Mr. Chairman,

 

I have the honor to speak on behalf of the Community of Latin American and Caribbean States (CELAC). We thank the Secretary General for the presentation of the reports relevant to Item 17 of the Agenda.

 

Mr. Chairman,

 

While recognizing the importance of  promoting responsible and preventive debt management and the need to minimize risks of debt default and other debt crises, CELAC members believe that the issue of external debt sustainability and development is one of the areas in which the Group considers that the central role of the United Nations,  in particular the  General Assembly should be further strengthened.

 

As it has been recognized in several General Assembly resolutions, the issue of debt sustainability is essential for underpinning growth. In this sense, both debt sustainability and effective debt management, as well as the determination of adequate debt repayment capacity that does not impair sustainable development perspectives, are core factors to be considered in the efforts carried out by Member States to attain national and international development goals, including the Millennium Development Goals. Past resolutions on external debt sustainability and development have acknowledged that debt crises are costly and disruptive, including for employment and productive investment, and tend to be followed by cuts in public spending, including on health and education, affecting the poor and vulnerable in particular.

 

These same resolutions stress the need for continuing efforts to address systemic fragilities and imbalances and to reform and strengthen the international financial system. They also reaffirm that multilateral institutions, including entities within the United Nations system and other relevant organizations, play an important role, given their respective mandates, in assisting countries in achieving and maintaining debt sustainability.

 

In his latest report on debt sustainability and development, the Secretary General has stated that sovereign debt crises, which can affect both developed and developing countries can lead in many cases, through procrastination and the costly bailout of creditors, to socializing private debt and to human suffering. Noting further that in many cases, the existing procedures are ad hoc and lack consistency, the Secretary General underlines the immediate need to improve the efficiency and coordination in sovereign debt restructuring at the international level, to reduce the obstacles to wider participation in restructuring in the absence of clear sovereign insolvency procedures.

 

Also, resolutions 65/144, 66/189 and 67/198, have recognized the design of a debt workout mechanism as a tool for debt crisis prevention and resolution and called for consideration of enhanced approaches to sovereign debt restructuring and debt resolution mechanisms.

 

The current situation has once again highlighted the gaps in the international financial arcitechture with regard to timely and effective solutions to sovereing debt distress. Even if the technical discussions that are being held at several fora represent an important progress, there is still room for improvement, through the establishment of a framework for the orderly and predictable restructuring of sovereign debt. This discussion should be at the core of any debate concerning the reform of the international financial architecture, and  the United Nations should be the appropriate forum for this discussion, given its unquestioned legitimacy and convening power.

 

CELAC believes that the adoption of sound practices in the management and governance of sovereign debt is crucial to the promotion of economic growth and development through sustainable and good-quality finance. The global sovereign debt system is in dire need of harmonization as sovereign debt crisis resolution is governed by loose networks and ad hoc arrangements. This patchwork arrangement could benefit from the establishment of common standards applicable to all stakeholders and compliance to norms that promote co-responsibility between lenders and borrowers at the international level.

 

Mr. Chairman,

 

CELAC recognizes the importance of a human rights-approach when dealing with debt crisis and highlights that when debt sustainability is miss-managed, it might lead to cascades of litigation and causing ripple effects throughout the debt market.  CELAC therefore stresses that the existing instruments have failures and gaps that need to be urgently addressed. We also recognize the need to work towards the establishment of responsible and preventive policies for responsible lending and borrowing in order to maintain sustainable debt management.

 

We believe that this human-rights approach is appropriate, given the fact that debt relief can contribute decisively to free up resources that could be directed towards activities to advance poverty eradication and hunger, sustained economic growth and achieve the internationally agreed development goals, including the Millenium Development Goals and the Sustainable Development Goals.

 

Mr. Chairman,

 

In this context, CELAC reaffirms the importance of developing tools conducive to the strengthening of the international financial system, providing a stricter and more effective regulation of large financial entities and the adoption of concrete measures to achieve international best practices in international financial flows.

 

We also recognize the importance of a timely, effective, comprehensive and durable solution to debt problems and underscore that significant progress has been made through debt relief programmes to poor countries, including through the highly indebted poor countries (HIPC) initiative and the multilateral debt relief initiative (MDRI).

 

Concerning vulture fund litigations, we realize that many debt-restructuring processes and debt sustainability itself are at present facing serious risks, related to the actions of speculators endeavoring to gain excess profits from countries facing debt obligations and repayment processes, thereby placing them in vulnerable situations. We believe that vulture funds must not be allowed to paralyze the debt-restructuring efforts of developing countries, and that these funds should not supersede a State's right to protect its people under international law.

 

In this sense, we recognize that more effective work needs to be done in order to address the highly speculative activities of the so-called “vulture funds”, which  have systemic implications and pose a risk to all future debt restructuring processes, and to create, with the participation of all relevant stakeholders, a multilateral legal framework for the orderly and predictable restructuring of sovereign debt with a view, inter alia, to increasing the efficiency, stability, transparency and predictability of the international financial system.

 

Mr. Chairman,

 

The international community must realize that no path to growth can be construed or fostered with unsustainable debt overhang. We therefore believe that debt restructuring processes should have as their core element a determination of real payment capacity so that they may not compromise national growth perspectives. If the real repayment capacity of any country is not properly addressed, the original restructuring may require more time for further restructuring. Such outcome would further affect growth and good faith of creditors.

 

We also consider it essential for the stability and predictability of international financial architecture, to ensure that agreements reached between debtors and creditors within the context of sovereign debt restructuring processes are respected, allowing payment flows to be distributed to cooperative creditors as agreed with them in the process of consensual readjustment of the debt. We must count on instruments making reasonable and definitive agreements between sovereign creditors and debtors, allowing them to confront debt sustainability problems in an orderly fashion.

 

We therefore welcome the resolution adopted by the UN General Assembly 68/304, entitled “Towards a multilateral convention to establish a legal regulatory framework for sovereign debt restructuring processes” and the resolution adopted by the UN Human Rights Council 27/30, entitled “effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights: the activities of vulture funds”.

 

Mr. Chairman,

 

CELAC Member States stand ready to contribute to the discussions on this issue that will take place during this session and wish you and the Committee great success.

 

Thank you.