Doing business with vultures
Hearing news such as that recently revealed about Dart Management collecting over €400million (US$500m) from the Greek government when the people of that country are suffering so much always makes me question the unbridled free market. The fact that any group of investors could make such a killing on the backs of human suffering by being so unscrupulous should be a concern to anyone that has an ounce of compassion. But knowing it is Cayman’s largest investor that’s involved this time also makes it frightening.
The previous Labour government in the UK passed legislation to prevent vulture funds profiteering on old debts of very low income countries in British courts, but this does not apply to new debts of other countries and the practice is not illegal. It surely is, however, immoral.
Dart has often been praised here in the Cayman Islands because of the group’s charitable donations, its investment in infrastructure and the creation of local jobs. At present, many people are looking to the firm to save Cayman from its own economic struggles (and the ever growing Mount Trashmore) with the deal it plans to implement with government.
While there are many who are opposed to the ForCayman Investment Alliance, there is still significant support for the proposed deal, which many people think will boost Cayman’s ailing economy.
However, this recent reminder of how it is that the Dart Group really got rich should give us all pause for thought. Even without the proposed alliance with the Cayman Islands government, the Dart group is estimated to already own somewhere between 20-25% of Grand Cayman’s land mass as well as owning numerous businesses, including a large chunk of our liquor trade.
Given the firm’s propensity to deal in such distasteful financial products that have such a direct and significant negative impact on whole communities of people, I am not as convinced as others that the evidence of some charitable tendencies towards Cayman by the Dart Group could guarantee that this little island would always be treated so kindly.
Vulture investors are groups of people who buy the sovereign debt of countries in trouble cheaply then, by holding out against a write-down, they take the gamble of getting paid out in full. Having paid only a fraction of the value for the debt, when they get full repayment they can make a ginormous profit.
In the past Dart was said to have taken some $600 million from Brazil following its 1993 crisis, and over the last few years various vulture fund investors have targeted some of the world's poorest countries, where the debts were run up, not by the regular people who suffer in the end, but by dictatorial regimes. There is some risk, of course, as some countries simply default on the debt, but the vulture funds will use the courts to seize assets from the countries that owe them money.
This week, rather than risk legal action Greece made a repayment of €436m to the owners of its debt, 90% of which has reportedly gone to Dart, while the country’s social system collapsed and rates of suicide soared.
While making a profit is not a crime, and it appears to still be what makes the world go round and is the raison d’etre for so many people, it cannot be moral for anyone to make so much money as a result of the direct suffering of their fellow human beings, even if they are thousands of miles away.
Fortunately, despite the claims of the premier, the debt situation in Cayman is nothing like that of Greece or many of the European countries and so far none of our public debt is in the claws of vulture funds. But surely we should be asking ourselves, given the Dart Group’s involvement in this type of profiteering, could Cayman be vulnerable in other ways.
The current administration appears to be placing its hoped for economic recovery in the hands of Dart, and while the group is certainly rich and in a position to help generate jobs, is it really in the interest of the people of the Cayman Islands to become so dependent on one company that has clearly demonstrated how ruthless it can be when it comes to making money.
The world is still a very uncertain place. The crisis in Greece will have a knock-on impact globally, especially if, as is increasingly likely, it leaves the Eurozone. This, together with Portugal’s financial troubles and the news on Thursday of a run on the banks in Spain, makes it appear that the financial troubles around the world are spiralling out of control and likely to continue impacting our own economy negatively.
No one can say with any certainty what the future holds. But given such instability, government’s decision to do business with the vultures in order to insulate Cayman from further economic turmoil looks increasingly unattractive and even a little bit scary.
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