EXPERIENCES OF DEBT
AUDITS
An alternative to the crisis
Maria Lucia Fattorelli
Seminar Debt and Austerity:
From the Global South to Europe
Athens, Greece, 6th-8th May 2011
EXPERIENCES OF DEBT AUDITS
 Citizen Debt Auditing – Brasil
Since 2001, Coordinator
 Official Debt Audit – Ecuador
2007-2008, Member of the Commission CAIC
 Parliamentarian Investigation – Brasil
2009-2010, Assessor of the Federal Deputies CPI
CITIZEN DEBT AUDIT
BRASIL
• Citizens' initiative from the assessment
conducted in 2000, with more than 6 million votes
• Pressure for the realization of the Official Debt
Audit, required by the 1988 Federal Constitution,
but never implemented
CITIZEN DEBT AUDIT-BRAZIL
• KEY INITIATIVES:
I - Historic Debt Rescue: Studies, Documents, Congress Reports
II - Support for Current Events
Analysis of National Budget and fight against the privilege of debt
III - Compilation of Legal Arguments – Law Suit of Lawyers in STF
IV – Main Political Results
CAIC in Ecuador
CPI in Brazilian Parliament
V – National Mobilization linking organizations or workers, students and
other popular associations
VI - International Connection: Countries and Organizations LATINDADD, CADTM, JS,
UNCTAD
VI I- Popular Publications, participation on national and international events,
book, video, studies, website: www.divida-auditoriacidada.org.br
LEGAL/POLITICAL ARGUMENTS
1. ILLEGITIMATE DEBT
Study published in Ecuador
2. DEEPENING STUDIES ABOUT:
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Co-responsability of creditors Example: Norway
Asymmetry between parts
Violation of principles: Reasonability, Rebus sic Stantibus
Right to Development and to Sovereignity
Violation to Human Rights
3. BUILD JURISPRUDENCE: Start studies to build
jurisprudence and impulse INTERNATIONAL
LEGITIMATE AND FAIR LEGAL FORUMS
Debt Payments: Highest expense of the Federal Budget
Brazilian Federal Budget - 2010
R$ 635 billions
Source: SIAFI - http://www.camara.gov.br/internet/orcament/bd/exe2010mdb.EXE. Elaboração: Auditoria Cidadã da Dívida
CITIZEN DEBT AUDIT-BRAZIL
CHALLENGES/ DIFFICULTIES:
 POLITICAL SITUATION:
• Since PT took over the government in 2003, the forces against indebtness
process got very difficult, because Lula didn´t change the debt-policies
• This way, the rich elite, banks, industries and big-media – who take
advantage of public debt - became stronger, because the traditional
opposition of PT and other parties that turned to support Lula´s
government were all together on the same side
• Since 2005, when Lula paid IMF - symbol of debt - there is a continuous
speech (from gov. and media) that “the Brazilian Debt is not a problem”
• Citizen Debt Audit has to do a very hard effort to analyze facts and take
the discussion about Debt-process and its consequences to workers of all
areas, retired people, students, unemployed, and all social movements
who fight for social services, specially health and education.
CITIZEN DEBT AUDIT-BRAZIL
CHALLENGES/ DIFFICULTIES:
 ECONOMIC SITUATION:
 Brazilian Internal Debt is over R$ 2.3 trillions (over US$ 1.5 trillion), the
External Debt is over US$ 300 billion, and the service of the debt took
45% of National Budget in 2010. That´s the reason for such deep
inequality in Brasil: 7th largest economy; 73rd Human Development Index
DEBT: BRAZILIAN MAJOR PROBLEM
 2011 – President Dilma Roussef proceeded the largest budget cut of R$50
billion (US$33billion) to reduce social expenses in order to pay debt;
announced the “need” of tributary and pension reforms; keeps selling
petroleum areas by auctions. No question on debts payments besides the
many indications of illegality and illegimacy founded by the CPI –
Commission of Investigation of Debt in Brazilian Parliament
 Risks of transference of Financial Crisis to Brasil: investments of
Petroleum and Sovereign Funds in international market; free capital flow
DEBT AUDIT
 RIGHT to ACCESS INFORMATION
 BASED on DOCUMENTS and PROVES (not only an
opinion, a point of view or a thesis)
 EVIDENCES of the TRUE ROLE of PUBLIC DEBT that
allows Political and Juridical Actions
WHAT HAS PUBLIC DEBT BEING?
 Instrument to Finance the Public expenses?
or
 Instrument of Financial Power that utilizes the
Debt as a mechanism of transference of public
resources to the financial private sector ?
Official Debt Audit – Ecuador
Integral Debt Audit Definition – Decree Nº 472 / 2007:
Art. 2 - Integral Debt Audit is:
“oversight actions aimed at reviewing and evaluating the contracting
process and / or renegotiation of public debt, the source and destination
of resources, and implementation of programs and projects to be
financed with internal and external debt, in order to determine its
legitimacy, legality, transparency, quality, effectiveness and efficiency,
considering the legal and financial aspects, the economic, social,
gender, regional, ecological and nationalities and peoples”
ECUADOR: LESSON OF SOVEREIGNITY
OFFICIAL AUDIT OF THE PUBLIC DEBT WITH CIVIL
SOCIETY PARTICIPATION - CAIC
• CAIC Final Report Presentation: October/2008.
• Interruption of interests payments (Global Bonds 2012 and 2030):
November/2008
• Sovereign proposal to repurchase the principal of these bonds
paying only 30% of its nominal value in order to end this debt and
interests. RESULT: 95% of the creditors accepted
The Economist (23/04/2009): “Mr. Correa seems to be incorruptible (...)
public spend increase 71% on 2008, due to investments in schools and
hospitals”
“Ecuador suggests sovereign external debt audits worldwide” (Ecuador
Inmediato, 23/04/2009)
PARLIAMENTARY INVESTIGATION – BRASIL
CPI – PUBLIC DEBT
Commission created by the Brazilian
Parliament to investigate the public debt of
the Union, states and municipalities, interest
payments, the beneficiaries of these payments
and its dramatic impact on social policies and
sustainable development in the country
PARLIAMENTARY INVESTIGATION – BRASIL
 Participation of Civil Society
 Access to documents untouched since dictatorship
(1970´s)
 Most relevant Participation of Private Banks on the
External and Internal Debt Stock and Payments
 Most relevant Benefits to Private Banks Debt in all
decades since the 70´s
 Since 80´s, Debt increase without correspondence in social
benefits or investments to the country. Crisis opened the
way to IMF intervention in internal subjects
 Consecutive change of the debt face, from EXTERNAL to
INTERNAL, that pay the highest interest rates
 Investigation sent to Prosecutor
GREECE - DEBT AUDIT
 What is the origin of Greek Debt of almost € 400 billion?
Did Greece received this amount of money? Where did it go
to? Who got the benefit of these loans? For which purpose?
 How big is the responsibility of the Banks for:
 not telling the true about the amount of Greek Debt in order
to impulse more and more new loans, turning it exaggerated?
 speculating with Greek bonds, in order to make the interest
rates go up continuously to force an intervention from IMF?
 playing with derivatives, “Credit Default Swaps” and other
“toxic” papers?
GREECE - DEBT AUDIT
 Why did Greek government accepted IMF and EU
impositions to implement reforms against the people,
benefiting the Banks?
 How much money has the Greek government destined to
rescue Banks?
 What is the influence, on the increase of public debt, of
conceded tax reduction to the richest part of Greek society?
A UE Report points that, from 1995 to 2010, the income tax
of Greek companies came down 40% to 24%. And how
much the workers are their families are paying?
Only an AUDIT can answer these and other important
questions to Greek people, who is paying the “bill” of the crisis.
GREECE - DEBT AUDIT STEPS
 Organize a Commission: CITIZEN, OFFICIAL or
PARLIAMENTARY
 ACCESS TO DOCUMENTS: statistics; records about real
situation of Greek public debt and its historical evolution;
accounts, complete contracts and reports about all financial
operations with bonds, private debts transformed into
public, banks rescues, interests and other taxes, fees and
costs agreed and paid; destination of funds; exposition to
derivatives, “Credit Defaults Swaps” and all “toxic” papers,
tax reductions and benefits approved in the last period;
deregulation of financial market
Chance of articulation with other countries submitted to the
same process of borrowing
DEBT CRISIS IN EUROPE
Banks Rescue take over Social Rights
France
Portugal
Ireland
Greece
UK
Spain
REDUCTION OF WAGES, PENSIONS,
SOCIAL EXPENSES
WHAT FOR?
TO PAY DEBT MADE TO SAVE THE
PRIVATE BANKS
THIS MUST BE AUDIT!
Illegitimate Debt: ICELAND SAY “NO”
When people can vote, the debt is defeated
The BANKS are being saved!
We fight for justice and guarantee decent life
for all human beings
Thank you,
Maria Lucia Fattorelli
www.divida-auditoriacidada.org.br