Fishy Bonds

By Samantha Bader, Co-President

A potentially booming tuna industry, corrupt government officials, and a few shady lenders sounds like the start of a spy thriller, but in the real world, it has led to massive harm for Mozambique. Credit Suisse has been fined almost 350 million pounds by global regulators, after the so-called ‘tuna bonds’ scandal threw Mozambique into a financial crisis.

Starting in September 2013, Credit Suisse started raising funds for a project called Empresa Mocambicana de Atum (EMATUM), which was to be a state backed tuna fishing company in Mozambique. The deal would include maritime security contracts and a state run fishery. They presented investors with information that claimed that Mozambique was on the precipice of becoming a key fishing nation, with untold profits to be realized. Helped along by a bond yield of 8.5%, and a state guarantee, $500 million was raised in 2013 alone. These bonds were continued to be lent by Credit Suisse until 2016, for a total of $1.3 billion in ‘tuna bonds’. 

However, there was a catch. Suisse Bank officials got $50 million in kickbacks for arranging the deal, and made at least $200 million in improper payments and bribes to key Mozambique officials and bankers to ensure the deal went smoothly, according to the United States Department of Justice.  

When the scandal was discovered, it almost immediately plunged the country into dire financial straits. The International Monetary Fund stopped providing assistance to Mozambique, and Mozambique’s currency crashed when the state defaulted on their debt obligations. Furthermore, a report by the Chr. Michelsen Institute and Mozambique’s Center for Public Integrity put the total financial impact of this bond scandal at $11 billion, which is equal to the entire GDP of Mozambique for 2016. 

Credit Suisse is also now being forced to pay up. Not only do they now owe the US Securities and Exchange Commission (SEC) and the UK’s Financial Conduct Authority (FCA) a total of 350 million pounds, they have also agreed to forgive $200 million of Mozambique’s debt with the bank. The US Department of Justice has also come to terms with the bank in a deferred prosecution agreement that will see Credit Suisse heavily monitored for the next three years. 

According to Mark Steward, the FCA’s director of enforcement and oversight, “The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique”.

The US Department of Justice also spoke out, saying, “Credit Suisse, through its subsidiary in the United Kingdom, engaged in a global criminal conspiracy to defraud investors,” in a statement they released. 

Now it is left to see how Mozambique can recover from this. While Credit Suisse has now been charged, there are still plenty of people who need to take accountability for their actions during this scandal, including the corrupt officials operating within Mozambique. Hopefully, the country can get back on a path to recovery, and this will not be the start of yet another long-term decrease in living standards for the people of Mozambique.

Photo by NOAA on Unsplash

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