Surely the most egregious corruption offense of the decade is Mozambique’s “hidden debt” scandal. According to a January U.S. indictment, executives of the Lebanese shipbuilding company Privinvest and Swiss banking giant Credit Suisse paid senior Mozambican officials tens of millions of dollars to approve loans to finance a coastal protection service, a tuna fishing fleet, and a shipyard to maintain the vessels. The scam produced little more than a cluster of overpriced boats rusting in the Maputo harbor while saddling the citizens of one of the world’s poorest countries with billions in debts they cannot repay.
The key to the scam was the debts were incurred without the executive telling auditors, the parliament, or citizens. As Mozambique’s Constitutional Court recently affirmed, Mozambique law requires the disclosure and parliamentary approval of government debt. Part of the bribe allegedly went to ensuring then Minister of Finance Manuel Chang and his accomplices would keep the debts secret. It will take years to repair the damage done by these hidden debts. Full recovery may never be realized.
One scandal is enough. The international community must make ending “irresponsible lending” a priority. At a July conference the Open Society Initiative for Southern Africa held in Johannesburg, I was on a panel that discussed what can be done to end hidden debts. While the other members, all from borrowing countries, offered measures borrowers could take, I advanced five that financial regulators in the countries where private lenders are located should take. Largely stolen from a paper by Tim Jones of Debt Jubilee Campaign and a forthcoming Illinois Law Journal article co-authored by Fordham Law Professor Susan Block-Lieb and University of North Carolina Law Professor W. Mark C. Weidemaier, they follow. Comments welcome. Continue reading