“Supreme Decree No 242-2017-EF is based on the illegal Constitutional Tribunal ruling of July 16, 2013 – in which a document was doctored… through the use of white out…”
— Asociacion de Bonistas de la Deuda Agraria del Peru (ABDA), in a letter to Peru’s Minister of Economy and Finance
Since Peru’s highest court issued its doctored decision in 2013, the government has published different plans purporting to resolve the agrarian reform debt. All have relied on the fraudulent ruling, despite an ongoing criminal probe. Applying various arbitrary formulas concocted by Peruvian officials, these plans would reduce the value of the bonds to a fraction of their true worth. Leading bondholder groups have roundly rejected these disingenuous attempts to settle the debt, but the government refuses to engage the victims of its default in a meaningful dialogue.
The Peruvian Ministry of Economy and Finance publishes two Supreme Decrees that would allow the government to wriggle out of its agrarian reform debt while paying next to nothing. The plan establishes an inscrutable formula for updating bond values, and attempts to force bondholders to submit to a one-sided process for settling the government’s debt to them. To participate, bondholders would have to forfeit the right to legal recourse without knowing how much—and in what form—they would be repaid.
Facing ongoing outrage over its refusal to resolve the agrarian reform debt, the Peruvian government confirms its obligation to repay the bonds in a Supreme Decree executed by President Pedro Pablo Kuczynski. However, the decree—which expressly relies on the forged court ruling—fails to disclose the amount Peru is willing to pay, leaving bondholders to wonder exactly how much they might be compensated. The plan would impose other conditions clearly favoring the government over the victims of its default, including an extremely low cap on the amount of cash bondholders could receive. The balance would be repaid in the form of more bonds, or parcels of land of the government’s choosing.
The Peruvian government publishes yet another Supreme Decree based on the doctored court decision, attempting to shirk its obligation to repay the agrarian reform bonds at a fair price. Once again, bondholders would have to surrender their legal rights without knowing the value of their bonds—or if they are worth anything at all. The government reserves the right to unilaterally determine the form of compensation bondholders would receive, and establishes a convoluted repayment process that could drag out for years.
Bondholders have overwhelmingly rejected these decrees, including the most recent one. Soon after it was published, the plan was formally condemned by leading bondholder organizations including PABJ, the Asociacion de Bonistas de la Deuda Agraria del Peru (ADBA) and the Asociacion de Agricultores Expropiados por Reforma Agraria (ADAEPRA).
In separate missives to Peruvian officials, the groups pointed out numerous problems with the latest decree, including the fact it relies on a tainted court ruling that remains under investigation. ADBA and ADAEPRA members also noted the plan would violate their constitutional property rights. Bondholders continue to urge the Peruvian government to engage in a constructive dialogue to reach a mutually acceptable resolution instead of attempting to settle the ongoing default through unilateral edicts.