Lenders and Illegitimate Debt

Asserting that "it takes two to tango," the Jubilee movement argues that it is high time lenders assume their share of responsibility for the debt crisis. Many projects benefited creditor country firms, but not the people who now have to pay.

The Bataan Nuclear Power Plant in the Philippines is a prime example. Built on an earthquake fault line at the foot of a volcano, the nuclear plant is unsafe and has never been used, but it costs the Philippines $155,000 a day in debt payments to U.S., Swiss, and Japanese banks. Like much of the Philippines' foreign debt, this debt was incurred during the 24-year dictatorship of Ferdinand Marcos, who was supported by successive U.S. administrations eager to maintain two key military bases on Philippine soil.

As a U.S. ally, Marcos was favored with loans from commercial and multilateral lenders, despite clear knowledge of rampant corruption. For instance, Marcos and his close associate Herminio Disini together are said to have personally taken some $80 million from the Bataan nuclear project; Westinghouse, the U.S. firm that won the contract, admitted to having paid Disini $17.3 million in cash as a commission. Today, although the Philippines is considered a middle-income country, 40 percent of Filipinos live in poverty. Like many other countries, it struggles to develop while shouldering the heavy yoke of illegitimate debt.

Jubilee campaigners say such debts should be repudiated; they want international law to recognize the concept of "odious" debt—that is, loans that were incurred without the consent of the people and which creditors were aware did not serve the interests of the state. Jubilee South has developed a sophisticated guide to carrying out country debt audits and is calling for cancellation of illegitimate debts. In the U.S. Congress, the bill supported by the Jubilee USA network, known as the Jubilee Act, includes a requirement that such an audit be conducted in up to 27 countries with odious debts.

Christina Cobourn Herman was an associate director of the Oblate Justice and Peace/Integrity of Creation Office in Washington, D.C., when this article appeared.

Have Something to Say?

Add or Read Comments on
"Lenders and Illegitimate Debt"
Launch Comments
By commenting here, I agree to abide by the Sojourners Comment Community Covenant guidelines