Hedge fund threatens to sue Peru over debt: activists

A US hedge fund is threatening to sue Peru for payment of defaulted debts issued by its former military regime, which an activist group condemned Friday as "predatory."

Jubilee USA, a campaign group pushing for debt relief for developing countries, said Connecticut-based hedge fund Gramercy is planning to sue Peru under a tribunal system established in a 2009 trade deal with the United States.

Peru is in the spotlight this week as host of the annual meetings of the International Monetary Fund and World Bank, and Jubilee used the occasion to pounce on "predatory" behavior by hedge funds.

"It's ironic that this threat is coming amidst global meetings in Peru that continue to try and stop this kind of predatory behavior," said executive director Eric LeCompte.

Speaking on the sidelines of the IMF meetings, Peruvian Finance Minister Alonso Segura said his country would oppose any legal action outside its territory.

"That's not going to happen. Peruvian laws protect the government. There's no problem. This issue will be dealt with by Peruvian laws," he told AFP.

Gramercy said it had sought a "consensual resolution" with the Peruvian government over the dispute.

But "we were told point blank by a senior Peruvian official: 'Make us care,'" Gramercy's chief legal officer James Taylor said in an email, without confirming whether the firm had in fact threatened to sue.

The potential litigation relates to bonds issued by Peru's 1968-1980 military regime after expropriating millions of hectares (acres) from landholders.

It never paid the $5.1 billion in bonds, but Gramercy bought a portion of them seven years ago at steep discounts, hoping to win full payment.

Peru has launched a partial repayment plan on the bonds, but Gramercy is suing for more, Jubilee said.

Peruvian holders of the defaulted bonds said they tried to organize a peaceful protest march outside the IMF meeting venues Wednesday but were refused permission by the Peruvian government.

"Peru must fulfill its legal, financial and moral obligations," they said in a statement.