Portugal’s BCP pursues Mozambique

Banco Comercial Portugues (BCP) has taken legal action against Mozambique, becoming the latest bank to pursue the heavily indebted East African state, which has been embroiled in a long-running $2 billion debt scandal.A filing dated April 8 shows BCP has begun proceedings in London’s High Court against both the Mozambique government and state firm Mozambique Asset Management (MAM) related to “general commercial contracts and arrangements”. BCP declined to comment, but said it maintains “excellent institutional relations” with the Mozambique government. The London court filing does not provide any further information, other than that BCP is being represented by Enyo Law. Mozambique’s Attorney Generals Office did not immediately respond to a request for comment on Thursday.

MAM is one of three state-run firms set up as part of a $2 billion project spanning tuna fishing, shipyard development and maritime security that U.S. authorities now say was an elaborate front for a bribery and kickback scheme. BCP contributed $100 million of a $535 million syndicated loan arranged by Russia’s VTB to MAM as part of the project, VTB court documents in a separate case which were reviewed by Reuters showed. VTB and Credit Suisse, both of which are involved in separate court cases demanding payment from Mozambique, together arranged around $2 billion in lending for the project in 2013 and 2014, all of which was guaranteed by the government. Mozambique, which as well as being one of the world’s poorest countries is also one of its most indebted, has tried to challenge the validity of some of the guarantees and arrested several people for their alleged roles in the scandal but it remains on the hook for all of the money. Its economy had been recovering from the impact of the scandal until the global coronavirus crisis, which is expected to hit vulnerable nations with high levels of debt hardest. The country’s external and public debt to GDP ratios already stood at 99% and 118% at the end of 2019, the World Bank says.

Hundreds of millions of dollars went missing and the supposed benefits of the project never materialised, while Mozambique’s government also did not disclose some of the loans. The scandal has sparked criminal and civil lawsuits spanning three continents. It also prompted donors including the International Monetary Fund (IMF) to cut off support when the loans came to light in 2016, triggering a currency collapse and sovereign debt default. Debt campaigners say Mozambique should not have to repay any of the loans, which in two cases were arranged in secret and none of which were approved by parliament.