Bond Buyer Features Eric LeCompte on Puerto Rico and PROMESA

Four years after passage of the Puerto Rico Oversight, Management, and Economic Stability Act, many observers say the Oversight Board it created has not accomplished its stated goals and doesn’t have enough power to fix the island's woes as it continues to struggle.

The local government's inertia and PROMESA's unwieldy structure, along with uncontrollable natural disasters and a global pandemic, has made for a perfect storm for any sort of Puerto Rico recovery.

President Barack Obama signed PROMESA on June 30, 2016. Since then, restructuring settlements have been reached for three of the island’s 18 classes of debt. Using PROMESA, the board and the Puerto Rico U.S. District Court approved deals for Puerto Rico Sales Tax Financing Corp. (COFINA), Government Development Bank bonds and notes, and ports-related Puerto Rico Infrastructure Finance Authority debt.

Nearly all the remaining 15 classes of debt will also be restructured.

Board Executive Director Natalie Jaresko has said it’s impossible to develop a structurally balanced budget for the island without having an adopted restructuring settlement for the central government debt. PROMESA requires the board to remain until there has been four years of structurally balanced budgets.

Though more than a dozen bondholders or their representatives were contacted, only one responded. Many bondholders continue to participate in the bankruptcy process.

At least 17 people answered questions about their confidence in the process, whether the law should be changed, and hopes and expectations for the future.

The Oversight Board takes stock
In an interview on Wednesday, Board Member David Skeel and Executive Director Natalie Jaresko pointed to several areas they think the law has helped. Skeel said there had been "enormous progress" using the law’s Title III and Title VI to advance debt restructuring.

Prior to the COVID-19 epidemic Jareskso said the board had done "quite well" by reaching a deal with broad array of bondholders on the central government’s debt. After the virus spread to the island and the consequent lockdown to the economy, the board will have to relook at the deal, she said.

Jaresko said the board had broken the cycle of deficit spending and because of its work, Puerto Rico’s government is "in a fiscally sustainable environment."

She also said the board had created a "depoliticized road for the economy." Nearly all groups across the political spectrum now agree the board’s goals, as found in its fiscal plans, are the proper goals, she said.

While there is disagreement about implementation, some agree that labor participation and the labor markets need to improve, the electricity sector must improve, the competitiveness and ease of doing business must improve, and that there must be educational reform, she said.

“The issue is being able to manage your way through the change and that is hard, especially with these interruptions,” Jaresko said, referring to Hurricane Maria, the January earthquakes, and the COVID-19 epidemic.

As concrete achievements, Jaresko pointed to the creation of an emergency budget reserve and a recent announcement that private firm LUMA would take over the island’s electrical transmission and distribution from the Puerto Rico Electric Power Authority.

However, even its drafters have criticisms. A federal official who had been involved in crafting the law said that when it was created those involved knew there had to be a pairing of debt restructuring and oversight. The former has been more successful than the latter, the official said.

The Puerto Rico board wasn’t given the powers the Detroit emergency manager, New York control board, and Washington, D.C. control board were given in those distressed situations, the official said.

"We underestimated the local government’s willingness to oppose the board," the official said. The Puerto Rico board doesn’t have enough power to straighten out the island and the local government doesn’t want to take the necessary steps, he said.

Board member Andrew Biggs said similar comments in tweets in late May and early June. “I went into this process hopeful that things could really improve in Puerto Rico. But PR’s problem isn’t this-or-that public policy, that in theory could easily be fixed. It’s a dysfunctional system that produces those policies, and that system won’t fix itself. Pessimistic now.”

Experts weigh in
“To some extent the board has been asked to do an impossible job,” said José Javier Colón, University of Puerto Rico professor. What the board needed was the power to jumpstart the economic relations between the island and the 50 states. But Congress didn’t give the board this power, he said.

Center for a New Economy Policy Director Sergio Marxuach agreed that things haven’t been going well and Congress bears some of the blame. U.S. Treasury officials had incorrect assumptions about Puerto Rico politicians when they created the law.

They thought local government officials would accept the board’s proposals as well as its dictates. But Puerto Rico politics is very different from that in the U.S., he said, adding the pushback from local officials was predictable.

Center for a New Economy Public Policy Director Sergio Marxuach said Congress has some blame for PROMESA's failings in practice.

Several other commentators said the law wasn’t working and the blame lied with the board, but their criticisms varied.

Center for a Popular Democracy’s Julio Lopez Varona said, “PROMESA has failed to resolve the Puerto Rican debt crisis and in doing so, it has brought suffering and hardship to the people of Puerto Rico. In the last three years, Puerto Rico has faced a worsening economic crisis, natural disasters, and severe austerity measures.”

Lopez Varona, who is co-director of Community Dignity Campaigns for the center, continued, “While PROMESA requires every approved fiscal plan to ‘ensure the funding of essential public services,’ in practice, the [board] has failed to define or discuss essential services in any fiscal plan to date ... Even worse, since its inception, the unelected [board] has been riddled with conflicts of interest that have made many organizations question the real motives of the [board].”

Coming from a different perspective, Tim Travis, chief executive officer of T&T Capital Management, said, “I think PROMESA has been an unmitigated disaster. The intent was to grandfather the original [Puerto Rico Electric Power Authority] deal, honor pledges and liens, put an emphasis on obtaining consensual deals, and put Puerto Rico on a path to accountability, transparency, and fiscal responsibility so that it could once again gain access to capital markets.

T&T owns general obligation, PREPA, HTA, and COFINA bonds.

“Instead the Oversight Board and government of PR have yet to provide current audited financials or anything close to it. They have rejected multiple PREPA deals that had been agreed upon after months of negotiations, setting PREPA back even further and hurting the island greatly. Puerto Rico is the only municipal bankruptcy that has increased spending during the bankruptcy process, which is absurd," he said.

Board spokesman Matthias Rieker responded, "The Oversight Board used its mandate under PROMESA to break the Government of Puerto Rico’s cycle of deficit spending. The government rightsizing measures in the Certified Fiscal Plan have already reduced the government’s payroll and overall operating expenses while securing essential government services, as mandated under PROMESA. The general fund budget, looking only at operational costs, declined from $8.9 billion in fiscal year 2016 to $6.2 billion in fiscal year 2020, a more than 30% reduction. The general fund budget operational costs for the coming fiscal year 2021 are projected to increase to $7 billion because of COVID-19 and the reclassification of certain expenses (about $600,000) from the Special Revenue budget.

"Separately and in addition, since fiscal year 2018, the government’s budget also includes paygo pension costs, which did not exist in general fund budgets before. That cost fluctuates between $2.5 billion and $2.6 billion per year, prior to any pension reform proposed in the Plan of Adjustment. Ensuring pensions is mandated under PROMESA. Further, the government must budget for Puerto Rico’s expenditures on Medicaid, which fluctuate dramatically based on Federal funding. Medicaid costs not included in the above general fund budget numbers has fluctuated from about $400 million to over $1.5 billion. The Oversight Board has always ensured that the Certified Fiscal Plan projects costs of Medicaid based on current Federal legislation."

Travis said the Oversight Board has worked with a select few "vulture hedge funds" to try to cram unfair deals that hurt long-term supporters and financiers of Puerto Rico.

“The [board] has tried to break liens and pledges, including on the GO bonds, which are guaranteed before any other expense, including salaries, via the constitution of Puerto Rico. They have spent four years and well over a billion dollars litigating and have almost nothing to show for it,” Travis said.

Puerto Rico commentator Cate Long said, “Generally one measures ability to manage public finances by the timeliness of audited financial statements and paying debts as they come due. According to this criteria PROMESA has been an enormous failure as the Puerto Rico government have only published their audited financials for fiscal year 2016 and fiscal year 2021 begins on July 1.

“Also PROMESA required the payment of interest on debt during the pendency of the bankruptcy and instead the Oversight Board has allowed the government to accumulate $19 billion in cash. Puerto Rico has increased their spending since filing for bankruptcy in May, 2017 and has cut taxes multiple times,” Long said.

For others the measure of failure is quite simple.

Attorney John Mudd said after four years there should have been an approved plan of adjustment for the central government debt. Jubilee Executive Director Eric LeCompte said all of the debt restructuring should have been completed by now. Mudd is an attorney for unsecured creditor Servicios Integrales en la Montaña in the bankruptcy as well as a long-time commentator on the board and the bankruptcy.

Advantage Business Consulting President Vicente Feliciano said PROMESA prevented debt restructuring from going into a tailspin.

Others were more positive about the law and the board.

Chief Financial Officer Carlos Vazquez of Banco Popular — the largest bank in Puerto Rico — said, “Like any law intended to address multi-faceted and complex problems, the statute is far from perfect. Having said that, to the extend we are making progress in improving the PR government’s income statement (via controlled and prudent management of the budget); the government’s balance sheet (via debt renegotiations) and structural challenges (via government restructuring); then the statute is moving matters in the correct direction.”

Advantage Business Consulting President Vicente Feliciano said of PROMESA, “It is certainly working because without a stay in the claims to the government of Puerto Rico, the restructuring process would have gone into a tailspin of conflicting claims and chaos. Regrettably, the actions undertaken under the PROMESA umbrella have been derailed twice by the largest external setbacks to the economy of Puerto Rico since German U-boats were sinking merchant ships in the Caribbean: Hurricane Maria and the Covid-19 pandemic.”

Estudios Técnicos Chairman José Villamil said, “PROMESA, through the [board], has returned some degree of sanity to fiscal management, and I am convinced that had there been no [board] the local political class would have made the situation much, much worse than it is.”

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The Business Times, Taipei Times and Reuters cite Eric LeCompte on G20/World Bank Debt Plans

WASHINGTON, June 22 (Reuters) - The Group of 20 major economies’ debt relief initiative for the world’s poorest countries has made good progress but additional relief and greater participation by private sector creditors are needed, World Bank President David Malpass said on Monday.

Malpass told Reuters in an interview that 35 of 73 eligible countries were participating in the G20 initiative, which will freeze debt service payments on official bilateral debt through year-end, and more had expressed interest.

The Debt Service Suspension Initiative (DSSI) will free up $12 billion that countries can use to deal with the health and economic strains caused by the coronavirus, a new World Bank database shows.

Malpass said the pandemic had clearly delivered a “very serious, long-lasting setback” to the global economy that was hitting the poorest countries especially hard.

The relief agreed by G20 members and the Paris Club of official creditors in April was helping, but further steps would be needed to prevent the economic crisis from widening rates of poverty, he said.

He did not endorse calls by African countries and others for an extension of the debt holiday through 2022 and cancellation of some debts, but said further steps would be needed.

“We need to look for ways to provide additional debt relief for the poorest countries and then look at the broader situation facing developing countries,” he said.

He also urged the private sector to boost its participation.

“It doesn’t really make sense for the commercial creditors to continue taking in, requiring and legally enforcing payments from the ... poorest countries that have been struck by both the pandemic and the deepest economic recessions since World War Two,” he said.

Some countries have been reluctant to seek such relief out of concern it could harm their credit ratings and access to international capital markets.

The new database would provide increased transparency about debt levels and creditors, a key step in creating an attractive investment climate to promote future growth, Malpass said.

Eric LeCompte, executive director of Jubilee USA Network, said having the data in one place would make it easier to deal with an impending wave of debt restructurings.

“It’s no longer a question of if, now it’s just a matter of when,” he said.

The G20’s International Financial Architecture Working Group is due to meet virtually on Tuesday to discuss the initiative and private sector participation, LeCompte said. (Reporting by Andrea Shalal; Editing by Sandra Maler, Kim Coghill and Sonya Hepinstall)

 

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Catholic Profiles Interviews Eric LeCompte on Addressing Poverty

Gordon: When were you appointed as Executive Director of Jubilee USA Network, and what have been some of the most rewarding experiences that you have had to date?

Eric: I took over the reigns of Jubilee USA in April 2010. Working at Jubilee USA is a fulfillment of my Catholic vocation. The most rewarding experience of my career is working with, supporting and advising Catholic and other Christian, Jewish and Muslim leaders. Working with the Bishops and Catholic religious orders of the United States, Caribbean, Puerto Rico, Africa, and Latin America as well as major interfaith leaders in all of these regions can only be described as a gift.

Together this interfaith work has had unprecedented results. We’ve moved forward major policies to address the structural causes of poverty - debt, tax, and trade issues. In Africa, our efforts brought aid and debt relief monies to confront the Ebola epidemic that hit Sierra Leone, Liberia and Guinea. We created a new process at the International Monetary Fund that strengthened healthcare and built new hospitals across the region.

In the Caribbean, we rallied religious leaders to deal with financial crisis and high poverty rates head on. In Puerto Rico, our work with religious leaders yielded new processes to address the 60 percent child poverty rate.

Globally, our work at Jubilee USA with the Holy See and interfaith religious partners won policies to address the causes of poverty worldwide. Together, we won new global policies to stop the exploitive behavior of vulnerable communities and decreased global corruption. It's been our efforts that called attention to the financial crisis and the reality that developing countries can't deal with poverty without dealing with high debt loads, budget transparency and tax evasion.

At the same time, the great reward of supporting and working with Catholic and other religious leaders in every corner of our world has also met challenges. While our successes together are myriad, our work must continue to address the root causes of poverty.

The same causes of poverty also spur inequality, human rights abuse, terrorism, war, and environmental degradation. I admire the teaching of our Holy Father who frames all of these issues in the economic issues that I am privileged to work on.

Gordon: You have been a tireless advocate for the reduction of poverty globally. Poverty may have a different connotation in different parts of the world. Please share your definition of poverty with our readers.

Eric: Global standards assume that anyone living on less than $1.90 a day lives in extreme poverty. But in the simplest of terms, poverty is not having enough healthy food to eat or receive basic education or health-care or have access to decent shelter. In every country of the world and on every continent, there are severe forms of need and extreme poverty.

As a Catholic and as someone who works on the causes of poverty, we can not separate these issues from the causes of inequality. The wealthiest 80 people in the world have more wealth the half of the world's population. 80 people on earth own more than the bottom 3.6 billion people in the world. The causes of poverty, that I work on, are debt, tax, trade, and transparency policies. It's why our work at Jubilee USA Network is so incredibly important.

Gordon: What are our moral obligations as Catholics to address poverty?

Eric: Our faith requires us as a moral obligation to not only be charitable but to address the primary causes of poverty. As Catholics, scripture and Catholic doctrine and the Holy Father call us to do everything in our power to end poverty.

The Catholic Church is at the forefront of articulating that we can not end poverty without addressing the structural causes of poverty.

Gordon: In your opinion and based on your testimony to the US Congress, how has the United States addressed the support of the people in need in Puerto Rico?

Eric: I think that the US Government has addressed the situation of Puerto Rico in a range of ways. I testified several times before Congress met with Puerto Rico’s former and current Governor and testified to the Congressionally installed oversight board of Puerto Rico. My message, rooted in Catholic teaching, is that it is imperative for decision makers to protect the vulnerable, limit austerity policies, protect the environment and reduce the nearly 60 percent child poverty rate on the island.

Our message is met with many responses. Both positive and negative.

Puerto Rico remains a colony of the United States and as such, decisions the US Government makes impact Puerto Rico. The Catholic Church, the Archbishop of San Juan and Caritas has been heroic in their advocacy for Puerto Rico’s people. Working with the Catholic and other interfaith religious groups on the island has brought a strong response from the Obama and Trump White Houses as well as Republican and Democratic leadership. The partnership of the US Conference of Catholic Bishops has also been instrumental.

Because of our role with Catholic partners, we won a process to restructure the debt and reduce austerity. We’ve won rules for preferential treatment of poor communities. At this point, we’ve won more than 40 billion dollars in hurricane aid. We’ve ensured that policies are in place so Puerto Rico can rebuild to withstand the next storm.

With that noted, we still face enormous challenges. Creditor groups are successfully preventing positive debt restructuring and the island needs another 80 billion in aid. Our work as Catholics to lift and defend the people of Puerto Rico is so essential now and must continue.

Gordon: As a member of expert working groups to the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Human Rights Office of the High Commissioner, what is your experience can nations do to more effectively deal with life-threatening poverty wherever it occurs?

Eric: Life-threatening poverty is caused by structural policies. Debt, tax, and trade policies are why resources are poorly distributed and why poverty exists. It's why Catholic teaching is so important in terms of going beyond the important works of charity and working towards acts of justice. Our Savior reminds us of this when he declares the year of the Lord’s favor or the year of Jubilee, in his first public act in Luke’s gospel. He reiterates the call of the prophets: in order to live in harmony with one another, we must act for justice.

Countries must go beyond giving aid, we need to implement policies that will end poverty. The developing world loses a trillion dollars a year because of tax evasion and corruption. Countries around the world lose hundreds of billions annually because of a lack of public budget transparency and irresponsible borrowing. For every 1 dollar in aid developing countries receive, they lose 5 dollars in debt payments. At the United Nation, the IMF and in every country in the world, we can change these policies. Even minor shifts will release hundreds of millions of people from the bondage of poverty.

Gordon: You address the diverse challenges of religion, politics and economics often in the Wall Street Journal, the Washington Post, the Associated Press, Bloomberg, McClatchy News Service, National Public Radio, Agence-France Presse, Market Place, CNN Money, the Financial Times and The Hill. What issues have resulted in the most feedback?

Eric: Sharing the Gospel with the media is critical for our efforts. Because we raise these issues in the mainstream media, there is a broader understanding of the actual structures that create global poverty.

Many of us don't realize how issues like debt, tax, and trade are the source of inequality and poverty. These issues impact our lives almost as much as the very oxygen we breathe. The media, just like most of us, is yearning to understand and communicate these issues. It's how why we spend so much time engaging with them.

Gordon: Jesus asked us to live our neighbor as ourselves Considering we are members of a global community and a global religion, who is our neighbor?

Eric: In our global community, we are all neighbors. In this global economy, what happens to one of us impacts all of us. We are called to love our neighbors, no matter who they are or where they call home.

Gordon: Thank you for this exceptional interview.

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Fox News, Houston Chronicle, San Francisco Chronicle and Associated Press Feature Eric LeCompte United Nation COVID Speech

UNITED NATIONS (AP) — The president of the U.N. Economic and Social Council called for urgent action Tuesday to help the growing number of countries already facing or at risk of “debt distress” because of the economic impact of the coronavirus pandemic.

Norway’s U.N. ambassador, Mona Juul, head of the 54-nation U.N. body, told a meeting on financing and recovery for the crisis that the decision by the world’s 20 major economic powers to freeze debt service payments for the world’s poorest countries through the end of the year isn’t enough.

She said the Group of 20’s freeze will free about $11 billion until the end of the year, but it’s estimated that eligible countries have an additional $20 billion in multilateral and commercial debt combined coming due in 2020.

Juul said that means even if the moratorium is extended to 2021, “many countries will have to make difficult choices between servicing their debt, fighting the pandemic and investing in recovery.”

Eric LeCompte, executive director of Jubilee USA Network, an alliance of more than 75 U.S. organizations and 700 faith communities working for debt relief, was sharply critical of the resistance of private creditors, commercial lenders and banks to participate in debt relief calls — despite calls by the G-20, International Monetary Fund, World Bank and United States.

“Because of the enormity of this crisis and the long-term challenges the markets could face, the fact that some private and commercial creditor blocks are not participating ... baffles the mind,” he told the virtual meeting.

LeCompte said the U.N. Security Council must act “given that this crisis could devastate all of us, poor countries and the markets.”

He called on the Security Council to follow its “precedent in 2003 when it protected the assets of Iraq from creditor payments and now immediately make the same decision for the 73 countries that need this protection most to compel private creditors to join the G-20.”

“This decision would protect the assets of these countries and mandate that debt relief from official bilateral creditors is not used to pay private creditor debt,” LeCompte said.

He also said that instead of calling or inviting private creditors to participate, officials should say they “expect” their participation “in order to help compel it.”

LeCompte welcomed last week’s strong announcements from World Bank Group President David Malpass and said the IMF, G-20 and U.N. agencies should strengthen previous statements to say they “expect” private creditor participation in debt relief.

Malpass told last Thursday’s largest gathering of world leaders since the coronavirus pandemic began that he was among the first to call for a debt moratorium, and he welcomed the support of G-20 countries for a suspension of debt service payments by all bilateral creditors and “comparable treatment by commercial creditors.”

“I have been vocal in stating that all official bilateral creditors should participate, that commercial creditors should also participate on comparable terms and not exploit the debt relief of others,” Malpass said, “and that much more is needed, including longer term debt service relief and, in many cases, permanent and significant debt reduction.”

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NPR's Marketplace Features Jubilee USA on COVID and Developing Country Debt

Washington DC - Marketplace podcast, NPR's flagship program on contextualizing the economic news of the day, featured Jubilee USA's Eric LeCompte as it discussed how emerging markets are faring in this crisis. 

"The United Nations right now predicts that 40 to 60 million people will move into extreme poverty because of this crisis," said Jubilee USA Executive Director Eric LeCompte. His warning comes as the IMF seeks to provide small, short-term debt relief when the current situation demands more significant action.   

The episode also included analysis on the rapidly developing unemployment rate, the different ways the government measures joblessness, and evictions in Texas. You can listen to the full podcast here

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The Tablet Covers our Coronavirus G20, IMF and White House Letter

The Tablet covered Jubilee's faith community letter to the White House, G20 and IMF calling for expanded debt relief in the face of the coronavirus crisis. Read an excerpt below, and click here for the full story.

Debt relief needed to help poor nations in pandemic

Advocates for debt relief for the world's poorest countries are calling on international policymakers to cancel debt payments and expand debt relief for developing nations to bolster health care and protect vulnerable people and workers during the coronavirus pandemic.

The request from more than 100 organisations, including more than two dozen Catholic religious congregations, came in a letter to the International Monetary Fund, representatives of 20 industrial and emerging economies, or G-20 nations, and President Donald Trump.

It comes in advance of today's opening of the World Health Assembly, the decision-making body of the World Health Organisation. The global pandemic response will be the major item of business during the meeting, which was rescheduled to take place online.

Decisions by the assembly are likely to affect the upcoming G-20 and Group of Seven meetings this summer.

Eric LeCompte, executive director Jubilee USA, an alliance of faith-based development and advocacy groups that drafted the letter, said that action on canceling the debt would allow poor countries to devote more resources to respond to the pandemic.

The G-20 nations agreed to suspend debt payments owed to them by 76 of the world's poorest countries. The agreement covers payments through 2020.

Debt cancellation and the suspension of payments was one of four policies the advocates said were necessary to prevent a serious financial crisis from engulfing the world economy, LeCompte said.

Other issues raised in the letter include:

– Identifying additional revenues that nations can tap to respond to the economic and health impacts of the pandemic.
– Improving debt restructuring and implementing debt payment moratoria for countries affected by the coronavirus.
– Supporting all countries as they emerge from the crisis "with more resilience by encouraging policies and agreements to increase protections for the vulnerable, instil greater public budget transparency, implement financial crisis and market protections, promote responsible lending and borrowing, and curb corruption and tax evasion."

LeCompte said such steps would move a global economic recovery along and "protect all of us from financial crisis".

He added that he believed the actions would head off future financial crises that may be caused by another pandemic, economic upheaval or massive food shortage.

"If we don't have a process in place, we're just setting ourselves up for failure again," he said.

Pope Francis in his traditional Easter message "urbi et orbi" (to the city and the world) called for forgiveness, or at least a reduction, of the foreign debt of the world's poorest nations.

The pope also has established a Covid-19 response commission in the Dicastery for Integral Human Development to examine the challenges the world is facing in battling the pandemic and what it will inevitably face in its aftermath.

Among its tasks, the commission is reviewing debt of the world's poorest countries, joining the plea of Pope Francis and a wide variety of leaders in calling for debt relief,  either through the suspension of payments or an outright forgiveness of debt.

 

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Catholic News Service, Crux Features Jubilee USA and Eric LeCompte on Coronavirus Efforts

Catholic News Service interviewed Eric LeCompte on our faith community letter to world leaders calling for debt relief. Read an excerpt below, and click here for the full story. 

Advocates seek debt relief so poor nations can better respond to pandemic

CLEVELAND (CNS) -- Advocates for debt relief for the world's poorest countries are calling on international policymakers to cancel debt payments and expand debt relief for developing nations to bolster health care and protect vulnerable people and workers during the coronavirus pandemic.

The request from more than 100 organizations, including more than two dozen Catholic religious congregations, came in a May 15 letter to the International Monetary Fund, representatives of 20 industrial and emerging economies, or G-20 nations, and President Donald Trump.

It comes in advance of the May 18 opening of the World Health Assembly, the decision-making body of the World Health Organization. The global pandemic response will be the major item of business during the meeting, which was rescheduled to take place online.

Decisions by the assembly are likely to affect the upcoming G-20 and Group of Seven meetings this summer.

Eric LeCompte, executive director Jubilee USA, an alliance of faith-based development and advocacy groups that drafted the letter, told Catholic News Service that action on canceling the debt would allow poor countries to devote more resources to respond to the pandemic.

The G-20 nations agreed to suspend debt payments owed to them by 76 of the world's poorest countries. The agreement covers payments through 2020.

Debt cancellation and the suspension of payments was one of four policies the advocates said were necessary to prevent a serious financial crisis from engulfing the world economy, LeCompte said.

Other issues raised in the letter include:

-- Identifying additional revenues that nations can tap to respond to the economic and health impacts of the pandemic.

-- Improving debt restructuring and implementing debt payment moratoria for countries affected by the coronavirus.

-- Supporting all countries as they emerge from the crisis "with more resilience by encouraging policies and agreements to increase protections for the vulnerable, instill greater public budget transparency, implement financial crisis and market protections, promote responsible lending and borrowing, and curb corruption and tax evasion."

LeCompte said such steps would move a global economic recovery along and "protect all of us from financial crisis."

He added that he believed the actions would head off future financial crises that may be caused by another pandemic, economic upheaval or massive food shortage.

"If we don't have a process in place, we're just setting ourselves up for failure again," he said.

Pope Francis in his traditional Easter message "urbi et orbi" (to the city and the world) called for forgiveness, or at least a reduction, of the foreign debt of the world's poorest nations.

The pope also has established a COVID-19 response commission in the Dicastery for Integral Human Development to examine the challenges the world is facing in battling the pandemic and what it will inevitably face in its aftermath.

Among its tasks, the commission is reviewing debt of the world's poorest countries, joining the plea of Pope Francis and a wide variety of leaders in calling for debt relief -- either through the suspension of payments or an outright forgiveness of debt.

 

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Eric LeCompte Barron's Column on Coronavirus and Financial Crisis

Barron's invited Eric LeCompte to pen an op-ed on the coronavirus financial crisis and debt relief solutions. Read an excerpt below, and click here for the full story. 

The World’s Poor Are Drowning in Debt. Here’s How to Help Them.

The coronavirus is spurring the worst downturn since the Great Depression, warns the International Monetary Fund.The U.N. World Food Programme says 265 million more people now face famine.

The pandemic forces work stoppages, shutters factories, and eliminates tourism and travel. The International Labor Organization projects more than 195 million jobs lost. While governments lose revenue, they must increase spending to protect the poor and businesses.

High debts for many countries make it impossible to negotiate the corona crisis. The IMF and World Bank reported, prior to the virus, that 40% of low-income countries were already in debt crisis or held worrisome debt levels. Unsustainable debt leaves little space for countries that need to enact stimulus packages like the U.S. passed. Treasuries already lacked billions because of corruption, tax evasion, and tax avoidance.

More than 100 countries now request emergency IMF financing to deal with virus health and economic impacts.

Before Covid-19, too many health care systems were weak because of austerity policies in place to pay debt. In fact, most of the 76 poorest countries have fewer than 50 critical care units for millions of people. Some have none. Two-thirds of the world’s people who live in extreme poverty call these 76 countries home.

What are the short-term solutions to bolster global health care and survive a possible economic collapse?

The IMF, World Bank, G7, G20, and U.N. are debating solutions.

While the IMF provides rapid, below market-rate loans to a growing number of countries, more resources will be needed. One answer is found in our response to the 2008 financial crisis. We accessed $250 billion in global reserves, also known as the special drawing rights or SDRs.

There are growing calls for the IMF and G20 to allocate a trillion in new SDRs to low-income and middle-income countries. This is doable and could provide immediate resources to developing countries to strengthen health care and to pass the bridge financing needed to support workers and the poor. With few short-term options, this proved effective before and we should do it again.

We’ve seen other powerful short-term actions led by the U.S. Treasury, G20, IMF, and World Bank on debt relief. In April, the IMF cancelled six months of debt payments for the world’s 25 poorest countries, and G20 countries agreed to stop collecting debt for 73 countries through 2020. Countries that count their budgets in the tens of millions now have $22 billion to confront the coronavirus.

Is it enough?

African finance ministers are calling for $44 billion in debt relief. The United Nations Conference on Trade and Development calls for a trillion dollars in debt cancellation for countries to survive.

In the absence of an actual system to globally adjudicate all types of debt, like the bankruptcy processes we have in our own domestic economies, moving forward debt restructuring in the best interest of both the lender and borrower seems challenging.

Still, in the short term there are signs that political will is growing to relieve more debt. The IMF and World Bank closed their April meetings with a historical bang, committing to look at debt relief for middle-income countries and other countries that might need it as the crisis deepens. The G20 and IMF called all other types of creditors (banks, private and commercial) to negotiate debt payment suspensions. Again, the challenge is that without the formal bankruptcy that we have in our home countries, you can’t make sure every debt holder comes to the party.

However, in the short term, the IMF, G7, and G20 can make decisions that move us toward more predictable bankruptcy-like processes. The G7 countries house the financial jurisdictions that arbitrate most of the world’s private sovereign debt. Changes to laws in New York and London can ensure private creditors accept invitations to debt-settlement soirees.

If we treat the 2020 debt-payment moratorium for 73 countries like the first phase of bankruptcy, we have breathing space to figure out if it’s possible to pay debts, strengthen health care, and reduce child poverty. The IMF committed to review debt problems. June and July G7 and G20 meetings can set the stage to relieve and restructure debt. These meetings are the opportunity to review the need for further debt relief for the developing middle-income countries as well.

After past crises, we’ve flirted with global, comprehensive bankruptcy processes.

In the aftermath of the Asian financial crisis in the early 2000s, the U.S. Treasury and IMF supported a bankruptcy process known as the Sovereign Debt Resolution Mechanism that failed to be implemented. As we recovered from the 2008 financial crisis and wrestled with financial crises in Argentina and Greece, world leaders briefly again entertained a process. The United Nations General Assembly even passed a bankruptcy process in 2014, but it wasn’t binding.

The father of modern economics, Adam Smith, advocated for such a process. Pope Francis supports this arbitration mechanism.

There were moments when we learned the lesson of exporting bankruptcy beyond our domestic borders. The 1953 London Accord brought all stakeholders together to restructure Germany’s debt in a process fair to creditors and debtors, a process creating the path for one of the strongest economies that ever existed. While never adequately used, super bankruptcy measures were passed for Puerto Rico by the Republican-led Congress in 2016.

My organization, Jubilee USA Network, has won more than $130 billion of debt relief for developing economies since the early 2000s to increase social spending on health and education. Many of those same countries were again in debt crisis before this pandemic hit. Our name, Jubilee, comes from scripture sacred to Jews and Christians about a continual promised process, beyond debt relief to ensure that in times of peace or crisis, we all are protected from having too little or too much.

As we plan to emerge from this crisis, with wisdom to prevent the next crisis, will we move beyond debt relief and accept the promise of Jubilee?

 

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Buenos Aires Times, Pagina12 Cover Eric LeCompte Argentina Debt Plan Support

Pagina12 and the Buenos Aires Times covered Eric LeCompte and other top economist's support of the newly proposed Argentina debt plan. Read an excerpt below, and click here and here for the full stories.

High-profile economists back Argentina's debt restructuring bid

The full name of signatories: Jeffrey D. Sachs, Columbia University; Dani Rodrik, Harvard Kennedy School; Thomas Piketty, School for Advanced Studies in the Social Sciences; Mariana Mazzucato, University College London; Kenneth Rogoff, former IMF chief economist and Harvard University; Brad Setser, Council on Foreign Relations; Ricardo Hausmann, former IADB Chief Economist and Harvard Kennedy School; Carlos Ominami, former Economy Minister, Chile; Yu Yongding, former member of the Monetary Policy Committee, People’s Bank of China; Erik Berglof, former EBRD chief economist and London School of Economics; Nora Lustig, Tulane University; Nelson Barbosa, former Minister of Finance and Planning; Justin Yifu Lin, former World Bank chief economist and Peking University; Partha Dasgupta, University of Cambridge; Kevin P. Gallagher, Boston University; Stephany Griffith-Jones, Columbia University; Stephanie Blankenburg, UNCTAD; Richard Kozul-Wright, UNCTAD; Ricardo French Davis, University of Chile; James K. Galbraith, University of Texas; Jean-Paul Fitoussi, Sciences Po; Amar Bhattacharya, Brookings Institution; Robert Boyer, National Scientific Research Council; Robert Pollin, University of Massachusetts-Amherst; Robert Howse, NYU Law; Giovanni Dosi, Scuola Superiore Sant’Anna; Juan Carlos Moreno Brid, National Autonomous University of Mexico; Josh Bivens, Economic Policy Institute; Arjun Jayadev, Azim Premji University; David Soskice, London School of Economics; Jayati Ghosh, Professor of Economics, Jawaharlal Nehru University; Mauro Gallegati, Università Politecnica Delle Marche; Natalya Naqvi, London School of Economics; Daniela Gabor, UWE Bristol; Marcus Miller, University of Warwick; John E. Roemer, Yale University; William H. Janeway, University of Cambridge; Dean Baker, Center for Economic and Policy Research and University of Utah; Gerald Epstein, University of Massachusetts-Amherst; Anwar Shaikh, New School University; Kaushik Basu, Cornell University; Matias Vernengo, Bucknell University; Philippe Aghion, London School of Economics; Anne Laure Delatte, Centre d’Etudes Prospectives et d’Informations Internationales; Sudhir Anand, London School of Economics; Christoph Trebesch, University of Kiel; John Weeks, University of London; David Vines, University of Oxford; Saskia Sassen, Columbia University; Sandra Polaski, Boston University; Thomas Pogge, Yale University; Rhys Jenkins, University of East Anglia; Jurgen Kaiser, Jubilee Germany; Gary A. Dymski, University of Leeds; Andreas Antoniades, University of Sussex; Raphael Kaplinsky, University of Sussex; Diane Elson, University of Essex; Ernst Stetter, former secretary general, Foundation for European Progressive Studies; Ozlem Onaran, University of Greenwich; Todd Howland, Office of the United Nations High Commissioner for Human Rights; Isabel Ortiz, Columbia University; Carolina Alves, University of Cambridge; Eric LeCompte, Jubilee USA Network; Richard Jolly, University of Sussex; Christoph Trebesch, University of Kiel; Diego Sanchez-Ancochea, University of Oxford; Mark Weisbrot, Center for Economic and Policy Research; Lara Merling, International Trade Union Confederation; Pedro Mendes Loureiro, University of Cambridge; Ilene Grabel, University of Denver; Sabri Öncü, CAFRAL; David Hall, University of Greenwich; Jose Esteban Castro, Newcastle University; Andy McKay, University of Sussex; Stefano Prato, Society for International Development; Rosemary Thorp, University of Oxford; Barry Herman, The New School for Public Engagement; Andres Aruaz, former Minister of Knowledge and Central Bank General Director, Ecuador; Manuel Alcántara, University of Salamanca; Alex Izurieta, UNCTAD; Michael Cichon, UNU Maastricht; Biswajit Dhar, Jawaharlal Nehru University; Jens Martens, Global Policy Forum; Nicolas Pons-Vignon, University of the Witwatersrand; Jean Saldanha, European Network on Debt and Development (Eurodad); Leonidas Vatikiotis, Debtfree Project; Valpy FitzGerald, University of Oxford; Giovanni Andrea Cornia, University of Florence; Matthias Thiemann, Sciences Po; Yılmaz Akyüz, former chief economist, South Centre, Geneva; Stephan Schulmeister, University of Vienna; Eduardo Strachman, São Paulo State University; Peter Dorman, Evergreen State College; C.P. Chandrasekhar, Jawaharlal Nehru University; Leopoldo Rodriguez, Portland State University; Chris Tilly, University of California Los Angeles; Tracy Mott, University of Denver; Jeffrey Madrick, Schwartz Rediscovering Government Initiative; Günseli Berik, University of Utah; Joseph Ricciardi, Babson College; Lorenzo Pellegrini, Erasmus University Rotterdam; Erinc Yeldan, Bilkent University; Sunil Ashra, Management Development Institute; Mustafa Özer, Anadolu University, Turkey; Rolph van der Hoeven, Erasmus University Rotterdam; Al Campbell, University of Utah; Antonella Palumbo, Università Roma Tre; Arthur MacEwan, University of Massachusetts Boston; Neva Goodwin, Tufts University; Korkut Boratav, Turkish Social Science Association; Michael Ash, University of Massachusetts-Amherst; Alicia Puyana, Facultad Latinoamericana de Ciencias Sociales, Mexico; John Willoughby, American University; Marco Palacios, El Colegio de Mexico; Reza Mazhari, Gonbad Gavous University, Iran; Ann Markusen, University of Minnesota; Renee Prendergast, Queens University; Michael Moore, University of Warwick; Carlos A. Carrasco, Universidad de Monterrey, Mexico; Robert Lynch, Washington College; John Schmitt, Economic Policy Institute; Venkatesh Athreya, Bharathidasan University; Jeff Faux, Economic Policy Institute; Kunibert Raffer, University of Vienna; Jenik Radon, Columbia University; Maria Joao Rodrigues, Foundation for European Progressive Studies; Stephanie Seguino, University of Vermont; Gustavo Indart, University of Toronto; Cyrus Bina, University of Minnesota; Alberto Minujin, The New School; Philip Alston, NYU; Sudhir Anand, London School of Economics; José Gabriel Palma, Cambridge University; Michael A. Cohen, The New School; Jeff Powell, University of Greenwich; and Rob Johnson, President, INET.  

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SwissInfo Quotes Eric LeCompte on Emergency IMF Ecuador Credit

SwissInfo quotes Eric LeCompte on the IMF's emergency Ecuador credit for COVID-19 mitigation efforts. Read an excerpt below, and click here for the full story.

FMI da crédito de emergencia a Ecuador azotado por Covid y bajos precios del crudo

Eric LeCompte de la organización Jubilee USA Network señaló que "debido a las altas deudas y a las políticas de austeridad, países como Ecuador, no pueden dar servicios de salud básicos para afrontar el coronavirus".

"Y mucho menos para ayudar a su pueblo a sobrevivir este desastre económico", sentenció LeCompte en un comunicado.


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