Debts Back To US Pensioners

By Joe Geiger | September 21, 2022

In business and in life, there is a fundamental rule we all should live by: You have to repay your debts. Unfortunately, that fundamental rule is often unfollowed. As many of us know, refusal to repay a debt can ruin business relationships, end friendships and disrupt the life or retirement plans of those owed money.

Today, thousands of union members in New York and across the country could be impacted by the Government of Peru’s refusal to repay pension funds for bonds that they purchased decades ago.

In the early 1970s, the Government of Peru gave land bonds to its citizens as compensation for stealing their land. The bonds were government-backed and expected to accrue value over time. Peru’s highest court authorized the sale of these bonds on the secondary market in 1979, and they were obtained by a U.S. investment fund. In 2001, it became clear that the government of Peru was going to attempt to evade repayment of the bonds. However, Peru’s highest court ruled that the government must compensate bond holders in an amount equal to the “current value” of the debt.

Relying on these legal commitments, along with the U.S. Free Trade Agreement with Peru, starting in the late-2000s, the U.S. investment fund purchased approximately 15% of the bonds on behalf of over 200 U.S. pension funds. After the bonds were purchased, the Peruvian government – presumably to avoid the embarrassment that would arise from a U.S. investor forcing the Peruvian government to make good on its debts when its own citizens could not – decided to change the bond valuation formula. Unfortunately, and likely not coincidentally, the Peruvian government’s new valuation formula determined that the bonds were worthless.

As a labor leader that represents over 20,000 union Carpenters, I know when a group or individual is attempting to take advantage of my members, and it is my job to protect them.  With this action, the Government of Peru is callously attempting to take advantage of my hard-working members and their families, as well as thousands of other pensioners across the country. These bonds represent millions of dollars of retirement benefits for members of the Carpenters’ union. To arbitrarily value them worthless is laughable.

For the past several years, thousands of public U.S. pensioners have been pushing members of Congress to stand up for working people by holding the country of Peru accountable to our bilateral trade agreement.

Members of Congress raised this issue directly with the Peruvian Government in June 2017, when then-President PPK promised multiple Congressional Members that he would meet with bondholders. Unfortunately, Peru’s U.S. lawyers have convinced the Peruvian government to avoid a meeting, leaving bondholders with no venue to negotiate a solution with the government.

The Carpenters’ union has been part of that chorus of voices prompting action and finally, the United States House of Representatives has stepped up to fight back on behalf of U.S. pensioners.

We applaud the United States House of Representatives – and thank Congressman Donald Norcross and the New York delegation for their leadership- for passing floor amendment 439 in the House NDAA bill. The amendment urges the Secretary of State to take action concerning unpaid Peruvian agrarian reform bonds to ensure pension funds receive payment. Pension funds across the U.S. – many of which are labor funds – have failed to be repaid for over fifteen years. This amendment sends a strong message that Congress, and labor will not sit idly by while Peru continually evades this issue.

The Carpenters’ union is now urging that the United States Senate and Majority Leader Schumer to keep this amendment in the final NDAA bill on behalf of the thousands of affected New York and countrywide pensioners. The livelihood and futures of thousands of hard-working laborers and their families depend on it.

By Joe Geiger, Executive-Secretary Treasurer of the NYC District Council of Carpenters