The End For Nauru?
from Agence France-Presse

Nauru, the world's smallest republic, is on the verge of a default that will result in a major United States financier seizing the once rich Pacific nation's last assets, diplomatic sources said Thursday.

The country of 12,500 people owes the US General Electric Capital Corporation, which has a mortgage over Nauru's Australian property investments, around 230 million Australian (169 million US) dollars.

But with a political crisis hampering efforts to revive economic fortunes, a Nauru opposition political newsletter published this week warned the country faces foreclosure by May 5 after failing to meet several payment deadlines.

Receivers have already moved in on a Nauru-owned hotel in Sydney and ailing president Rene Harris was to fly to Australia Friday in a last ditch bid to rescue the country's remaining savings, a diplomatic source said.

He said Nauru's parliament had effectively been suspended since April 6 when its speaker resigned in protest at the government's lack of a budget. Parliament is deadlocked on the budget and cannot meet without a new speaker.

"It really is in a desperate state now," the source said.

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The 21-square kilometre (eight square mile) island's economic woes are in
sharp contrast to the days following 1968 independence when Naurans were among
the world's richest people, with global air, shipping and building investments.

Nauru, which lies between New Zealand and Hawaii, was formerly a UN territory
under joint control of Australia, Britain and New Zealand, who began strip
mining much of the island's phosphate-rich topsoils for export as fertiliser.

Mining continued after independence, with money pouring into a trust fund
whose payouts became the islanders' only source of income. Now, the natural
resources have dwindled, leaving the island a bleak, bleached coral landscape.

Many of the investments were mismanaged and with the phosphate mining no
longer viable, the country has fended off bankruptcy by acting as a detention
camp for Australia's asylum seekers and through aid payouts.

Under international pressure Nauru has also closed down offshore banking
operations that critics said were heavily used by the Russian Mafia.

Last Thursday Australian receivers PPB Group took over one of Nauru's key
properties, the Mercure, a 517-room hotel in Sydney's Railway Square.

The Australian newspaper Monday quoted sources saying GE Capital's action
against the Mercure Hotel was designed to squeeze Nauru into refinancing its
mortgage by selling the building, said to be worth up to 80 million dollars.

A Nauru newsletter, "The People's Voice", which says it is compiled by
members of parliament, said GE Capital was planning to take over Nauru's
properties.

"Nauru has defaulted on five conditions of the extension deal and therefore
GE has issued their 'Notice of Foreclosure' ... which means we, the land owners
and other beneficiaries would have lost over 230 million dollars worth in assets
which we will never see again," the newsletter said.

posted by prof_booty | 04:35 PM