US hedge fund files claim against Peru over defaulted bonds

LIMA, Peru (AP) - A Connecticut hedge fund has filed a $1.6 billion claim against Peru in a decades-old dispute over bonds issued by the nation's former dictator.

In the claim filed Thursday, Gramercy Funds Management accuses Peru of indirectly expropriating its investment in bonds in violation of a bilateral free trade agreement.

Peru in the 1980s began defaulting on bonds used to pay for military dictator Juan Velasco's agrarian reform a decade earlier.

Gramercy said it and other investors were short-changed billions because of Peru's failure to abide by a local court ruling and repay the defaulted debt accounting for inflation.

Peru's government hasn't commented. But in February it accused Gramercy of waging a media campaign against Peru and disavowing its repayment offer in a speculative bid to wrest money from the government.