Amidst the high waves surrounding the demise of Credit Suisse, the impact on countries in the global South is often lost in local reporting. In an article, Alliance Sud makes a wight classification of the consequences of the banking scandals.
Since 2017, terre des hommes switzerland and other Swiss non-governmental organizations (NGOs) have been investigating the illegal activities of Credit Suisse in Mozambique. Illegal loans plunged Mozambique into a financial crisis in 2016 that continues to this day. To mark the occasion, terre des hommes schweiz and several NGOs launched a campaign in 2019. A petition (see also Humanitarian crisis in Mozambique: NGOs call on Credit Suisse to cancel debts | terre des hommes switzerland). Alliance Sud also reported on the Credit scandal.
Money to dubious companies
The financial scandal began in 2013, when Mozambique took out state-guaranteed loans totaling two billion dollars within two years, half of which was arranged by CS. The money was to be used to finance a coastal surveillance system, the construction of shipyards and a tuna fleet. The deal bypassed parliament and the National Bank of Mozambique, and the money went to three dubious parastatal companies. The boats were overpriced and are still rusting away unused in the port of Maputo. And part of the money disappeared into dark channels.
When the first details of the obscure deal came to light in early 2016, various foreign donors, including the International Monetary Fund, withdrew from Mozambique. In 2017, the government in Maputo announced that it could no longer service the debt - the country had to temporarily declare its insolvency.
The social consequences of this debt crisis were fatal: government spending was cut by around half. Most of the cuts affected the education and health sectors, as a 2021 published study by research institutes from Norway and Mozambique. According to the study, around 1.9 million people slipped into poverty between 2016 and 2019 as a result of the state financial crisis. The leading victims of the irresponsible and criminal machinations of the banks are the poorest of the poor.
Financial catastrophe is followed by another natural disaster
Mozambique is one of the poorest countries in the world, with nearly 64 % of its population living below the poverty line in 2020. It is also one of the world's countries most affected by the impacts of climate change. Tropical storms on the country's east coast are becoming more destructive and frequent. In 2019, hurricane "Idai" caused a humanitarian disaster with devastating floods that affected more than two million people. This year, a similar scenario is repeating itself. In recent weeks, more than 160,000 people have been displaced by cyclone "Freddy", and a total of around 1.4 million people have been affected by the storm damage. The destruction exacerbates the health crisis in the region, as it increases the spread of cholera, malaria, and covid-19.
The crisis-ridden country will not recover from the debt crisis, which Credit Suisse helped to create, for a long time. Although the bank became Penalties of $475 million and debt relief for Mozambique in the amount of $200 million. But this will not reverse the serious effects of the country's long-standing financial crisis.
CS still under indictment
Further court cases are still pending. Specifically, this involves an action brought by creditors against Credit Suisse at the London High Court, whose Negotiation scheduled for September 2023 was. It remains to be seen how the federal government's guarantees for UBS will be applied in the event of any penalties.
Author: Andrea Zellhuber, Development Policy and Theme Responsibility Peace Culture
