The Republic of Peru has received a preliminary notice under the United States-Peru Free Trade Agreement (TPA) in connection with alleged purchases of agrarian reform bonds by U.S.-based entities, the Ministry of Economy and Finance reported.
"Peru is carrying out a diligent procedure for the benefit of holders of agrarian reform bonds and will defend itself energetically with respect to any eventual international claim," it stressed.
The Notice of Intent to Commence Arbitration Under the TPA is dated February 1, 2016 and has been submitted on behalf of Gramercy Funds Management LLC, a U.S. asset manager, and three apparently related entities. The Notice sets forth claims related to alleged purchases of agrarian reform bonds by Gramercy.
The following is noted in this regard:
• Peru has demonstrated over several decades that it is a stable and responsible country in the management of its sovereign debt, as reflected in the investment grade rating of the country by the principal credit rating agencies.
• The agrarian reform bonds originated from particular circumstances in the country that emerged in 1969, and are different from contemporary sovereign bonds. These bonds were issued in Peru, in local currency, and are subject to Peruvian law and the jurisdiction of Peruvian courts. All bondholders are subject to the terms of these bonds. The global markets know this historical context, as reflected in a report issued by Moody's this past December.
• Peru has developed a reasonable and transparent procedure for holders of the agrarian reform bonds, in accordance with a 2013 decision by the Constitutional Tribunal and relevant decrees. Any bondholder may participate in the procedure that has been established to authenticate, register and actualize the value of their bonds. Some bondholders are presently reaching the last phase of the process, and the Ministry of Economy and Finance is duly implementing the final phase of the procedure as anticipated.
• Based on available information, Gramercy is a U.S. asset manager that purchased agrarian reform bonds speculatively and has not chosen to participate in the process duly established under applicable law. Instead of respecting Peruvian law or participating in the established process, Gramercy has pursued a misguided media campaign seeking to harm Peru's reputation, as reported by the Wall Street Journal.
• The Notice of Intent does not constitute the commencement of arbitration proceedings. In any event, it should be highlighted that Peru has an unprecedented positive record in cases involving international investment claims, which it has managed diligently and in accordance with due process. Peru has defeating baseless international claims of approximately US$50 billion, and, in addition, obtained international decisions in its favor of US$110 million for the benefit Peruvians. Peru has demonstrated that its conduct that is transparent, diligent and consistent with the rule of law, demonstrating respect for private investment and providing opportunities for domestic and foreign investors in Peru.
"Peru continues to work daily to facilitate investment and good relations with legitimate investors. Peru is sharing the foregoing comments promptly and transparently. Peru has confidence in its position on this matter and reserves its right to develop additional comments in the future," the Ministry of Finance and Economy stated.
(END) NDP/MVB