HSBC and the Corrupt Debt

During the 90s, under Fujimori's administration in Peru, the Hong Kong & Banking Corporation (HSBC) of British, Scottish and Chinese capitals - together with Peruvian and foreign financial insitutions – used privileged information from the Ministry of Economy and Finance to benefit from the external public debt of Peru. A series of illegitimate operations resulted in the appropriation of the Peruvian public treasury by the foreign bank and by an advisor of the Peruvian government, who managed to use his political power to become wealthier by selling the country to HSBC. The consequence would be a new debt, a “corrupt debt”, to be paid by the Peruvians.

In 1992, after buying Midland Bank (England), HSBC sent an official to convince the Peruvian authorities of admitting papers of the Peruvian external debt as a form of payment for the selling of public companies in the privatization process. Thus, HSBC made contact with attorney Francisco Moreyra García Sayán, who in 1993 was appointed as advisor to the Minister of Economy Jorge Camet. The proposal consisted in persuading the Ministry of Economy and Finance (MEF) to receive promissory notes of the external debt for 100% of their face value.

The amount agreed for the privatizations between 1991 and 1998 is of 7,7 billion dollars. The Public Treasury obtained 6.1 billion dollars in cash and 229 million dollars in credit reports at a market value equivalent to 343 million dollars of face value. This means that the system of debt documentation as a result of a privatization used only 4,4% of the total sales and concessions. About the external public debt of 25 billion dollars a year in 1991, the impact of the swap was only 1%. This means the mechanism of debt for privatization swap did not result in the reduction of the external debt, but it was only useful for HSBC and its partners to do business.

On July 18th, 1994, the Peru Privatization Fund (PPF) was created. It is a company made up by the US, HSBC and the Credit Bank of Peru with 85.8% of the shares in equal parts of 42.9%; and Chase Manhattan Bank with 14.2% of the shares. Moreyra participated in the foundation of the PPF, as and advisor attorney, while it held its position of advisor of the Ministry of Economy and Finance.

HSBC had a person infiltrated in the direction of the Ministry of Economy and Finance to 1) guarantee that the debt for privatization swap took place and 2) to know the exact moment to do the oeprations. Moreyra became the PPF's director in 1995. What is worse, the Peruvian state assumed the debt of the Banco Popular. It had credit reports of the HSBC and the Banco de Credito, which allowed these banks to use 69.2 millon dollars in reports that had recovered their value after their devaluation as a result of the bankrupcty and liquidation of the Banco Popular. The two big winners here were the Banco de Crédito and HSBC, which had a direct representative in the Ministry of Economy and Finance.

HSBC and its partners bought credit reports for 125 million dollars, and obtained profits for over twice as much for the credit reports used in the privatization processes. Another part of the reports were sold in the stock exchange.

This case is a violation of economic and social rights of the Peruvian population, enshrined in the International Covenant on Economic, Social and Cultural Rights (ICESCR) «All peoples may, for their own ends, freely dispose of their natural wealth and resources (...) In no case may a people be deprived of its own means of subsistence». Article 1 ICESCR.

Key issues: Financial System and Economic Crimes
Denouncing organizations: Inter-American Platform on Human Rights, Democracy and Development and the Jubilee Network Peru

Banco Santander in Madeira River: A Spring of Ecologic Debt and Environmental Refugees

The Spanish bank Banco Santander Central Hispano (SCH), is currently the largest private bank operating in Latin America and the Caribbean. It is accused of being co-responsible for causing a huge ecologic and social debt associated with the impacts that the construction of four dams and a water way will have on the Madeira River (Brazil and Bolivia) and with the displacement of 5,000 families that will become landless environmental refugees without any compensation whatsoever. As a result of this and of the funding of many irresponsible mega projects, the bank will continue to provide huge benefits to far off share holders.

The funding of the Madeira river project is aimed at the construction of two hydroelectric dams: Santo Antonio and Jirau, plus two additional dams that will build a 4,200 km water way, destined to transport soy, wood and minerals from the Amazon to big consumers (US, European Union and China). Banco Santander is the bank behind the project, with plans of funding 20% of its costs (14.2 billion dollars). Madeira River's water way is also part of the IIRSA initiative, led and promoted by the Inter-American Development Bank, several businessmen networks and estate owners and local administrators, and it aims to extract all kinds of commodities to export them according to the needs of the global consumer class, at international market prices. That is the necessary infrastructure for “free trade”, which is supplemented with FTA and is an essential part for the looting by transnational corporations.

The consequences will extend to both margins of the river, the Bolivian and the Brazilian side.

SCH is accused of being co-responsible of the:

· Displacement of the local population: 1.4 million people live in Rondônia for example, most of them rubber producers, nut collectors and fishermen. It is estimated that nearly 5,000 families living on the Brazilian side will be forced to leave their land without there being plans for their resettlement or compensation.

· Impacts on the people's health: the construction will affect the drinking water of Porto Velho (Rondônia's capital) and it would also increase the cases of malaria.

· Loss of biodiversity and food sovereignty: the interruption of the migration of the dourada (cat fish) will endanger not only the survival of this species but the future of the families of 2,400 fishermen of the region.

Despite its aggressive marketing and corporate responsibility campaign, Santander Group fails to comply -as in this case- with the weak international laws that could govern the actions of an international bank. The OECD Guidelines for Multinational Enterprises, the United Nations ICESCR, ILO's 169 Convention - which provides the consultation to the affected indigenous communities - do not apply, nor do the standards of the finance community such as the Equator Principles, let alone the Collevechio Declaration.

Key issues: Financial System and Economic Crimes

Denouncing organizations: MAB, SETEM, XODG

BBVA: CAMISEA and HOLLOW Corporate Social Responsibility

The Spanish bank Banco Bilbao Vizcaya Argentaria is the second largest bank in Latin America (and it is the leading bank in management of pension and insurance funds in the region). The bank has a long record of human rights violations. In opposition to what is announced in its CSR, BBVA has been accused of buying political support of several governments like the government of Fujimori-Montesinos, money laundry from drug traffiking in Colombia and Mexico, anti-union policies, freezing bank accounts of groups considered subversive such as Enlace Civil (Chiapas, Mexico), funding of projects to manufacture cluster bombs, looting the public treasury by turning the public debt into the collection of high interest rates to be paid by the state, or funding of projects that damage the environment (such as a mega pulp mill in Uruguay or OCP pipeline in Ecuador).

Most of its environmentally controversial projects are associated with mine exploitation (such as in Yanacocha and Antamina mines in Peru), followed by projects linked with the construction of dams, gas and oil projects and big pulp mills. In all of these projects, they provide direct funding by means of the “project finance” formula, in joint venture with other banks. So the bank's responsibility in those cases is clear.

After holding a hearing in Bilbao (Basque Country) last year, where the people's accusations were filed against the BBVA, the Peoples' Tribunal in Lima will address the accusation in the case of Camisea Gas Project 1 and 2 in Peru. (For more information about Camisea, please see http://www.finanzaseticas.org/pdf/Informe_BBVA.pdf).

In 2006, BBVA Banco Continental, the Peruvian subsidiary of BBVA, funded a 35 millon-dollar loan to Tecpetrol, one of the leading companies in exploration activities of Camisea gas project. Gas pipelines have broken down causing gas and oil leaks as a result of this project. Recent studies show that Techint, operator of the gas pipeline and Tecpetrol's parent company, used defective pipes and hired unqualified smelter workers, causing serious problems in the construction of the gas pipeline. The project was also criticized for its impacts on indigenous communities of the area, both in their way of life, livelihood (hunting, collecting) and in their economy (agriculture, cattle growing), and in their health (cancer, skin diseases, abortions, malformations, etc.). In many cases the rules of protection and Indigenous Reserves created for this purpose were not enforced.

BBVA has violated the Peruvian constitution by funding projects that fail to respect the indigenous reserves protected under them and ratified by the corresponding governments: in this case the Nahua Kugapakori Reserve created in 1990, or the violation of the rules to protect peoples like Nahua, Nanti and Kirineri. Camisea also implies a violation of ILO's 169 Convention, under which Peru recognizes the right of the community to give consent to an activity aimed to be carried out by a corporation or a state in its territory.

BBVA Group has violated codes of conduct it signed to wash its image, such as the Principles of the UN World Pact (2002) which includes human rights, labor, environmental rules, the struggle against corruption as an important part of its strategy and of its operations, all aspects that have been clearly overlooked by BBVA.

The adoption of the Equator Principles in 2004 (in projects with funding exceeding 10 million dollars) and its reviewed version of July of 2006, implied a commitment of the BBVA to avoid environmental and social risks in the process of funding projects, an aspect which, according to the accusation, the bank fully violates.

Key issues: Financial System and Economic Crimes

Denouncing organizations: Transnational Institute (Holanda), Ecologistas en Acción/ Observatorio de la deuda en la Globalización / Ekologistak Martxan/SETEM (Estado Español), SOMO (Holanda), France Amérique Latine (Francia), Jubileo Sur (Perú)/span>