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Debts are bought and sold all the time, and Western courts have awarded hundreds of millions of dollars in judgments to debt investors. Peru is the best-known example: In 2000, Elliott Associates, whose founder, Paul E. Singer, is a top Republican donor and a backer of Rudolph W. Giuliani's presidential campaign, won a $58 million judgment on debt it had bought in 1996 for $20 million. Now African countries are in the sights of debt investors. In 1979, Zambia borrowed $15 million from Romania to buy agricultural equipment. Twenty years later, the two governments agreed to settle the old debt for about $3 million. But a hedge fund, Donegal International, bought it first and sued for about $55 million. This year, a British court ruled that Zambia must pay Donegal $15 million.

Unlikely Ally Against Congo Republic Graft

By Lydia Polgreen (December 10, 2007)

BRAZZAVILLE, the Congo Republic - The main teaching hospital here is in such disrepair that many patients have to pay freelance porters for piggyback rides up and down the stairs to get X-rays. It costs $2 a flight, each way.

But why is the hospital, like so much of the Congo Republic, so tattered when the country sells billions of dollars of oil each year?

The government says it is still recovering from a devastating war and faces a new problem: Western investors, sensing a chance to rake in millions, are suing to recover old debts that they bought for pennies on the dollar.

Such investors, running what critics derisively call vulture funds, have been widely denounced by the World Bank and the International Monetary Fund for forcing poor countries to fend off costly lawsuits rather than build classrooms and clinics.

But in the Congo Republic, where a deep-seated culture of graft has squandered so much of the nation's wealth, those investors have become unexpected allies of anticorruption campaigners, who say such lawsuits may be the only way of holding the country accountable for how it spends its money.

"We ask ourselves, why is our country like this?" said Dr. Bebene Bondzouzi-Ndamba, a neurologist at the hospital. "Why are we so rich and yet so poor?"

Her questions have come into sharp relief in the fight between the Congo Republic and an affiliate of an American hedge fund, Elliott Associates. For an undisclosed price, the company bought about $31 million in debt that the country took on in the 1980s but later defaulted on. Now it is suing in American, European and Asian courts to collect the principal plus interest and penalties - more than $100 million in all. So far, it has collected $39 million.

Advocates of canceling third world debt recoil at such cases, with some calling for a code of conduct among lenders to prevent them from selling unpaid debts to investors.

"I deplore the activities of so-called vulture funds that seek to profit from the debts owed by the poorest countries," Gordon Brown said in May, the month before he became prime minister of Britain. "I am determined to limit the damage done by such funds."

But organizations that fight corruption argue that those investors are exposing in court the corrupt networks of government officials, providing a much-needed check on mineral-rich states. Beyond that, anticorruption campaigners, like the groups Global Witness and the Publish What You Pay Coalition, contend that when nations win debt relief without becoming more accountable, they will simply repeat old mistakes and end up deep in debt once again.

"If it were not for these vulture funds, we would not know any facts about the way our country's wealth is being taken away," said Brice Mackosso, a campaigner for greater transparency in the Congo Republic's government. "We don't agree with their ultimate aims, but they are the only ones capable of exposing the truth."

Critics argue that virtually all countries use their debt relief savings to help the poor, and that so-called vulture funds achieve outsize returns from long-forgotten debts at the expense of the world's poorest people.

Cutting Both Ways

While investor lawsuits may expose nefarious dealings, they may also make governments more secretive to avoid asset seizures. "It can cut both ways," said Mark Thomas, a senior economist at the World Bank. "It can be a cause of revealing nontransparent practices, but it can also be a cause of those nontransparent practices in the first place."

Debts are bought and sold all the time, and Western courts have awarded hundreds of millions of dollars in judgments to debt investors. Peru is the best-known example: In 2000, Elliott Associates, whose founder, Paul E. Singer, is a top Republican donor and a backer of Rudolph W. Giuliani's presidential campaign, won a $58 million judgment on debt it had bought in 1996 for $20 million.

Now African countries are in the sights of debt investors. In 1979, Zambia borrowed $15 million from Romania to buy agricultural equipment. Twenty years later, the two governments agreed to settle the old debt for about $3 million. But a hedge fund, Donegal International, bought it first and sued for about $55 million. This year, a British court ruled that Zambia must pay Donegal $15 million.

The plight of Zambia, a poor country stricken by AIDS, raised awareness of so-called vulture investing in Africa, and debt relief campaigners, celebrities and some members of the Bush administration have taken up the issue.

Most creditors go along with debt reduction or write-off deals, and the Congo Republic has qualified under international programs for a reduction of much of the $8.5 million in debt it owed as of December 2004.

Government officials here point to a slew of new projects under construction, like a hydroelectric dam, hundreds of miles of new roads and an emergency power plant as evidence that they are rebuilding the country. A June report from the I.M.F. noted that at least some progress has been made to address "corruption and weak governance."

Still, half the nation's population lacks access to clean water, according to Unicef. The lifetime risk of dying in childbirth for women in the Congo Republic is 1 in 26, one of the world's highest rates. Life expectancy is just 53 years, down from 55 in 1990.


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