African debt relief

[TheEarl]

http://news.bbc.co.uk/1/hi/business/4083676.stm

G8 reaches deal for world's poor

The world's eight richest countries have reached a landmark debt relief deal to alleviate global poverty.
The move provides relief for poor, indebted nations, mostly in sub-Saharan Africa, freeing up much-needed revenue.

Announcing the deal at a meeting of G8 finance ministers in London, the UK's Gordon Brown said now was "not a time for timidity but a time for boldness".

The UK, which will host a summit of G8 leaders next month, has vowed to make poverty reduction a priority.

The plan, which was devised by the UK, secured the backing of the US administration on Friday - paving the way for its adoption at the London meeting.

Teflon Tony switches his 'legacy' plan from Europe to Africa and look at him go. Within a week or so, this happens. First time in a long time that I'm completely in favour with a policy of Mr Blair's.

The Earl

 

[Colleen Thomas]

Tis rather astounding.

 

[English Lady]

That sounds really encouraging

 

[Liar]

I think it's interresting to note that the UK and the US are the ones backing the initiative right now. I read that the rest of the G8 countries are pretty reluctant to the idea. Let's hope they come around, this is one of the most sound things I've heard suggested in years.

#L

 

[amicus]

Sighs....just in general, one would think the loans made to African nations were made on a sound basis of investment and repayment.

Most of the nations affected have been making, 'interest only' payments for years.

I am reluctant to join the applause offered for 'writing off' those loans, as money is money and was earned and invested and loaned with the expectation of a return on those investments.

I too am reminded of the reign of Edi Amin and other African leaders driving around in Cadillacs and Mercede's Benz automobiles and pillaging the coffers of their own government for their own personal profits.

I mentioned in another post the recent interest of China in the resources of Sub saharan Africa. I have a rather suspect feeling that G8 nations are going on the offensive to meet Chinese competition rather than making an altrustic gesture to poverty in Africa.

But then, I am a bit cynical....


amicus...

 

[Liar]

I mentioned in another post the recent interest of China in the resources of Sub saharan Africa. I have a rather suspect feeling that G8 nations are going on the offensive to meet Chinese competition rather than making an altrustic gesture to poverty in Africa.

You might be right, or you might bee a cynic who wouldn't belive in philantrophy if it twisted your nuts..

But either way, I'm too pragmatic to really care. If this works to help those countries' current situation, I'm all for it. A loan is a loan is a loan, yes. But isn't one that can't possibly be repaid anything but a paper tiger?

 

[Colleen Thomas]

Sighs....just in general, one would think the loans made to African nations were made on a sound basis of investment and repayment.

Most of the nations affected have been making, 'interest only' payments for years.

I am reluctant to join the applause offered for 'writing off' those loans, as money is money and was earned and invested and loaned with the expectation of a return on those investments.

I too am reminded of the reign of Edi Amin and other African leaders driving around in Cadillacs and Mercede's Benz automobiles and pillaging the coffers of their own government for their own personal profits.

I mentioned in another post the recent interest of China in the resources of Sub saharan Africa. I have a rather suspect feeling that G8 nations are going on the offensive to meet Chinese competition rather than making an altrustic gesture to poverty in Africa.

But then, I am a bit cynical....


amicus...

You aren't a cynic. I'm a cynic.

Anyone who made a loan to a developing african nation and expected to ever see it back deserves a default. Lets be realistic.

1. The aids epidemic is deciating the working population, taking with it the potential of so many minds.

2. The governments of most are at best unstable, at worst, like vegas Kendo. You pick one guy and he is one of 100 who might be in power in three months, much less when the term of the loan is up.

3. These nation's only real collateral is their natural resources. Commodities futures are notoriously volitile and at any moment your loanee's deposits of whateverthefuckium might be worth millions or pennys to the pound.

4. Perhaps most relevant, these nations don't have the infrastructure to provide well rounded public officials. General whatshisname, might be awarded the lucurative position of minister of finance by strongman Whosit, but he is unlikely to understand the consequences of borrowing and long term accrual of interest on debts. He's really unlikely to care, as long as the contry has specie with which to buy whatever strongman Whosit wants today. And since his head is probably the price of disappointing strongman Whosit, he's going to take everyloan he can get, reguardless of the terms.


In vegas, on any hand of blackjack, your odds of winning are 50%. You will or you won't. By careful adherance to a probability chart, the odds say you will win 49% of the time. It' a pretty good bet, when the house edge is 2% or less. One of the worst bets you can make is on snake eyes or box cars at the craps table. These are prop bets, with odds of about 1 in 32. I mention this because if investment potential vs. risk were of import, you have better odds on a horn bet than you do on a loan to a devloping african nation returning your original capital, much less parlaying it into a viable investment.

Writing off those loans makes far more sense than trying to squeeze blood money out of nations already laboring under crushing debt, limited income potential, epidemic and very often civil war. If the minimal interest payments they are relieved of end up going to provide education, public healthy and safety or even building of infrastructure, the odds of them developing a stable government sky rockets. Should they develop stable government, they will need loans for expansion. In that case, you might actually consider giving a loan with some reasonable chance of having it repaid. Even if you don't feel comfortable giving another loan, they become viable trading partners and open up a market for your products that didn't exist before.

 

[~hellbaby~]

http://news.bbc.co.uk/1/hi/business/4083676.stm



Teflon Tony switches his 'legacy' plan from Europe to Africa and look at him go. Within a week or so, this happens. First time in a long time that I'm completely in favour with a policy of Mr Blair's.

The Earl

..And this would be the debt relief Bush wants to renig on isn't it?

 

[TJChurch]

Fact is, this should've been done during the first Dubya Administration. But rather than listen to O'Neill, Bush sacked him. (No wonder so many people left before his 2nd term began.)

Who cares if he's not natural-born American? I am, & I'd much rather have Bono as President.

 

[EnglishMuffin]

nah. stings ass is fitter.

 

[ishtat]

Most of the nations affected have been making, 'interest only' payments for years.


amicus...

I have been doing a bit of research which indicates that many of these loans are not paying the interest either. Thelender nations are not forgiving debt. They are writing off bad debt in their national accounts. As Colleen indicated this was bad debt from day one. The effect of this gesture is to make the 'lender' nations accounts marginally more accurate than they otherwise would be. It achieves nothing for the debtor nations. The only thing that might help the third world is a better Trade deal and none of the three major economic blocs USA, Europe, or Japan is interested in that.

 

[TheEarl]

I have been doing a bit of research which indicates that many of these loans are not paying the interest either. Thelender nations are not forgiving debt. They are writing off bad debt in their national accounts. As Colleen indicated this was bad debt from day one. The effect of this gesture is to make the 'lender' nations accounts marginally more accurate than they otherwise would be. It achieves nothing for the debtor nations. The only thing that might help the third world is a better Trade deal and none of the three major economic blocs USA, Europe, or Japan is interested in that.

Ishtat: If you read the rest of the article, you can see that's exactly what Blair is interested in. He wants to create a legacy, something which he'll be remembered for, which seems an extraordinary conceit for a national leader. His original plan for a legacy was to take Britain fully into Europe, but he's finally removed his head from his arse long enough to notice that no-one actually wants that and if he tries forcing it anymore, then he'll be remembered as 'that wanker who forced us into Europe.'

So now, his legacy is to try and set Africa up with stable trading deals, no debts and less poverty. He may be a conceited wanker, but at least this time he's being a conceited wanker in a good cause.

The Earl

 

[LadyJeanne]

Those natural resources - aren't they often mined by foreign corporations? Do the nations get a cut of the profits, either through deals with the government or through taxes? Perhaps they could pay a bit more for those diamonds and oil and whateverium.

Don't get me wrong - I think forgiving the debt is a good start. But it doesn't generate income for the nations, which is what they need to be able to do to move their economies forward.

 

[Guest]

http://www.guardian.co.uk/comment/story/0,3604,1505816,00.html

 

[Colleen Thomas]

Those natural resources - aren't they often mined by foreign corporations? Do the nations get a cut of the profits, either through deals with the government or through taxes? Perhaps they could pay a bit more for those diamonds and oil and whateverium.

Don't get me wrong - I think forgiving the debt is a good start. But it doesn't generate income for the nations, which is what they need to be able to do to move their economies forward.

They generally do get income. It is also, very often, so heavily embezzeled by corrupt officials that few if any dollars make it to the population at large.

In many cases, the underlying problem is the fact many, if not most people think of themselves primarily in terms of their tribe, clan, group and only in a secondary way as a citizen of a nation. that leads to a huge amount of what we would call cronism. And that, in these governments or any other, invariably leads to corruption.

 

[amicus]

Ladyjeanne....not that it matters...but as with Iran, after many western nations had made huge investments in oil drilling and transportation and paid a 'fair' royalty to the government, they ended up, 'nationalizing' the industry and stealing it all.

That happens often in third world countries.

amicus...

 

[ishtat]

Ladyjeanne....not that it matters...but as with Iran, after many western nations had made huge investments in oil drilling and transportation and paid a 'fair' royalty to the government, they ended up, 'nationalizing' the industry and stealing it all.

That happens often in third world countries.

amicus...

The major flaw in that argument is that since at least the 1920's until Khomeini the government in Iran was the one which was nominated and armed by firstly UK and France and later by the USA. It was not a 'fair' royalty deal in that the Iranian government had no legitimacy in the eyes of its own people as it was a foreign sponsered dictat.

Its interesting to observe that we do not learn much from History. In Uzbekistan for example the west is now sponsering a dictator who kills his own people as willingly as the Shah ever did .

 

[ishtat]

Ishtat: If you read the rest of the article, you can see that's exactly what Blair is interested in. He wants to create a legacy, something which he'll be remembered for, which seems an extraordinary conceit for a national leader. His original plan for a legacy was to take Britain fully into Europe, but he's finally removed his head from his arse long enough to notice that no-one actually wants that and if he tries forcing it anymore, then he'll be remembered as 'that wanker who forced us into Europe.'

So now, his legacy is to try and set Africa up with stable trading deals, no debts and less poverty. He may be a conceited wanker, but at least this time he's being a conceited wanker in a good cause.

The Earl

Its what Blair says he is interested in but in my view he knows it is unachievable. I think that one thing we can agree on is that nothing is outside the bounds of Tony Blair's conceit !

What I think will happen is this:-

1 Some of the non performing (bad) debt will be forgiven (written off)

2 The increased liquidity (if any) will be diverted to whoever the existing power holders are, and probably end up in Swiss Banks.

3 There will not be a significantly better trade deal for the third world and even if there was the efficient agricultural producers (those without subsidies ) like Argentina, Turkey, Ukraine, Canada, Australia would supply those markets far more efficiently. Can you see France or Japan for example with their peasant farmer voting base giving any significant Trade concessions?

4 The net indebtedness of third world countries will increase Why ? because all of the first world countries have government controlled or sponsered Export Credit or Export Finance/Insurance Institutions which provide a guarantee that their local producer will get paid.They convert private debt to sovereign debt.

For example The USA, Canada and Australia all export wheat to Egypt. Egypt hasn't the money to fully service the interest let alone repay the capital outstanding. Each country is owed about $2 Billion. They know they will not be paid so they finance the sovereign debt assumed through the issue of government Bonds in the Capital Markets. This may seem crazy but it's better than giving Aid because these trading conditions with all their faults at least ensure that goods and services are actually delivered wheras aid seems to end up directly in the pockets of corrupt governments .

Finally I doubt that aid to Africa is in fact a good cause. Apart from the corruption all it seems to achieve is the prolongation in power of people who would have been got rid of ages ago if it were not for aid support. Examples include Nyrere, Mugabe, Moi and many others. Is Ethiopia any better off for all the aid it has received ? Contrast with India, a country which has 1 Billion people, feeds them, albeit modestly, exports agricultural produce and has a long history (note the recent Tsunami) of refusing aid. Nehru said in 1956 that "assistance without work is a cancer"

I don't think we really differ . You're just decent enough to want to believe that Tony Blair is not always a self serving asshole.

Post script . I haven't yet seen any comment on the result of the red shirted pussycats v the Maoris !

 

[TheEarl]

Ladyjeanne....not that it matters...but as with Iran, after many western nations had made huge investments in oil drilling and transportation and paid a 'fair' royalty to the government, they ended up, 'nationalizing' the industry and stealing it all.

That happens often in third world countries.

amicus...

Happened in Egypt with the Suez Canal as well.

The Earl

 

[TheEarl]

I don't think we really differ . You're just decent enough to want to believe that Tony Blair is not always a self serving asshole.

Post script . I haven't yet seen any comment on the result of the red shirted pussycats v the Maoris !

I like to think that no-one can have their head up their arse for that long without coming up for air at least once.

As for the highly misguided comment about the mighty British Lions - we will see the true Lions when the first ritual demolition of All Blacks, sorry, I mean the first test rolls around. Poor tactics and some limp wristed rucking lost us the game against the NZ Maori; I doubt we'll make the same mistake twice.

Plus we'll have the major advantage of Matt Dawson not being near the test side, which will definitely help.

The Earl