At the founding conference last week, the religious community sought to spread Pentecost and Shavuot. They resolved the following:

1. To raise the awareness of the effects of the sovereign debt on Caribbean Countries

2. To establish a structure within which our countries can resolve indebtedness fairly

3. To build a Jubilee coalition to achieve debt resolution, sustainable development and fiscal responsibility at all levels

4. To illustrate how sovereign debt impacts issues of concern, such as human trafficking, drug trafficking, climate change and HIV/Aids.

5. To work with governments and with our international partners on all aspects of debt

6. To encourage the Governments of Grenada and Antigua & Barbuda to champion the cause of a special initiative for resolving Caribbean indebtedness to achieve a sustainable debt level

Eric LeCompte is the Executive Director of Jubilee USA Network and serves on UN expert working groups that focus on debt restructuring and financial reforms. He recently returned from Grenada where he supported the launch of the Caribbean Debt Network.

Aggressive creditors and investors are seriously undermining the ability of poor countries to deal sustainably with debt issues, academics and anti-poverty campaigners told a briefing at the U.S. Capitol on Wednesday.

Further, many of these investors are now based in the United States, after other important financial centres have moved to curtail such practices. As such, national lawmakers and international experts are stepping up calls for Washington both to follow suit domestically and to lead a related international effort.“If the hedge funds win, they will have a precedent that will allow them to dismantle 15 years of core U.S. debt restructuring policy." -- Jubilee's Eric LeCompte

“We need to acknowledge that aspects of the financial crisis could have been prevented if we had basic, common-sense principles on responsible lending and borrowing within the international financial system,” said Eric LeCompte, executive director of Jubilee USA, a network of anti-debt campaigners and a co-host of Wednesday’s briefing.

“In fact, both Northern and Southern countries that have gone through severe external debt crisis may have been saved the severe shocks to their economies and austerity restructuring if these reasonable principles were in place.”

(Jubilee released a full report on these proposed principles last year.)

Maxine Waters, a member of the House of Representatives, agreed, saying in a statement, “The time has come for the world to design a formal, more efficient system for managing the restructuring of sovereign debt.”

At issue is a strategy adopted by a small number of hedge funds to purchase reduced-rate debt from poor countries with little hope of repayment. These firms then file lawsuits against those governments for failure to repay, looking to scoop up government revenues and international aid monies when they eventually start to flow.

Perniciously, these firms maintain the lawsuits even as other investors typically agree to reduce some debts, accepting lower-than-expected returns that nonetheless allow the indebted government to begin to recover. Even a single such “holdout creditor” (also known as a “vulture fund”, for having purposefully sought out governments in fiscal distress) can gum up the entire debt-restructuring process.

“One of the most obvious remedies being discussed is that of collective action clauses, which allow a super-majority of creditors to force holdouts to accept a restructuring,” Rep. Waters noted Wednesday.

“Yet it would be wrong to rely solely on such clauses … This is why I favour the establishment of a formal, institutionalised, and politically recognised mechanism for restructuring the debt of bankrupt sovereigns, which would address all forms of debt.”

Other countries, most notably the United Kingdom, have already put in place restrictions aimed at undercutting the motivation to engage in such “vulture” speculation. Yet the United States has yet to do so.

On Wednesday, Cephas Lumina, the United Nations independent expert on the effects of foreign debt, noted that the U.S. is today a “preferred jurisdiction” for holdout creditors. He called on Washington to take “robust legislative measures … to limit the ability of vulture funds to pursue immoral profits at the expense of the poor.”

High stakes

In the aftermath of the 2008-09 financial crisis, government debt has become an increasingly important topic for all countries. And as austerity measures increasingly impact on poor communities, some advocates suggest that stronger international principles on sustainable lending practices could mitigate some of these ongoing ramifications.

Perhaps improbably, the issue of holdout creditors has heated up considerably here in Washington in recent months. Much of this is due to a landmark legal fight taking place between the government of Argentina and two New York-based hedge funds – NML Capital and Aurelius – that own some of the bonds Buenos Aires, then facing bankruptcy, defaulted on in 2001.

In a widely watched decision, in August a judge ordered the Argentine government to pay the two funds nearly 1.5 billion dollars. But Buenos Aires rejected the decision, saying that it would continue to repay its debts on its own terms (indeed, it is barred from paying the hedge funds, due to a law passed by the Argentine legislature in 2005).

It also warned that agreeing to pay off NML and Aurelius would embolden the 93 percent of Argentina’s other creditors – each of which has agreed to accept lower repayment – to demand their full share. Doing so, Argentina noted, would put the government back in the situation it faced in 2001.

The case has now been appealed to the U.S. Supreme Court. Although the justices refused to take on the issue in October, following a new appeal many observers now see a high probability the court will review the case.

Jubilee’s LeCompte says the stakes are high. Most countries facing holdout creditors, it should be noted, are far poorer than Argentina.

“The outcome could have some of the most far-reaching consequences for global poverty in our lifetimes,” he says.

“If the hedge funds win, they will have a precedent that will allow them to dismantle 15 years of core U.S. debt restructuring policy. With this precedent, the hedge funds will hurt some of the most fragile economies in the world.”

In June, even the International Monetary Fund was planning to file a brief on behalf of Argentina with the U.S. Supreme Court, its first ever such move. That decision was scuttled, however, reportedly due to lack of support from the U.S. government.

Legislative momentum?

Some see the issue’s suddenly high visibility as encouraging for potential legislative action.

“It would certainly be good timing right now, so we’ll probably see something rolling out,” Nathan Coplin, coordinator of the New Rules for Global Finance Coalition, a Washington-based international network of activists and researchers, told IPS.

“This will have a major precedent for sovereign debt for middle income and low-income countries. But there could also be an impact for the United States – given that one holdout creditor can stall the entire [restructuring] process, countries may consider issuing their bonds outside the U.S.”

It is currently unclear how much appetite there is in the U.S. Congress to tighten regulations on holdout creditors. Representative Waters has repeatedly introduced legislation to do so in past years, but none of these proposals was even brought up for a full vote.

Still, despite the significant lobbying power of the U.S. financial services industry, most investors don’t want to have anything to do with “vulture funds”.

“Certainly legitimate investors are in support of having a streamlined process, in which they can restructure the debt and move on,” Coplin says. “Where exactly the pushback is coming from is an interesting question – it’s hard to see how a small group of investors and hedge funds could influence or obstruct any kind of legislation.”

Residents of Bangalore, India, who live in extreme poverty. Credit: bandarji/ CC by 2.0

By Jim Lobe
WASHINGTON, Oct 26 2013 (IPS)

Key multilateral institutions charged with improving regulation of the international financial system are failing to democratise their governance and adequately consider the impact of their actions on the world’s poor, says a new report by anti-poverty groups.

The 68-page study, entitled “Global Financial Governance & Impact Report”, gave higher marks on both counts to the International Monetary Fund (IMF) and the World Bank than to other institutions, notably various rule-making bodies on international taxation, the Group of 20 (G20), and the Basel-based Financial Stability Board (FSB).

Overall, however, the study, which was released by the ten-year-old Washington-based New Rules for Global Finance Coalition, found all agencies’ governance and impact on poor countries “very disappointing”.

“Too much of the governance of global finance remains ad hoc, with non-transparent, non-inclusive, largely unaccountable and un-responsible institutions wielding great power,” according to the coalition, which includes ActionAid, the South African Institute of International Affairs, and the Jubilee USA Network."Those who are often most affected by the rules aren't there when these rules are being made."
-- Jo Marie Griesgraber

Despite increased integration of poverty reduction into the work of the IMF and the Bank, in particular, “there are huge gaps between declarations and actions,” according to New Rules, which also includes the Institute for Agriculture and Trade Policy, the Tax Justice Network, the South African Institute of International Affairs, Germany-based World Economy, Ecology & Development (WEED), and the Heinrich Boell Foundation of North America.

“All have a very long way to go before they can confidently declare that they are having a strong positive impact on equitable and sustainable development,” the report said.

“The problem is that all of the wealthy countries have a seat at the table in these institutions, while those who are often most affected by the rules aren’t there when these rules are being made,” New Rules executive director Jo Marie Griesgraber told IPS.

“What we’re trying to do is make room at the decision-making table for excluded peoples and thereby ensure that their decisions and processes benefit everyone,” she added. “This is an initial attempt to assess how these institutions are performing in that regard.”

Most experts believe that the 2008 financial meltdown was caused primarily by key national and international institutions’ failure to adequately regulate increasingly sophisticated transactions in an ever-more globalised financial marketplace – a product of the neo-liberal orthodoxy that guided many of the world’s economic policy-makers, including in the IMF and the World Bank, in the 1980s.

In the wake of the crisis, however, world leaders decided that greater regulation was required to keep the global economy from falling into a 1930s-like depression and to impose greater discipline on financial markets.

So they replaced the G8 with the G20 as the key forum for global financial policy-making; boosted lending resources and modified strategies of the IMF and the Bank; and created the Financial Stability Board (FSB) to develop and coordinate global financial regulatory policies to promote stability.

The new report marks the first effort to assess how well these rule-making agencies have performed with respect to their own internal governance, including their “transparency” in internal processes; accountability to all governments and to civil society; involvement of the poor in decision-making; and responsibility to promote “more just and economically sustainable global development, especially for people in low income countries.”

The institutions were given scores ranging from 1 (poor) to 4 (excellent) on each of the four criteria, as well as an overall score.

For the aggregate scores, the IMF, the World Bank, and the FSB all rated a 2 (moderate), while the G20 and the new tax authorities were given 1.5. On transparency, the IMF and the World Bank scored highest at close to 3 (good), while the G20 was the lowest at 1.5.

The IMF also scored highest (2.5) on inclusiveness, higher than the World Bank (2), despite the latter’s long-standing commitments to consult closely with civil society. But with respect to responsibility, the IMF and tax-related agencies received the lowest possible score.

Regarding the impact of these institutions on the world’s poorest, New Rules said it was not possible to use a common framework such as the one it applied in assessing governance. Instead, it used independent specialists and experts from within the coalition’s member organisations to evaluate each institution.

The IMF gained the highest score on impact at 2.6, followed closely by the World Bank (2.4) and the G20 (2.1), which was praised for its coordinated stimulus package devised at its 2009 London Summit, its establishment of the FSB, and its efforts at reducing transfer costs of remittances by migrants from poor countries.

The FSB received a 1.4 score, while the tax authorities received the lowest possible score in large part because none addressed the problem of “offshore” tax havens, or secrecy jurisdictions that are estimated to hold 21 to 32 trillion dollars of the world’s private wealth.

That failure, according to the report, is due primarily to the fact that the status quo powers continue to control the OECD and that the IMF and have deliberately weakened the U.N. Tax Committee.

The World Bank strongly criticised the study. “This report is deeply flawed, and it misses the mark on the World Bank’s increased push for results, our huge strides in openness, and our strong focus on accountability,” David Theis, a Bank spokesman, told IPS by email.

He noted that the “2012 Aid Transparency Index: Publish What You Fund” rated the Bank, along with the British aid agency DFID, first among all donors at the country level on transparency.

Requests to the IMF for reaction to the report went unanswered.

Griesgraber said the new report was “an initial attempt, and we know there’s a lot of room for improvement.…Our report is a challenge to the institutions. If you don’t like our data and conclusions, show us where we’re wrong.”

But, she suggested, the report’s focus on the inclusion of the poor in the governance of institutions that oversee the global financial system and the poverty-reduction impact of these same institutions offered important insights that call for greater study.

“The fact that the voices of low-income countries and the world’s poor citizens are rarely heard in the forums governing global finance almost certainly explains why they have disappointingly low impact on improving their lives,” said the report.

As the International Monetary Fund shares initial proposals for Grenada’s debt restructuring during the Washington DC meetings this week, the Caribbean island could gain a reputation for more than nutmeg, calypso, beaches and the 2012 gold medal sprinter Kirani James.

Because Grenada is listening to the nation’s religious leaders, it may become famous for a debt resolution deal that includes the participation of its citizens, protects the most vulnerable from austerity programmes and keeps current employment on the island intact.The religious leaders, themselves long astute in Sunday School lessons on human dignity, became experts in the concepts and terminology that economists and lawyers utilise when negotiating debt restructuring.

Part of what could make possible protecting jobs and the island’s social safety net is curbing corporate and professional tax avoidance in Grenada.

The most interesting part of what propelled this debt deal is that the churches of this tiny island have staked a place at the negotiating table. On this island nation of 100,000 people, where most people on the street are debating any debt deal, religious institutions have taught or served a significant portion of the island’s government leaders.

As in so many parts of the world, often religious groups are the primary social service providers and in the case of Grenada they’ve earned the people’s respect.

Before Grenada defaulted on some of its debt this past March, the Conference of Churches in Grenada had called for a biblical Jubilee or national debt cancellation. The island’s various religious bodies didn’t stop there, and they strategically inserted themselves in the government and IMF discussions.

In fact, from almost every pulpit across Spice Isle last week, pastors and ministers asked for the faithful to pray for their national religious leaders who would meet for two days of discussions with the government, its parliamentary leadership, and an observer from the IMF. The Churches invited their own international partners and experts to support them in their discussions on Grenada’s debt deal.

The religious leaders, themselves long astute in Sunday School lessons on human dignity, became experts in the concepts and terminology that economists and lawyers utilise when negotiating debt restructuring. The meeting was opened by the head of the Conference of Churches in Grenada where participants heard what may be the first prayer on poverty that included the word “debt restructuring.”

For a place that is perhaps wrongly faulted for a Mayberry carefree attitude, one stands in awe when you see how savvy the religious leaders are. They know any reforms they move forward that protect people in Grenada could mean better IMF deals for millions of other poor people around the world who are always the most affected when a country restructures its debt.

In their discussions, the Conference of Churches set and discussed their expectations with their government and the IMF to judge the success of both the actual debt restructuring and transparency in the process. Here they are:

– The IMF should publicly recommend an upfront debt stock reduction of at least two-thirds in line with suggestions made in recent IMF staff papers and other analyses

– The Grenadian government should continue its spirit of openness. When the government of Grenada receives IMF proposals for debt restructuring it should share those documents with the broadest possible public constituencies for discussion and to seek national consensus before Grenada signs

– Grenada should seek an impartial financial assessment in addition to the IMF assessment

– Any deal should be comprehensive and include all external creditors to prevent holdout creditors from exploiting Grenada’s economic recovery or targeting public services for collection

– There must be accountable and transparent processes for the citizens of Grenada to monitor future lending and borrowing of their government

– Current employment and social protections for the poor and vulnerable should be maintained in any IMF supported agreement

Since the global financial crisis moved more than 70 million people, mostly women and children, into extreme poverty, it does not seem like the IMF has learned its lessons on austerity promotion. Perhaps, the tiny Grenada IMF Sunday School will shift how future debt restructurings take place and whether or not there are necessary protections for the poor in place.

If you ever find yourself on Grenada’s world renowned Grand Anse Beach on a Sunday, consider wandering into Sunday School at Blessed Sacrament Catholic Church; you’ll walk away with an unforgettable lesson in international economics.

Eric LeCompte is the Executive Director of Jubilee USA Network and serves on UN expert working groups that focus on debt restructuring and financial reforms. He recently returned from Grenada where he supported the Conference of Churches in Grenada during their recent debt restructuring negotiations.

A family living in an urban slum in Sonagachi, Kolkata, India. Credit: UN Photo/Kibae Park

By Jim Lobe
WASHINGTON, Oct 10 2013 (IPS)

Four hundred million children under 13 years of age are living in extreme poverty worldwide, according to a new study released by the World Bank here Thursday.

That total constitutes fully one-third of the 1.2 billion people still living on less than the equivalent of 1.25 dollars a day, according to the report.

“All but three countries in the world have ratified the Convention on the Rights of the Child, which guarantees some access to basic social services for children, including basic social protection,” Jeffrey O’Malley, director of policy and strategy for the U.N. children’s agency UNICEF, told IPS. “The scale of children living in extreme poverty shows how far we are from fulfilling those rights.

“But it’s also important because, beyond the needs and rights of those children, their families, communities, and countries won’t reach their development potential, if the children don’t benefit from adequate food, nutrition, water, health care – all of which are essential to their intellectual and physical development into productive adults,” he said.

Indeed, the report found that half of all people living in absolute poverty in the world’s 35 poorest countries – most of them in sub-Saharan Africa and South Asia – are 12 years old or less.

“Children should not be cruelly condemned to a life without hope, without good education, and without access to quality health care. We must do better for them,” the Bank’s president, Jim Yong Kim, said at a press conference here on the eve of the annual meetings here of the Bank and the International Monetary Fund (IMF).

Later this week, Kim will host a special event with Malala Yousafzai, who was awarded the European Parliament’s Sakharov Prize Thursday and is considered a favourite for winning the 2013 Nobel Peace Prize. He said the 16-year-old Pakistani school girl and education activist was a “powerful symbol of hope” for the 400 million children who remain in extreme poverty.

“She would not be denied,” he said in a reference to her continuing fight for girls’ education before and after the 2012 attempt on her life by Taliban gunmen in Pakistan’s SwatValley and subsequent threats against her after her recovery.

His remarks came as the IMF’s managing director, Christine Lagarde, announced that it had received sufficient authorisation from its membership to transfer profits it made from sales of part of its gold holdings to its Poverty Reduction and Growth Trust (PRGT), a fund to provide no-interest loans to low-income countries.

“We now have secured critical resources to provide adequate levels of financial support to the poorest countries for years to come,” she said.

Eighty percent of the IMF’s member states agreed to transfer their share of the profits to the PRGT which will permit the facility to lend an average of 1.92 billion dollars a year to its clients.

The announcement was hailed by anti-poverty groups who have long campaigned for the IMF to use its gold sales to aid low-income countries. Oxfam called it “great news, especially in these difficult financial times.”

“We’re excited that the profits are going into zero-percent lending, which essentially qualifies as debt relief for some of the poorest countries,” Jubilee USA director Eric LeCompte told IPS.

“That’s money that can go back into social protections for the poorest – most of whom are women and children — in their countries,” he said. “There’s no doubt that even a few billion dollars can go a long way to addressing extreme poverty.”

Since assuming the Bank presidency in July 2012, Kim has repeatedly stressed that the reduction of extreme poverty should be the institution’s top priority. Earlier this year, he set a goal of eliminating extreme poverty by the year 2030, along with promoting greater equity by increasing income growth of the bottom 40 percent of the population in developing countries.

Unveiling a major re-organisation of the Bank Wednesday, he set an interim goal of reducing global poverty levels to nine percent by 2020, which would mean increasing incomes of an additional 510 million people to greater than USD 1.25 a day in real terms.

The new report, entitled “The State of the Poor”, is being billed by the Bank as the first effort to provide an in-depth profile of the world’s poorest people who pose the greatest challenge to meeting those goals.

While reductions in extreme poverty in the developing world between 1981 and 2010 have been remarkable, according to the report, most of the progress has been confined to middle-income countries.

Increasing incomes among the poorest in low-income countries (LICs), on the other hand, has proved far more difficult. Indeed, the number of poor people in LICs actually increased by 103 million during the same period.

Indeed, after India, about one third of whose population lives in absolute poverty, LICs contain most of the world’s poorest — 29 percent in 2010. In 1981, the same countries accounted for only 13 percent of the world’s total, according to the report.

As to who the world’s poorest are, the study found that over 78 percent of the absolute poor in the developing world live in rural areas, a significantly higher percent than the 58 percent of the total developing-country population who are rural-dwellers.

Moreover, 63 percent of the absolute poor work in agriculture, mostly in small-holder farming.

The study also found a gender gap in education among those living in extreme poverty. Poor women aged 15 to 30, on average, have a year less schooling than poor men of the same age group.

But extreme poverty rates were found to be highest among children under 13 – 33 percent in the developing world as a whole and 50 percent in the LICs.

Not surprisingly in that connection, the study also found that the average number of prime-age adults available to provide income and support per child in non-poor households in developing countries was three. That was more than twice the number found in poor households where there was an average of only 1.4 adults per child.

Anti-poverty campaigners are celebrating the Norwegian government’s release of an external audit of all outstanding public debts it is owed by developing countries, the first time any country has undertaken such a process.

The investigation, by the international financial services company Deloitte, was conducted on aid packages offered by the Norwegian government to developing countries since the 1970s. Auditors were tasked with studying whether the deals, mostly concessional trade agreements, complied with past and present national guidelines as well as with newly established international principles.“The Norwegians clearly wanted to put out a test case that could be taken seriously." -- Eric LeCompte of Jubilee USA

The audit marks the first concrete use of what are known as the Principles on Promoting Responsible Sovereign Lending and Borrowing, established by a United Nations working group in April 2012 and still in the process of being rolled out. The Norwegian government has been a key supporter of the process of creating the principles, under the auspices of the U.N. Conference on Trade and Development (UNCTAD).

“This is really about setting a good example – as the first lending country to conduct such an audit, this is a very important first step in concretising and testing these principles,” Eric LeCompte, executive director of the anti-debt campaigner Jubilee USA, told IPS.

“The Norwegians clearly wanted to put out a test case that could be taken seriously, really moving the principles forward for the first time. Perhaps most interesting, while Norway is one of the world’s better lenders, Deloitte found that several of its past loans would not meet current standards of responsible lending.”

Jubilee USA is now calling on other countries, particularly those of the Group of 20 (G20) nations, to follow Norway’s example, conducting transparent debt audits to allow the public and civil society to see how decades’ worth of loans have been made. Given the new data, multiple groups are also calling on Norway to cancel certain debts.

“We hope the Norwegian government will take the next step of this critical audit and cancel illegitimate debt such as the debts of Egypt and Indonesia,” Gina Ekholt, director of the Norwegian Coalition for Debt Cancellation, said in a statement.

The audit report was explicitly written to act as a roadmap for future such exercises, noting pointedly, “The audit process has been conducted in such a manner that it may serve as a model for future debt audits.”

Interestingly, the Deloitte auditors also offer extensive feedback on the UNCTAD principles. In particular, they encourage the principles to become more explicit, and offer advice on ways in which they can become more operational.

They also offer some pointed specifics, including urging greater support for debt restructuring for developing countries. Jubilee USA’s LeCompte says this emphasis is “critical for getting us to the next place”.

“Fundamental cause of poverty”

In explaining his government’s decision to undertake the audit, Norway’s international development minister, Heikki Eidsvoll Holmas, said, “We are doing this to make sure that we are living up to our responsibility as a lender to developing countries.”

He added: “[T]he debt burden is hampering development in some poor countries. These countries are having difficulty servicing old debt agreements made on unfavourable terms. We now want to address this.”

The investigation covered 34 debt agreements with seven developing countries, according to the Norwegian government. While most of these are two to three decades old, their principals still add up to nearly 170 million dollars – and, once interest payments are included, approach four times that amount.

“Unmanageable debt burdens are one of the fundamental causes of poverty in developing countries,” the Norwegian Ministry of Foreign Affairs said in a statement.

“While the international community gives 141 billion dollars in aid to developing countries annually, the developing countries pay back 464 billion dollars each year to their creditors. Many of the debt agreements were entered into when economic, political and social conditions were uncertain.”

Indeed, this issue goes to the heart of one of the central contradictions to plague international development aid over the past half-century.

In the 1980s, for instance, the foreign debts taken on by developing countries more than tripled, to almost 420 billion dollars. Yet during that same decade, gross national product for these countries expanded only marginally, from 0.9 trillion dollars to 1.3 trillion dollars.

A more recent move towards debt restructuring and some debt forgiving notwithstanding, many countries are continuing to labour under those same repayments today.

Wild West

Although UNCTAD was not able to comment for this story by deadline, a representative for the body did laud the Norwegian audit when it was announced a year ago.

“To apply the UNCTAD Principles in the Norwegian debt audit is a solid way of showing that the Norwegian government takes the Principles seriously and that they take their responsibility as a creditor seriously,” Jostein Hole Kobbeltvedt, a member of the UNCTAD expert group, stated.

The UNCTAD principles on responsible lending and borrowing specifically aim to bring clarity to the international development lending relationship, advocating both greater accountability and responsibility. Part of the goal is ensuring that lending countries know that their loans can be repaid while also ensuring that receiving countries are not surprised by hidden contract provisions.

“Historically, and certainly now, these principles have not been part of the regulation of the international financial system – it’s still kind of like the Wild West out there. These are pretty straightforward principles that advocate for relatively minor levels of regulation that we’re currently missing,” Jubilee USA’s LeCompte, who was part of the UNCTAD working group, says.

“They also advocate for transparency in loan contraction. In other words, if I am a citizen of Zimbabwe, I should know what loans my government is taking out in an open, sanctioned, accountable government process. The Norwegian audit represents the threat of a good example.”

To date, 13 countries, including the United States, have endorsed the UNCTAD principles, but only as voluntary guidelines. LeCompte says his office is currently pushing to reintroduce U.S. legislation that would further concretise the principles, potentially impacting not only on U.S. policy but also on the lending guidelines used by some of the largest multilateral development lenders.

“We need legislation to ensure more binding action on this and to move the Treasury to use its vote in the International Monetary Fund and the World Bank to put forward these practices there,” he says. “Although some multilateral financial institutions have gotten better, I don’t think a single institution can say they’re adhering to these principles yet.”

The United States is being singled out for criticism after the Group of Eight (G8) rich countries failed to adopt a plan pushed by British Prime Minister David Cameron to require the creation of public country-level registries with detailed information on corporate ownership and activity.

Although the United States did unveil important new pledges Tuesday to crack down on anonymous “shell” corporations, used by money launderers and tax evaders, critics point out that Washington has not outlined how it will implement these commitments. They also warn that the commitments will not put corporate ownership information into the public domain, a criticism also levelled at the G8 declaration overall.

The G8 met Monday and Tuesday at a summit in Northern Ireland, during which tax evasion and corporate transparency were given top billing. While Cameron had hoped other countries would back his call for the creation of public registries, none did so.

Even as the G8 countries decided on a more incremental approach to financial transparency than some had hoped, however, they did arrive at a host of important agreements, including for countries to begin sharing tax information."We would like to see even greater moves for corporate transparency."
-- Eric LeCompte

“The G8’s declaration is absolutely historic,” Eric LeCompte, executive director of Jubilee USA Network, a religious antipoverty group, said Tuesday. “We would like to see even greater moves for corporate transparency, but the foundation the G8 built will take us into a more accountable corporate world then we’ve seen before.”

Christine Lagarde, managing director of the International Monetary Fund, the Washington-based multilateral lender, similarly issued congratulations, noting, “International tax avoidance and evasion have emerged as major risks to government revenue and as threats to the credibility of tax systems in the eyes of citizens – in both advanced and developing countries.”

Others are offering more tempered reactions, however, particularly over the failure of the G8 to explicitly call for the creation of public registries detailing the “beneficial” (or final) ownership of all companies, including shell corporations.

While the United States has now said it will be creating these registries on its own, these will apparently be available only to law enforcement and tax authorities. Critics urge these databases to be made open to the public from the beginning.

“It is important that the United States has committed to creating registries of beneficial information, because this does go beyond the G8 declaration,” Stefanie Ostfeld, a senior policy advisor with Global Witness, an advocacy group and member of the Financial Transparency Coalition, told IPS.

“But it’s not putting that information in the public domain, as the United Kingdom is saying it will do. Without such a commitment, these moves will not live up to their potential impact.”

Shell companies

“We’re very pleased to see the G8 as a whole recognise that anonymous shell companies around the world are a massive problem,” Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity (GFI), a Washington watchdog group, told IPS.

“But then it comes down to the individual national action plans to achieve meaningful progress. In this, the United States is particularly significant in part because of the very high number of companies created here in the first place.”

In recent years, the United States has increasingly spoken out on international tax evasion and money laundering, with a domestic political debate progressing on related reforms to the tax code. At the same time, the United States is widely thought to shelter a huge number of these shell corporations, used to launder corrupt earnings or hide income of foreign citizens.

“It’s very hard to tell how many of these shell companies are incorporated here, as the U.S. doesn’t require information on the ultimate beneficial controller of each company,” Lowe said.

“However, we do know that the potential for a large number of anonymous corporations existing under U.S. law is very high. We also know that those who want to create such a company know this is a good place to do it.”

U.S. shell companies are estimated to have facilitated some 18 billion dollars in illicit transactions in 2005 alone, according to the Treasury Department. Advocates say this legal laxity is directly affecting developing economies, allowing corrupt officials or cronies in resource-rich countries to siphon billions of dollars out of their countries.

According to a recent report by GFI, such abuse could be resulting in losses for developing countries as high as a trillion dollars a year – 10 times the amount those countries receive annually in foreign aid.

For this reason, activists had increased pressure substantially in recent months on President Obama, calling on him to back Cameron’s plan to create a public registry on corporate ownership.

Yet the final pledge fell short of this goal. In a fact sheet released Tuesday, the White House said simply that “The Treasury Department, along with other federal agencies, will continue to advocate for comprehensive legislation on beneficial ownership.”

Recommitment

Simply pushing for such legislation is in line with a commitment the Obama administration made nearly two years ago. According to Lowe, little progress has been made since then.

“While this is a step forward, it’s certainly not a change in U.S. government policy,” she said.

“This [G8 announcement] is really just a recommitment to the issue. That’s fine, but what we really wanted to see was a plan for how the government would advocate for new legislation, which we haven’t been able to obtain.”

In the past, U.S. legislation to require the collection of “beneficial ownership” information has been difficult to advance. One proposal has been introduced (and rejected) in the Senate at least three times over the past decade, at one point being co-sponsored by then-Senator Obama.

On Tuesday, Senator Carl Levin, a primary sponsor of a bill that would require such disclosure, lauded the new G8 commitments: “I said before the summit that the G8 nations were poised to strike a hammer blow against offshore corporate tax avoidance. The G8 commitments made today, if carried out, can bring that hammer down.”

Levin’s legislation, as well as a similar bill in the House of Representatives, is expected to be reintroduced in the coming weeks. Meanwhile, it is currently unclear whether regulatory or executive action on this issue could allow the administration to work around Congress, but advocates suggest they see some opportunities for doing so.