UNITED STATES (OBSERVATORY NEWS) — The Cuban government, which is subject to US sanctions, is facing difficulties in paying its debts to foreign companies and creditor countries, which raises some tension among its partners.
After negotiating with the Paris Club in 2015 to restructure its debt to 14 countries, Cuba failed to pay all the sums due to six countries in 2019 (France, Spain, Belgium, Austria, the United Kingdom, and Japan). This makes the interest go up to 9%.
On this sensitive issue, Deputy Prime Minister Ricardo Cabrisas is seeking reassurance. He pledged that Havana would pay the arrears by the end of May, in a letter to the Director-General of the French Finance Ministry Odile Renno-Basso, who also heads the group of creditor nations, and shared with France Press a copy.
“They have to come up with a clear schedule,” said an ambassador. He adds that the Cuban government is “going through a bad time, and it has no cash.”
A number of diplomats with whom France has spoken have expressed concern. “They said they would pay their debt,” one of them asserts, but in conclusion, “there is no plan, no credibility.”
Another drew “We met Cabreasas at the beginning of the year,” and despite his “defeatist tone (…) he told us that his country never wanted to default”, as happened in 1986.
– “Vicious circle” –
That year, the island was cut off from international markets. And it continued until 2010 when several countries almost completely canceled the debt owed: China in 2011 (6 billion dollars), Mexico in 2013 (400 million), Russia in 2014 (35 billion).
The Paris Club achieved the agreement with Cuba, and the 14 countries, the majority of whom are European, agreed to erase 8.5 billion out of the 11.1 billion dollars due. The remainder was converted into investment projects or arrears to be paid by 2033.
As a result, the European Union became the first investor in Cuba and its first trading partner, with exchanges recording $ 3.47 billion in 2018.
“The incomplete repayment of Paris Club creditors shows the complexities of the economic and financial situation in Cuba,” said Yafel Vidal, professor of economics at the University of Jaffriana in Colombia. “For at least three years, Cuba has shown the symptoms of a shrinking economy and has a balance of payments crisis,” he says.
And he continues, “leaving the vicious circle will be complicated without the assistance of an international lender like (the International Monetary Fund), especially in light of the escalation of US sanctions and the repercussions of the Venezuelan crisis.”
Cuba suffers from the intensification of the US embargo imposed since 1962 and includes laws punishing foreign companies and pressure on banks, as well as measures that limit Americans ’visits to the island.
She also suffers as a result of the situation in Venezuela, her first ally and supplier of oil.
The number of tourists in 2019 decreased by 9.3%, for the first time in ten years. The island was also affected by the return of nine thousand doctors from abroad, due to diplomatic crises, especially with Brazil, to which Cuba had not paid dues since mid-May 2018.
According to the latest official figures, the external debt increased 53% between 2013 and 2016, which means $ 18.2 billion.
Unpaid debts to companies
“The thing that worries me most is the other debt, that is, that is formed by supplier credits,” often due after two years, says economist Omar Everlini Perez.
The value of the sums accumulated and to be paid to the Spanish companies most present in Cuba, 300 million euros, according to Madrid.
“Of course, US sanctions” affect Cuba’s ability to pay, said Everlini Perez. He considers that, given the “political importance” of the agreement with the Paris Club, the government “will pay.”
However, he added that this “will not solve the problems in the long run”, and denounces in this context the absence of reforms aimed at stimulating the private sector and stimulating growth.
Seven years ago, the London Club, which has a portion of the island’s hundreds of millions of dollars in commercial debt, sought to reach an agreement with Cuba, but without results.
The investment firm CRFI Limited complained to the British court. “Our patience is running out,” said its president, David Caters, adding, “If Cuba wants to return to international markets, it must settle the matter.”
This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.
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