U.N. approves sovereign debt restructuring; López sentenced in Venezuela (Sept 11, 2015)

The United Nations General Assembly approved nine guiding principals for sovereign debt restructuring processes to improve the global financial system -- a proposal inspired by Argentina's debt crisis.

The resolution asserts that countries should protect foreign governments from minority creditors who refuse to go along with the majority of creditors who have mutually approved a restructuring plan, according to BBC News.

The proposal, submitted by South Africa, was approved by a landslide 135 votes in favor -- with the opposition of six countries including the United States, the United Kingdom, and Germany. Forty-two countries abstained from the vote, including most European nations.

The General Assembly's resolutions are not legally binding, but carry political weight. The resolution urges debtors and creditors "to act in good faith and with a cooperative spirit to reach a consensual rearrangement" of sovereign debt. It adds that states should be immune from domestic court decisions related to sovereign debt restructuring, adding that any exceptions should be limited, reports Reuters.

The resolution includes nine principles that should be respected when restructuring sovereign debt: sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability and majority restructuring.

The result offers a starting point for discussion within the international body regarding an international bankruptcy law for states, that would protect good faith creditors, explains Página 12.

Sovereign debt restructuring has been fairly regular for the past two hundred years, reports Página 12 in a separate piece. Since 1950 there have been more than 600 around the world. But -- unlike corporate bankruptcy, for example -- the process takes place in a legal vacuum, and there are no global rules to protect countries that default and their creditors.

Argentina's proposal to create international legal framework for the restructuring of sovereign debts was backed last year by the 134 countries of the G77. However it met with opposition from the U.S., which rejects the concept that countries have a right to restructure their sovereign debt.

Opposition nations favored taking the discussion to the IMF, saying it is a more appropriate venue for the debate. However, proponents of the resolution note that those are less democratic organizations, where the Global South has less of an influence, reports La Nación.

But Página 12 notes that the initiative joins efforts of the private sector, the IMF and other countries to limit the sovereign debt restructuring problem by modifying clauses on bonds.

The representative of South Africa, speaking on behalf of the Group of 77 developing countries and China said the text provided a good basis for future discussions. The principles seek a "win-win" situation for debtors and creditors, reports Página 12.

A letter in The Guardian earlier this week from leading economists, including James Galbraith and Thomas Picketty urged European countries to vote in favor of the resolution, noting that that such a framework would have permitted Greece to avoid many of the pitfalls of its current crisis, "in which political representatives gave in to creditor demands despite their lack of economic sense and their disastrous social impact."

The proposal was inspired by Argentina's travails with so-called "vulture funds," hedge-fund creditors who purchase debt at bankruptcy prices and then litigate for years seeking to obtain full repayment on the defaulted bonds. The proposal cannot help Argentina's current judicial dispute with hedge funds seeking to prevent the payment of the country's renegotiated debt, but could benefit countries seeking to restructure their debts, such as Greece, Puerto Rico, Portugal and the Ukraine.

News Briefs

• Venezuelan political opposition leader Leopoldo López was found guilty of inciting violence and other charges related to his role in massive anti government protests that left 40 people dead last year. A judge condemned him to nearly 14 years in prison, a maximum sentence, reports the Associated Press. López has repeatedly rejected the accusations, saying he only urged peaceful demonstrations. Critics question the trial for López, who has been jailed for over a year. His lawyers said they were barred from presenting all but two witnesses (who ultimately didn't testify) or evidence at the trial. His lawyers will likely appeal the conviction.

• The trial was closed to the public. "This has been a farce," José Miguel Vivanco of Human Rights Watch told the New York Times. "It's a kind of a caricature of a judicial procedure and in violation of fundamental principles of due process, of presumption of innocence."

• The case, along with that of other imprisoned political opposition leaders has drawn negative international attention to President Nicolas Maduro's government, including criticism from the United Nations office of the high commissioner for human rights, the Inter-American Commission on Human Rights and the United States, reports the New York Times. The sentence was a slap in the face for the United States, which had been pressing for his release during a quiet rapprochement with Venezuela over the last few months, reports Reuters. "This will challenge the new diplomatic channel between Venezuela and the United States developed over the past five months," David Smilde told the Washington Post. "The U.S. government will not likely break off relations, but they will undoubtedly raise their voice against this."

• López's trial has incited passions in politically charged Venezuela. The AP reports that an elderly man died and several people were injured yesterday during clashes outside the courthouse between government loyalists and Lopez supporters. But the sentence elicited cheers from grassroots government supporters who view the U.S.-educated activist as a dangerous conspirator, reports Reuters. López addressed the courtroom in a nearly three-hour speech prior to receiving the guilty verdict. He planned on showing a video taken on the day of last year's demonstration, in which he urges followers to remain peaceful, but evidence was not permitted by the court, reports the Miami Herald. He was allowed a few moments with his family, then was sent back to the isolation cell at the military jail where he has spent the past 18 months, reports the Washington Post.

• The Brazilian real has fallen to its lowest point since 2002, reports the Wall Street Journal. 

• Brazil's economic crisis has unleashed a national soul-searching regarding how the country's fortunes reversed so quickly, reports the New York Times. "As Ms. Rousseff’s administration and the opposition bicker over austerity measures, the crisis is casting attention on striking levels of corruption, flawed decisions and a gargantuan public bureaucracy denounced as wasteful and inept." Economists quoted in the piece argue that the slump -- the worst in the past quarter of a century -- has its origins in poor decisions taken by Rousseff's administration as the economy began to slow in 2010. 

• Ivan Velázquez, head of the International Commission Against Impunity in Guatemala (CICIG) is a rock-star in Guatemala after his leading role in fighting corruption peaked last week with the resignation of President Otto Pérez Molina who this week was jailed to face pending graft charges, reports the Associated Press.

• One of the candidates headed to Haiti's parliamentary election run-off next month was convicted of cocaine trafficking in Florida, reports the Miami Herald. It is an example of Haitian officials' failure to require a police background check for candidates, according to the piece and human rights organizations are worried about a "parliament of legal bandits."

• Former Peruvian military dictator Francisco Morales Bermúd will be forced to stand trial for the the 1978 abductions of 13 opponents, which included 3 journalists, reports the Associated Press.

• And back to the topic of international debt: Paraguay decided earlier this week that it is not obligated to repay $85 million borrowed by a representative of the late Gen. Alfredo Stroessner during the waning years of the 1954-1989 military regime, reports the Latin American Herald Tribune.

• The family of a Colombian human rights lawyer murdered more than a decade ago is demanding that the investigation include former President Alvaro Uribe, reports TeleSur.

• Cuban authorities announced they will release 3,522 prisoners ahead of Pope Francis' visit to the island next week. The freeing of inmates is becoming a tradition: it's the third time Cuba's done this ahead of a papal visit, reports the Associated Press. The people to be freed include women, people under 20, and inmates whose jail terms would end next year. However, it will not include people convicted of serious crimes, including those considered political prisoners by international groups.