In fact, the Philippines is forced to send $22 billion out of the country in debt repayments every day.

Many of these debts are inherited from the odious rule of Ferdinand Marcos in the 1970s and 80s – a period of Martial Law when loans poured in from these same international lenders, who turned a blind eye to the government’s crimes and corruption. As our partners in the Freedom from Debt Coalition, Philippines, ask: ‘Why pay debts we don’t owe?’- they are calling for an audit into the debts to find out which are illegitimate and should never be paid.

Please help campaigners in the Philippines by signing a letter to the international lenders who have the chance to end this vicious cycle of unjust debt.

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The post Cancel the debt of the Philippines! appeared first on Jubilee Scotland.

By Charlotte Snelling.

For much of the post-war period, Guatemala’s past has been a story of dictatorships, terror, and genocidal regimes. It is estimated that 200,000 people have died as a result of murder, torture, and extreme poverty whilst the country continues to be affected by a legacy of successive odious governments. It remains one of the most impoverished countries in Latin America and ranks at just 131 on the United Nations Human Development Index, out of a total of 187 countries. In the Americas, only Haiti ranks lower.[1]

A recent report by Jubilee Debt Campaign has been launched to investigate the build up of sovereign debt in Guatemala and the role this has played, and continues to play, in reproducing poverty across the country, particularly in its rural areas. It looks at how debt has been accumulated, the impact on the country’s economy, society, and population, as well as the steps needed to ensure the people of Guatemala are not left paying for the illegitimate actions and unfair treatment endured at the hands of their former leaders.

Guatemala has a long history of debt and exploitation by foreign powers. In the late 1970s and early 1980s, when the wave of terror was at its highest level, foreign lending to the country increased substantially. Successive loans of between $100 million and $300 million every year were granted from 1978 to 1982 and by 1985 Guatemala’s debt had reached $2.2 billion, an increase of over $2 billion in just 10 years. The majority of this debt was owed to multilateral institutions, in particular the World Bank, and today the country is still paying these institutions back over $400 million every year. This undoubtedly has important implications for Guatemala’s ability to rebuild and develop its economy alongside providing essential services to its citizens. Money which could otherwise be spent on moving people out of poverty and developing essential infrastructure is being shipped out of the country and into the pockets of Western lenders.

Guatemala, March 2009. Dozens gather to commemorate the 27th anniversary of the Rio Negro Massacre at Pak’oxom Peak in 1982. Photo: James Rodríguez / MiMundo.org

Significantly however, the loans granted to Guatemala were crucial in supporting the decades of terror its population endured, funding ill-conceived, unsustainable projects which impoverished families and led to displacement and destruction of rural communities. The Chixoy Dam is just one example but one which highlights some of the worst effects of the World Bank’s irresponsible lending. [2]In the late 1970s and early 1980s the Chixoy Dam project, $400 million of its budget financed by the World Bank and Inter-American Development Bank, acted only to exacerbate levels of violence and persecution against Guatemala’s indigenous people. In seeking to create a new reservoir as part of the project, the population of the Rio Negro region were threatened with eviction. When the local population resisted this pressure to move, their opposition was then exploited by the government as justification for counter-insurgency and increased violence against the Rio Negro community. It is estimated the project forcibly displaced more than 3,500 Mayan community members and led to 6,000 families suffering loss of land and livelihoods, with more than 400 people were massacred because of their opposition to the project. For the survivors the impact continues to be felt. A Probe International Report from 2001 states: “members of the Rio Negro community live in extreme poverty in comparison to neighbouring communities. However, before dam construction, the community enjoyed, relatively speaking, a high standard of living.”[3] Furthermore, World Bank loans for this project (and a second Chixoy Dam project in 1986) have cost Guatemalan governments $100 million in interest. The Chixoy Dam is a single example within a large back catalogue of odious debts originating from multilateral lending to Guatemala’s past dictatorial regimes. Worryingly the World Bank appears content to continue lending money to the country for new projects which threaten to exploit and impoverish even more communities.

A mural in Pacux, home of the Rio Negro survivors. http://upsidedownworld.org/main/guatemala-archives-33/1442-guatemala-the-forgotten-spirits-of-rabinal

As Barbara Rose Johnston at the Center for Political Ecology states, “the World Bank and Inter-American Development Bank… loans were the primary source of foreign aid to a nation ruled by a military dictatorship engaged in systematic state-sponsored destruction of Mayan peoples”[4]. Debt accrued in the period was loaned to illegitimate and unaccountable governments of which the lenders were well aware whilst only minimal, if any, token investigations into possible impacts of projects were conducted. It is unjust for new governments to be saddled with these debts and responsibility must be shared by the countries and multilateral organisations which funded and supported projects at the expense of the Guatemalan people.

The experience of Guatemala and this new report show that something needs to change. Not only should these illegitimate and destructive debts be cancelled, the accumulation of new odious debt has to be prevented. Lobbying for an audit of the debt in Guatemala and campaigning to force the World Bank to overhaul its current policy and apply ethical principles of justice, fairness, and sustainability to its future lending will be vital in this process.

Importantly though, we should also be looking closer to home. In the UK, UK Export Finance (previously the Export Credit Guarantee Department), a semi-autonomous government body existing to support UK exporters to enter in to international markets considered risky and where the likelihood of failure is high, has been responsible for numerous dodgy deals similar to that seen in Guatemala. Deals where UKEF is involved are typically made in the arms trade, aerospace or fossil fuel related industry (over 75 percent of UKEF’s observable transactions) and are often based in countries with unstable governments, despotic regimes, and areas of conflict, which further compounds their negative effects. Egypt, for example, owes the UK approximately £100mn which includes loans for arms made to the regimes of both Mubarak and his predecessor Sadat. Between 1985 and 1986 UKEF supported £250mn of arms sale loans to finance a tank factory near Cairo and a military city west of Alexandria.[5] As in Guatemala, the Egyptian people are now left paying for the actions of the governments which previously oppressed them.

Scotland has an opportunity to take a stand against unethical lending. It seems possible that, whatever the result of the referendum, Scotland will be given the powers to create export credits. We must campaign here to ensure that this agency will not follow the route of corrupt deals, human rights abuses and disregard for environmental considerations that has characterised UKEF, but instead lead the way in being a positive and socially responsible export agency, setting an example internationally of how exporters can be supported in a way that is ethical and fair[6].

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The post Guatemala: a study in human rights abuses appeared first on Jubilee Scotland.

Economics on the one hand, and justice and human rights issues on the other hand, are often discussed as separate phenomena; as ways of looking at the world that don’t connect or intersect. But I believe that it’s of fundamental importance that we consider them alongside each other. In this blog I would like to use the example of Egypt’s arms debt to the UK to argue this point, touching on the gaps in international law and the importance of lending in the often violent shaping of the political map.

Jubilee Scotland is campaigning at the moment alongside its sister organisation – Jubilee Debt Campaign – for the cancellation of $100 million is owed by the Egyptian people to the UK government.

We are asking for it to be cancelled because we believe it to be an odious debt. An odious debt is one taken on by an unelected dictator – in this case Hosni Mubarak – the repayment for which is then demanded from the people of the country. This is the moral equivalent of someone breaking into your house and taking out a huge second mortgage against it, which you then have to repay when you get back into the house.

This would be enough to make the debt odious, but in the case of Egypt there is another layer to consider. The debt was used to pay for Rapier and Swingfire missiles, Lynx helicopters and a tank factory, weaponry which would actually have been used to shore up the illegitimate Mubarak regime. So to use our previous analogy, the house owner is also having to pay for the weapons that kept them out of their own house

Unfortunately, international law doesn’t recognise the concept of odious debt. This ties into the wider fact that it only recognises sovereign states and leaders; individuals, or whole peoples even, have no personality in its eyes. To go back to the house example, national law would seek to protect the interest of the party whose house had been stolen, but international law, if it operated the same way, would recognise the existence of the house, but assume that whoever was in charge of the house was the rightful owner – a kind of ‘finders-keepers’ approach to ownership. It is not a Code of Law in the true sense, as first formulated in ancient Babylon, because it does not protect the weak against the strong. It’s a system in which individuals – and whole peoples – are totally exposed to the Great Predators of the global economy: dictators, arms manufacturers, and lenders.

Mubarak’s arms debts are owed to a branch of the UK government called the Export Credit Guarantee Department (now renamed as UK Export finance), who use British tax-payers’ money to underwrite ‘high risk’ exports such as arms deals, meaning that both the arms exporter and the dictator remove themselves from the equation, leaving a debt owed by the people who suffered from the deal to us, the UK taxpayers.

The Export Credit Guarantee Department are the UK’s Export Credit Agency. Every major world power has one of these bodies, whose job it is to promote and support risky investments overseas. By using tax-payers’ money to underwrite deals they totally transform the risk profile of these risky deals, in effect creating a market where otherwise there wouldn’t be one.

For decades, Export Credit Agencies such as the ECGD have been used to set up trading relations with dictators in all parts of the world, including President Suharto in Indonesia and President Marcos in the Philippines. Their activities have provided domestic weapons manufacturers with stable overseas markets, have shored up regimes sympathetic to the West and have ensured a steady flow of debt repayments.

Export Credit Agency lending forms part of a wider portfolio of lending and aid – and it’s worth knowing that to qualify as ‘Overseas Development Assistance’ (the most widely used concept of aid) capital flows only have to have a 25% component of grant finances. This lending has been used for many decades to shape the map of the world, and to ensure that governments sympathetic to lending powers remained in charge of the house.

By sympathetic, we mean sympathetic to the supporting superpower, rather than sympathetic to the people of the country. As Franklin Roosevelt famously said of Nicaragua’s dictator Somoza, ‘he may be a son of a bitch, but he’s our son of a bitch.’

Because the bloody origins of many of these debts are not widely discussed, all debt campaigners are frequently asked whether we should in fact cancel debts to poor countries without being very vigilant on how the money is spent. To my mind this would be shutting the stable door after the horse has bolted. In the case of an Egypt or Indonesia the money for these debts has already been spent by a dictator on arms – often under the lender’s very vigilant eye.

Cancelling the debts is morally essential because it’s wrong to keep collecting money from the people whose oppression we have unwittingly colluded in. But if we are serious about stopping oppression we need to put a stop to bad lending, not just cancelling pre-existing bad debt.

In 1997, when Robin Cook became Foreign Secretary, he spoke of an ‘ethical foreign policy’. This statement was widely derided at the time as being a joke. In 1998, the scoffers were to some extent proved to be right, when the UK’s Export Credit Guarantee Department underwrote a huge sale of jet-fighters to the Indonesian dictator Suharto. The phrase ‘ethical foreign policy’ – even the idea of having an ethical foreign policy – became at this point even more bankrupt.

This trend needs I believe to be reversed. We may view ourselves as individuals, or as citizens of the world, we may campaign or give as individuals, and strive as campaigners to change the international system but we should not ignore the large proportion of our individual global impact which is mediated through UK foreign policy. It’s for this reason that, as well as building individual links with debt campaigners around the world, and while campaigning for an international system through which odious debts can be recognised and cancelled as as such, Jubilee Scotland also campaigns – alongside Campaign Against the Arms Trade and Amnesty International – for the radical reform of the Export Credit Guarantee Department.

Find our more about the campaign to end unfair lending at www.cleanupexports.org.uk and Jubilee Scotland at www.jubileescotland.org.uk

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The post Finance and Human Rights appeared first on Jubilee Scotland.

‘Debt cancellation is a call not for charity but for justice’ – Lidy Nacpil.

By Olga Bloemen

‘We have a very fruitful partnership with the Philippines’, says the World bank ‘The World bank owes us for its damaging loans’, counters Filipino campaigner Lidy Nacpil. Jubilee Scotland is campaigning for the Scottish government to set up an international debt arbitration tribunal where creditors and debtors can meet. Thorough debt audits could help solve the debt crisis that is currently keeping developing countries in a poverty trap.

Third world debt seems to have disappeared from the public mind along with Jubilee 2000, Bono and Geldof. In 1998 and 2005, two initiatives pledged the one-off cancellation of the debts of 40 of the poorest countries. But, according to Jubilee Scotland, this remedy is ‘in many ways merely a sticking plaster’, offering too little too slowly: Many countries, like the Philippines, are excluded and debt is only cancelled to what is considered a ‘sustainable’ level, based on the country’s export earnings, while ignoring its domestic spending needs. Besides, the International Monetary Fund (IMF) and the World Bank demanded austerity measures in turn for debt cancellation like cuts on public spending and the privatisation of basic services, which many of the 40 countries have as yet not been able to meet.

This means that in 2008, the world’s poorest 48 countries still had debts totalling US$168 billion, and the 128 poorest together owed a dazzling total of US $3.7 trillion to multilateral bodies, individual countries, private companies, banks and individuals. Over the course of 2008 alone, the developing countries paid $602 billion towards servicing these debts. This year’s figures will be even higher, as the economic crisis has led developing countries to take up more loans. As a result, despite the aid rhetoric and the Millennium Development Goals, money keeps flowing from the Global South to the North instead of vice versa.

Many of the debts still stem from the 1960s and 1970s, when banks and governments in the North were eager to lend the huge amounts of money made from the rising oil prices to developing countries. Looking for Cold War allies, lending parties closed their eyes on corrupt or oppressive regimes and most of the money did not go into responsible hands and into development. In the 1970s and 1980s, the oil crisis led interest rates on the loans to soar. Additionally, falling commodity prices left countries with less hard currency to service the debts. The knock-on impact on exchange rates means that debts, which are most often counted in foreign currency, have skyrocketed in real terms for the affected countries. The debt total of US$3.7 trillion is the result.

Already since the early 1990s, campaigning organisations have called for an arbitration forum of some sort where historical cases of illegitimate or unfair debt can be lodged and solved, as well as unpayable debt relieved. With the 2010 Arbitration (Scotland) Act and the newly set up Scottish Arbitration Centre, Scotland would be a suitable host for such a tribunal. To demonstrate this, Jubilee Scotland organised a mock debt tribunal in Holyrood on the 5th of October. Here, the Philippines and the World bank met. Or, better said, Lidy Nacpil met “John Smith”, an actor who played, scarily realistically, a World bank representative quoting solely from the Bank’s official documents. In the debt tribunal, the legal principle of ex aequo et bono (“from equity and conscience”) was applied, according to which an arbitrator or tribunal has the power to move away from the law as laid down and to consider the case in the light of arguments of natural justice such as fairness and equity.

Lidy presented her country’s case: The New Economics Foundation has calculated that the Philippines need at least 63% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below the ‘ethical poverty line’ of $3 a day. According to a recent study, 107 countries are burdened with an ‘unpayable debt’ like the Philippines.

Former president Marcos, who governed the country from 1965 to 1985, left the Philippines with more than half of its current foreign debt. Although democratically elected, Marcos turned the Philippines into a dictatorship with martial law in 1972. When he fled the country in 1985, the country’s debt had gone from US$1 billion to of US$28 billion, most of it either stolen by Marcos or invested in failed or useless projects. The Bataan nuclear power plant is notorious in this regard. It was built by the US company Westinghouse on an earthquake fault-line at the foot of a volcano and has therefore remained unused. Westinghouse got paid generously nevertheless as the US government credit agency took over the standing debt. In 2007, the Filipino government finally completed paying off the $1.5 billion for the plant’s construction, more than 30 years after it began. As Marcos’ regime devastated the country’s economy, subsequent governments had to continue taking on loans to pay off the old ones.

During the fourteen-year dictatorship, the World bank granted five loans to Marcus. Now, the Philippines still owe the World bank around US $3 billion out of a total foreign debt of US $47,5 billion. The original loans from the World bank have long since been repaid, but because the interest has compounded, 80% of the debt is still owed. If nothing changes, Filipino taxpayers will continue to pay for the illegitimate debts of Marcos until 2025, 39 years after he was overthrown. While ‘Smith’ glorified the loans as an investment in pro-poor development, Lidy Nacpil said there is little evidence that the World bank has had any positive impact at all. ‘Debt cancellation is a call not for charity but for justice’, Nacpil concluded.

Of course, one could argue that debt cancellation would create poor incentives by making future borrowers hope that they will have their debts waived too. Also, developing countries are dependent on loans and if creditors would stop this flow of money due to lack of trust in return, the result could be disastrous, especially now in times of economic downturn. This, however, would relieve Northern countries of responsibility too easily. As we have seen, a major part of the third world debt is the result of the self-interested and reckless lending of first world creditors during the Cold War. Filipino people are currently forced to pay off a loan that was not taken up in their name and went to support an undemocratic dictator. The World bank could have reasonably foreseen this and should thus assume responsibility. Besides, one could argue that the Filipino people themselves never had a contractual arrangement with the World Bank.

The envisioned debt tribunal is just one step in creating a fairer lending system. Future loans should be given responsibly, on fair terms, and in a transparent way that is open to scrutiny by parliaments, media and citizens. Any loans given on unjust terms should be considered the responsibility of the creditor and thus eligible for cancellation in future. Jubilee’s mock tribunal demonstrated that debt arbitration can be done fairly and effectively. Or would it take a Bono to convince the Scottish government?

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