Season 1, Episode 3

Lee Buchheit and Mitu Gulati on Debt-for-Nature Deals

On this episode of Free Range, Mike Livermore speaks with sovereign debt experts Lee Buchheit and Mitu Gulati. Buchheit is a retired partner at international law firm Cleary Gottlieb Steen & Hamilton, whose practice centers on international debt restructuring and project finance. He has worked on more than two dozen sovereign debt restructuring deals, including leading the team that advised the Greek government during its 2012 debt crisis. Mitu Gulati is the John V. Ray Research Professor of Law at the University of Virginia School of Law. In addition to his academic work, he is the host of Clauses and Controversies, a podcast which examines the intersection of international finance and contract law.

Episode is an appropriate teaching tool for but not limited to the following topics & courses: Finance, economics, sovereign debt, foreign affairs

Discussion Questions

  • Do you agree with Lee that because the debt being discounted is ultimately the lender’s, that lender is fully justified in requiring a sovereign government to undergo structural changes? What if these changes are contrary to the will of the electorate?
  • Many decry the power of the IMF and World Bank as forcing Global South countries into a neo-colonial relationship with the capitalist West in which economic sovereignty is reduced and labor and resources are forced onto the open market. Will Chinese loans be any better? Why or why not? 
  • Debt, especially sovereign debt, is a complex and difficult subject. What are some ways in which we can think about these topics which make them more digestible and easier to understand?
  • Do economists and people who work in finance and in economy-related government positions leverage their knowledge over the citizenry? Is economic illiteracy in the masses apt to be taken advantage of? Is this undemocratic, or an inevitable outcome of the complexity of modern economies and financial systems?
  • In Belize, the negotiation for debt swapping with conditions of environmental protections was arranged by The Nature Conservancy, which is a non-profit NGO. Do you feel more comfortable with private third-party institutions arranging such swaps, or should lending and borrowing governments deal directly?  
  • In what ways do countries assessed debt discounts benefit from improvements/investments in nature? How might they quantify these benefits and determine that the discount is “worth” the adjustment?

Additional Readings