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CDD Says Out-of-Court Settlement is Bad for Mozambique

CDD Says Out-of-Court Settlement is Bad for Mozambique

The Centre for Democracy and Development (CDD), a Mozambican non-governmental organisation (NGO), considered that the agreement on the “hidden debts” case with three creditors “harms the state (…) in order to protect leaders of Frelimo”, the ruling party.

On Monday, Mozambique’s minister of economy and finance, Max Tonela, announced an out-of-court settlement with three banks, including Portugal’s BCP, in the dispute in London over the hidden debts, providing for a reduction in “state exposure” from $1.4 billion (€1.3 billion) to $220 million (€204.5 million).

“The out-of-court settlement reduces the state’s exposure to $220 million, i.e. a cut of 84% of the banks’ total claim [and 66% of the capital],” Tonela said at a press conference.

“Given the non-recognition of the debts, the CDD believes that the government’s position of entering into negotiations with the creditors is contradictory and undermines the democratic rule of law,” the organisation said in a statement.

The “hidden debts” have been declared null and void by the Mozambican Constitutional Council (CC) and the agreement with the creditors aims to protect the interests of those who indebted the state, including current President Filipe Nyusi, who was minister of defence when the loans were taken out, the statement continues.

The “default” was a corruption project involving senior state officials, including the secret services.

“At least two ministers, including current President, Filipe Nyusi, then minister of defence, [and then minister of finance, Manuel Chang], are involved in the default,” stressed the CDD.

The Mozambique Liberation Front (Frelimo, the ruling party) also benefited from the scheme, receiving $10 million (€9.2 million), the NGO recalls, citing documents from the US prosecution in a case linked to the “hidden debts” affair.

“Both in the Maputo trial and in the London trial, the proceedings began on the grounds that the debts were not recognised, because they were contracted contrary to national legislation, using bribes to fuel a corruption scheme,” the NGO emphasised.

The government’s strategy, the statement continues, could be to avoid exposing Filipe Nyusi and the group involved in the scandal by releasing more information, as happened in the US.

At the press conference announcing the out-of-court settlement with the three banks, the Minister of Economy and Finance said that “the state’s potential liability in this case, including both capital and interest, would be around $1.4 billion, with interest continuing to accrue, as well as estimated costs of around £50 million [around €59 million], in the event of losing the case”.

The agreement announced on Monday was reached with Banco Comercial Português (BCP), which only participated in the loan to the company MAM, VTB Capital Plc (intervened) and the former VTB Bank Europe, in a dispute that has been running in the London Court since February 2019.

“The out-of-court settlement offers clear advantages for the state, compared to an uncertain court decision with possible unsustainable consequences for the country in the short and medium term. It also avoids endless appeals and extremely high costs, considering the country’s current economic and fiscal challenges,” said Max Tonela.

The Mozambican government also pointed out that the agreement does not affect the accountability actions of those involved in the hidden debt scandal.

This is the second out-of-court settlement in the case.

Mozambique previously announced that it had paid $130 million (€119.1 million) to financial institutions as part of an out-of-court settlement with Credit Suisse to end a dispute in the London Commercial Court over the “hidden debts” case.

The ongoing trial is the culmination of almost four years of litigation in the British courts, to which the African country appealed alleging corruption, conspiracy to defraud by unlawful means and dishonest assistance to cancel debts and claim financial compensation worth millions of dollars.

Mozambique is demanding $3.1 billion (€2.8 billion) in damages, compensation and indemnity from the shipping group Privinvest and its owner, Iskandar Safa, whom it accuses of paying bribes to public officials, including former finance minister Manuel Chang, who signed the sovereign guarantees on the loans.

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The hidden debts scandal dates back to 2013 and 2014, when the then Finance Minister Manuel Chang, now in detention in the United States, approved state guarantees on loans from Proinducus, Ematum and MAM to Credit Suisse and VTB banks without parliamentary approval.

Discovered in 2016, the debts were estimated at around $2.7 billion (around €2.55 billion), according to figures presented by the Mozambican Public Prosecutor’s Office.




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