Gramercy Funds Management LLC said that it will pursue more than 1.3 billion US dollar from the government of Peru over a land-bond clash. The hedge fund, which possesses nearly 10,000 individual land bonds, filed a notice of intent to pursue settlement as per the US-Peru Free Trade Deal unless the situation reaches an agreeable solution.

In an e-mailed copy of the document to Bloomberg, the company said that it started buying dodged land bonds in 2006 and is now claiming over 1.3 billion US dollar for damages. The land-bond dispute between the hedge fund and the Peru government correlates to bonds issued as per the military dictatorship in the 1960s and 1970s as reimbursement to farmers who lost their lands under the agrarian reform.

Following the economy collapse in 1980s that forced Peru to alter its currency, the Peru government halted making payments on the loans. Court rulings in Peru stated that the nation is still accountable for the notes. Presently, the hedge fund and the Peru government are hectic over the formula to be used to compute the amount to be owed. Bloomberg quoted a creditor's association, APJBA, which says that a court ruling in 2013 ordering Peru to compute the debt utilizing the US Treasury rates lowers its value to merely 5 cents on the dollar.

According to the bondholders, Peru owes nearly $5 billion as debt, but the government calculation seems to be much lower and Gramercy stats that it will get just $1.9 million as reimbursement as per the government's methodology, Nasdaq said. Finance Minister of Peru said that Peru has shown itself as a responsible nation in the repayment of sovereign debt and that it will defend vigorously to any universal claims.

On Tuesday, Argentina entered into a deal to pay 1.35 billion US dollar to a team of Italian investors whose bonds the nation failed to make payments in 2001, The New York Times said quoting news reports. However, Argentina has yet to reach a deal with the New York hedge funds. The new administration of Argentina has pointed out that it seeks to resolve the loan as part of its move to reform the nation's economy.

The government under President Mauricio Macri is also taking steps to remove capital controls on peso. Recently, Argentina representatives held conferences with International Monetary Fund members to reorganise ragged relations.

The bond disputes are closely monitored by the investment world which believe that the problem will be resolved in a more amicable manner. Peru expects to handle the bond issue with Gramercy hedge fund more diligently.