Initial reflections on the UN decision to establish a multilateral legal framework for the processes of public debt restructuring

1 October 2014 by Jubilee South-Americas , CADTM AYNA , Lutheran World Federation

Since the imposition of the economic policies of the last dictatorship |1|, the Argentine people have continued to suffer the impacts and consequences of the debt generated in that period and its subsequent restructurings. Amidst repeated crises and via structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

after another, a model of production has been consolidated that is designed to ensure the foreign exchange required to “service” a debt whose origins and development are illegitimate, and whose sustained growth every effort has been made to try to disguise.

The failure of the official policies adopted to deal with this debt exploded again in June this year, in the face of the scarcity of foreign exchange and the refusal of the U.S. Supreme Court to hear the appeal of the Argentine government in one of the cases it faces concerning the collection of public bonds in the hands of so-called “vulture” funds.
It is in this context, and after a decade of litigation in foreign forums, that the Argentine government finally sought, and gained, the support of the G77 + China, to present the draft resolution that was adopted by the UN on September 9th.

With 124 votes in favor, 11 against and 41 abstentions, the General Assembly decided to launch negotiations to draft and adopt, within the peremptory period of one year, a “multilateral legal framework for sovereign (sic) debt restructuring processes” |2|.
Given the importance that some attribute to this decision, we want to share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. some initial reflections arising from the text of the Resolution itself, and the concrete situations of indebtedness, restructuring, and demand for and continual payment of debts that have shaped, and continue to shape, the present and future of most Latin American and Caribbean peoples.

1) As a starting point, we reaffirm our support for all those initiatives with regard to the debt that favor the rights of peoples - including their sovereignty, self-determination and dignified life (“well living”) - as well as the rights of nature. We thus will continue to demand that the community of nations take the measures necessary to stop the usurious, exploitative and plunderous system of indebtedness, and to make reparations for the social, ecological, historical and financial debt that it has created and deepened.
2) In this regard, it is useful to distinguish between two types of actions. There are actions that seek to make the system of indebtedness, and the domination that it exerts, work more “efficiently”, and there are others that seek to challenge the perverse logic and consequences of that system. Undoubtedly, the recent General Assembly decision is of the former category. Once the chain of indebtedness has exploded, it aims to facilitate its recomposition and improve its functioning but without touching, indeed leaving intact, the system of perpetual indebtedness which is a fundamental tool of financialised and imperial capitalism, responsible for the continual transfer of wealth and nature from the 99% to the 1% of the world´s population.
3) The target raised is that of “debt sustainability”, considered in the Resolution to be key in order not to hinder the development (also “sustainable”) of South countries that, for decades, continue to be classified as “developing”. Although it is not stated, the real goal is the sustainability of payments and therefore the collection of debts whose “normal” servicing has become impossible, in order to ensure the continuity, predictability and continuous growth of the system of indebtedness itself. The Resolution fails to express any concern about the costs and consequences of this sustained payment. The well-being of those who are condemned to pay is not an objective. Rather, it seeks to ensure that the process of plunder does not exceed the limits of “sustainability”, so that those who benefit from the system can continue to satiate their unlimited greed.
4) While the Resolution acknowledges that the international financial system, and the debt and crises that it generates, leave a strong mark on the lives of peoples and countries, it avoids asking why “sovereign (sic) debt crises are a recurring problem,” or why “it is still difficult to find a lasting solution to the problem of external debt” |3|.
5) The Resolution is based on a false premise: if there is debt, it is because, previously, there was an inflow of resources. Public debt – both internal and external - does not quite fit this criterion. Most public debt has been generated without any counterpart in goods or services to the people. It grows as a result of usury, abusive commissions, flawed conditions, the transformation of private into public debt, successive re financings, etc., which, among other strategies, provoke a continuous self-generation of new debt. The system even takes advantage of crises, such as humanitarian emergencies or the climate crisis, in order to generate more debt. It is a scheme that demands the constant surrendering of wealth and natural goods, while the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of outstanding debt continues to rise. Furthermore, the original purposes and uses of most indebtedness usually respond much more to the interests of the lenders than to those of the borrowers. In general, not only do affected peoples have little if any say, but in addition, their rejection is often ignored or worse yet, repressed and criminalized.
6) It is thus extremely telling that the Resolution adopted evidences no concern for the origin and legitimacy of debts whose payment and collection it aims to facilitate, in particular considering that it should be a priority of the UN to strengthen the willingness and ability of peoples and States to investigate and denounce their illegitimacy and illegality, and indeed stop paying debts which compromise their present and future.
7) Although the Resolution cites nearly every Summit, Conference, and Goal that the UN has established in recent years, it surprisingly avoids any reference to the Guiding Principles on External Debt and Human Rights |4|, approved by the same nations in 2012. It seems as though in seeking to safeguard the system of indebtedness, there was no interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in remembering that according to all international standards and doctrine, human rights take precedence over any contract.
8) It is worth noting that several of the countries that voted now to establish a binding framework for debt restructuring - including Argentina, the country that pushed the Resolution - just two months ago did not accompany with their vote, the historic decision of the UN Human Rights Council to negotiate a multilateral convention in order to hold the major private players in the international economic, financial and debt system - transnational corporations including vulture funds Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
- accountable for the fulfillment of human rights |5|. We ask whether coherency and priorities are on the side of safeguarding the “good” functioning of the financial markets, or of protecting and promoting human rights, the rights of peoples, and those of Mother Earth.
9) The Resolution adopted by the General Assembly refers to the Principles on Promoting Responsible Sovereign Lending and Borrowing |6|, presented by the United Nations Conference on Trade and Development UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.
in 2011, in order “to reduce the prevalence of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. crises, prevent unsustainable debt situations, maintain steady economic growth and help achieve the Millennium Development Goals ...” |7|. But curiously enough, what is highlighted is the importance of “encouraging, to this end, responsible sovereign borrowing” (our emphasis), apparently leaving aside the co-responsibility of those who make the loans or buy the bonds and charge usurious interests.
10) In conclusion, we recall that it is peoples and nations who are sovereign. Debts are not sovereign, nor is the payment thereof. For over 100 years now, different legal interpretations such as the Calvo, Drago and more recently, Espeche, Doctrines have set limits to the asymmetric power of lenders in the established debt system. Also, the Doctrine of Odious Debt, which clearly establishes the absence of any obligation to pay debts generated without the consent of the people and against their own interests. Strengthening the sovereignty of peoples and nations, especially in the South, means rather to recapture the spirit of these doctrines in order to confront the pretended rights of the market and the lenders, whose only concern is to continue to deepen the system of perpetual indebtedness and domination.

Latin America and the Caribbean, September 25, 2014

Translation from the original in Spanish courtesy Dialogue 2000 - Jubilee South Argentina

Jubilee South / Americas, Lutheran World Federation Program on Illegitimate Debt and Ecological Justice, CADTM-AYNA


|1| March 24, 1976 – December 10, 1983

|2| Resolution A/68/304, Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes, UN General Assembly,September 9, 2014

|3| ibid

|4| UN Human Right Council, April 2012, A/HRC/20/23.

|5| Resolution A/HRC/26/RES/9, Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights, UN Human Rights Council, June 2014.

|6| UNCTAD, Principles on Promoting Sovereign Lending and Borrowing, Geneva, updated April 2012

|7| Resolution A/68/304, idem.



35 rue Fabry
4000 - Liège- Belgique

00324 226 62 85