“(The agrarian reform bond issue) is a problem to face and not to sweep under the rug as it has been so far. We have to address the problem, but it is a problem that has solution.”
— Alfredo Thorne, Then-Peruvian Finance Minister
Financial Times, 6/2/16
Despite acknowledging its duty to repay the agrarian reform bonds, Peru still refuses to provide a valid formula for updating their value. In the meantime, the government has unlawfully hidden the details of this outstanding debt obligation from credit rating agencies, multilateral organizations and U.S. regulators as it seeks to attract foreign investment in Peru. This deceit includes misleading the U.S. Securities and Exchange Commission and violating IMF member obligations.
In concealing its agrarian reform bond debt, Peru has:
Violated the rules of the International Monetary Fund (IMF)
Peru belongs to the IMF, whose statistical data rules require member countries to disclose all debt. Unfortunately, Peru has failed to report its agrarian reform bond debt.
Misled the Inter-American Development Bank (IADB), World Bank (WB) and the Organisation for Economic Co-operation and Development (OECD)
Continuing to default on the agrarian reform bonds and failing to disclose that debt to various multilateral organizations is inconsistent with OECD membership, which Peru is seeking.
Committed securities fraud in the U.S.
Seeking foreign investment in Peru, the country issued a $1.2 billion sovereign bond in 2016. However, according to an analysis by Columbia Law School Professor John Coffee, Peru violated U.S. securities laws in its offering documents by claiming the country was “not involved in any disputes with its internal or external creditors.” In reality, agrarian reform bondholders have filed hundreds of lawsuits against Peru over the ongoing default.
Withheld information from the major credit rating agencies
Peru’s strong credit ratings from the so-called “Big Three” rating agencies—key to attracting foreign investment—are misleading. That’s because Fitch, Moody’s and Standard & Poor’s have all refused to rate the agrarian reform bonds. Fitch and Standard & Poor’s have both cited insufficient information as the reason.
“(The agrarian reform bond issue) is a problem to face and not to sweep under the rug as it has been so far. We have to address the problem, but it is a problem that has solution.”
— Alfredo Thorne, Then-Peruvian Finance Minister
Financial Times, 6/2/16
“Put bluntly, although other sovereign issuers have defaulted, I am aware of no instance in which they have done so in quite this lurid, covert and seemingly unlawful fashion.”
— John Coffee, Columbia Law School Professor, in a legal opinion on the agrarian reform bonds
1/11/16