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Exclusive: Wealthy creditors give Cuba a pass, but will impose penalties

HAVANA (Reuters) - Wealthy nations grouped together in the Paris Club of creditors have waived Cuba’s annual payment for restructured debt but plan to impose a penalty on the Communist–run island, according to five Western diplomats with knowledge of the situation.

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FILE PHOTO: A man rides a bicycle wearing a protective mask amid concerns about the spread of the coronavirus disease (COVID-19), in Havana, Cuba, October 1, 2020. REUTERS/Alexandre Meneghini/File Photo

This year marks the first time Cuba has missed the entire payment due by Oct. 31 since the restructuring agreement was signed in 2015, though it fell short of full payment last year as well.

The accord, signed in tandem with the U.S. detente under former President Barack Obama, is seen as a historic effort by all parties to begin to bring Cuba back into the international financial system and has survived efforts by the administration of President Donald Trump to torpedo it.

Cuba had asked earlier this year for a two-year moratorium and the waiving of penalties for overdue payments due to the coronavirus pandemic.

The Caribbean nation’s tourism sector was closed most of the year, export earnings declined, and fierce new U.S. sanctions are making matters worse for an economy already notorious for inefficiencies and currently suffering shortages of food, medicine and other basic goods.

The United Nations forecasts growth will decline 8% this year after averaging a 1% increase since 2016.

“We are united in our belief that the agreement should be saved and think the Cubans agree. That is why we waived payment, but not the penalties,” one diplomat said. Like others, he requested anonymity as he was not authorized to discuss the matter pubicly.

Paris Club negotiations with Cuba will cover unpaid maturities and penalties, as well as the scheme of future payments, the sources said.

A spokeswoman for the Paris Club said it did not comment on such matters. The Cuban government did not respond to a request for comment.

A number of the diplomats said they were encouraged by Cuba’s recent announcement that it would devalue the peso and take other measures aimed at increasing exports and cutting imports which they saw as crucial to regaining solvency.

“Creditors, from the Paris Club to Russia and China, will be very encouraged by devaluation and other measures,” said a Western banker who follows Cuba closely and also requested anonymity.

Another of the diplomats with knowledge of the Paris Club situation, said - in reference to the governments’ chief debt negotiator Recardo Cabrisas - “Mr. Cabrisas needs to come talk to us.”

Cabrisas was in Russia a few months ago where restructured Soviet-era debt, new debt and economic plans were discussed and where he said Cuba was having problems meeting those obligations as well.

The 2015 Paris Club agreement, seen by Reuters, forgave $8.5 billion of $11.1 billion, representing debt Cuba defaulted on in 1986, plus charges. Repayment of the remaining debt in annual installments was backloaded through 2033 and some of that money was allocated to funds for investments in Cuba.

Under the agreement interest was forgiven through 2020, and after that is just 1.5% of the total debt still due.

The agreement states if Cuba does not meet an annual payment schedule in full within three months of the Oct. 31 deadline, it will be charged 9% late interest for that portion in arrears.

Cuba owed an estimated $85 million this year.

Cuba last reported foreign debt of $18.2 billion in 2016, and experts believe it has risen significantly since then. The country is not a member of the International Monetary Fund or the World Bank.

“Faced with the pandemic, almost all governments are taking their debt levels to record highs, and Cuba is no exception,” said Pavel Vidal, a former Cuban central bank economist who teaches at Colombia’s Universidad Javeriana Cali.

“The fiscal deficit has grown and so have the trade imbalances. Although there is no data to know the magnitudes.”

The Cuba group of the 19-member Paris Club comprises Australia, Austria, Belgium, Canada, Denmark, Finland, France, Britain, Italy, Japan, the Netherlands, Spain, Sweden and Switzerland.

Reporting by Marc Frank; additional reporting by Michel Rose in Paris; Editing by Daniel Flynn and Tom Brown

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Posted

Now we don't appear to hold any of their debt, damn it... so the cost going up on cigars cannot be blamed on US (for once...) -LOL

-Piggy

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Posted

The accord, signed in tandem with the U.S. detente under former President Barack Obama, is seen as a historic effort by all parties to begin to bring Cuba back into the international financial system and has survived efforts by the administration of President Donald Trump to torpedo it.

This is exactly the kind of short-sighted decision by the Obama administration that makes republican policies look brilliant. Cuba pays when they feel like it. No other countries will ever seriously sanction them because of sympathy regarding the US's policy. Now Obama looks like a fool giving the republicans more ammunition to keep pressure on.

We are united in our belief that the agreement should be saved and think the Cubans agree.

I'm sure the Cubans would agree to save an agreement that lets them avoid making payments. 

Anyone dumb enough to loan Cuba money deserves to lose it all. Anyone expecting that any "restructuring" will increase the likelihood Cuba will pay is delusional. 

  • Like 2
Posted
22 minutes ago, NSXCIGAR said:

The accord, signed in tandem with the U.S. detente under former President Barack Obama, is seen as a historic effort by all parties to begin to bring Cuba back into the international financial system and has survived efforts by the administration of President Donald Trump to torpedo it.

This is exactly the kind of short-sighted decision by the Obama administration that makes republican policies look brilliant. Cuba pays when they feel like it. No other countries will ever seriously sanction them because of sympathy regarding the US's policy. Now Obama looks like a fool giving the republicans more ammunition to keep pressure on.

We are united in our belief that the agreement should be saved and think the Cubans agree.

I'm sure the Cubans would agree to save an agreement that lets them avoid making payments. 

Anyone dumb enough to loan Cuba money deserves to lose it all. Anyone expecting that any "restructuring" will increase the likelihood Cuba will pay is delusional. 

ideally it would be great if cuba, and all countries, repaid their debts on time and in full. fat chance. it is a long time since i worked in international finance and i am sure much has changed, though i'll bet much has not as well. the thing that staggered me when i started was just how many countries owe so much to other countries. cuba is simply one of them. if you think every other country makes full payments on time then i have some wonderful cohibas in a glass-topped box i can sell you. 

i have no doubt that when the Paris Club advanced the money, they would have been stunned if all had been repaid on time. but this article talks about loans from the Paris Club of nations, not the USA. doubt any US govt is lending cuba money. 

money is lent between nations for all manner of reasons. sometimes in the guise of foreign aid, sometimes as loans. when was the last time you remember any nation suing another for a debt? not sure it has ever happened. it is worked out other ways or very often simply forgiven. 

trying to keep this cuban-related and not political, though there is inevitably a connection, "The accord, signed in tandem with the U.S. detente under former President Barack Obama, is seen as a historic effort by all parties to begin to bring Cuba back into the international financial system and has survived efforts by the administration of President Donald Trump to torpedo it.".  that pretty much says it all. the international community, those that chose or wish to be part of it, have tried to assist another nation. only necessary because of the shambolic, moronic, pernicious policies perpetrated by successive US govts (of both stripes). 

whether one was a fan of the previous administration or detested them, they were the first US administration to make even a token effort to right decades of an appallingly cruel policy which benefits no one other than the dictators in power. 

attempts to set that back might look "brilliant" to some. i see them as disgraceful, inhumane, sightsighted, i could go on. the current administration is far from the first to put saving face ahead of good policy. both sides are guilty. 

i was in havana just after obama. anyone who saw the joy and the hope his visit had brought to the people could not help but be moved to tears. one occasion, a club at around 3am. the singer dedicated a song to obama. the crowd just burst into chanting his name. it went on for about 20 minutes. they were hugging and kissing each other in the anticipation that they might finally be able to join the world and be free from their oppressors. if those attempts make obama, or any politician from either side look like a fool then the world needs a lot more fools. and a lot fewer politicians who put themselves first. and both sides have done that far too often. 

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Posted
4 minutes ago, Ken Gargett said:

but this article talks about loans from the Paris Club of nations, not the USA. doubt any US govt is lending cuba money. 

True, but the US is in a bit of a different position. There's an internal political struggle over Cuba policy. Obama signing on to an agreement bound to fail just gives the other side more political capital to continue the Embargo. 

Posted
31 minutes ago, NSXCIGAR said:

True, but the US is in a bit of a different position. There's an internal political struggle over Cuba policy. Obama signing on to an agreement bound to fail just gives the other side more political capital to continue the Embargo. 

agreed it is far from easy but surely there is an internal political struggle over not just cuba but all issues. and that applies to all countries (yes, a generalisation). cuba is just one more issue between the sides. health, education, foreign policy, the economy and on and on. cuba is simply one of them. not an issue for us but we have other problems and our issues. 

i would not agree that it was bound to fail, but that would rely on politicians from both sides acting in the best interests and doing what is right. and i realise how pollyanna that sounds now. good luck with that happening from either side so i guess i am being extremely naive about this. but at some stage, surely people have to step up and do what is right. it won't be long before there will be no one left alive who was involved with this mess at the beginning. it is blindingly obvious to anyone outside this that the dictators have relied on this policy for so long to retain power. the embargo has the opposite effect to what was originally intended. 

to an outsider, it seems like the hatfields and the mccoys fighting for so long that they have long forgotten the original reason for the dispute (well, that is my impression of the hatfields and mccoys and apols if i have it wrong, but you know what i mean).  

  • Like 1
Posted
18 minutes ago, Ken Gargett said:

ideally it would be great if cuba, and all countries, repaid their debts on time and in full. fat chance. it is a long time since i worked in international finance and i am sure much has changed, though i'll bet much has not as well. the thing that staggered me when i started was just how many countries owe so much to other countries. cuba is simply one of them. if you think every other country makes full payments on time then i have some wonderful cohibas in a glass-topped box i can sell you. 

i have no doubt that when the Paris Club advanced the money, they would have been stunned if all had been repaid on time. but this article talks about loans from the Paris Club of nations, not the USA. doubt any US govt is lending cuba money. 

money is lent between nations for all manner of reasons. sometimes in the guise of foreign aid, sometimes as loans. when was the last time you remember any nation suing another for a debt? not sure it has ever happened. it is worked out other ways or very often simply forgiven. 

trying to keep this cuban-related and not political, though there is inevitably a connection, "The accord, signed in tandem with the U.S. detente under former President Barack Obama, is seen as a historic effort by all parties to begin to bring Cuba back into the international financial system and has survived efforts by the administration of President Donald Trump to torpedo it.".  that pretty much says it all. the international community, those that chose or wish to be part of it, have tried to assist another nation. only necessary because of the shambolic, moronic, pernicious policies perpetrated by successive US govts (of both stripes). 

whether one was a fan of the previous administration or detested them, they were the first US administration to make even a token effort to right decades of an appallingly cruel policy which benefits no one other than the dictators in power. 

attempts to set that back might look "brilliant" to some. i see them as disgraceful, inhumane, sightsighted, i could go on. the current administration is far from the first to put saving face ahead of good policy. both sides are guilty. 

i was in havana just after obama. anyone who saw the joy and the hope his visit had brought to the people could not help but be moved to tears. one occasion, a club at around 3am. the singer dedicated a song to obama. the crowd just burst into chanting his name. it went on for about 20 minutes. they were hugging and kissing each other in the anticipation that they might finally be able to join the world and be free from their oppressors. if those attempts make obama, or any politician from either side look like a fool then the world needs a lot more fools. and a lot fewer politicians who put themselves first. and both sides have done that far too often. 

Well said Ken. Unfortunately the people are merely pawns in a larger game. Punishing the oppressed serves no rational purpose - it only weakens the helpless and emboldens the rebellious. This has nothing to do with donkeys and elephants.  Releasing pressure allows one's opponents to gain perspective and is a sign of strength,  not weakness.

Posted

IMHO the inhumanity is how the Cuban government treats its citizens...obviously the current US policy hasn’t brought Cubans freedom but seems more rational (my view only) than does enabling the dictators.  No easy solutions here, and it is sad to see the Cuban people oppressed as they are.  I’m no foreign policy expert but hope that someday the West will find a solution that helps.

Posted
2 hours ago, Ken Gargett said:

but that would rely on politicians from both sides acting in the best interests and doing what is right

I simply can't understand how that could have backfired.

Posted

While I'm 100% against the Embargo I'm also against foreign governments giving or loaning the regime money. Virtually none of that money benefits the citizens but when the bill comes due, the citizens pay the costs. IMO, it ultimately ends up hurting the citizens who we're trying to help not to mention it will likely never be repaid. 

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Posted
5 hours ago, PigFish said:

Now we don't appear to hold any of their debt, damn it... so the cost going up on cigars cannot be blamed on US (for once...) -LOL

No, but Obama signed off on it--meddling capitalist pig!

Posted
10 hours ago, NSXCIGAR said:

 

I'm sure the Cubans would agree to save an agreement that lets them avoid making payments. 

Anyone dumb enough to loan Cuba money deserves to lose it all. Anyone expecting that any "restructuring" will increase the likelihood Cuba will pay is delusional. 

Having met foreign businessmen in HAV bankrupted by the Cuban gvmt. not paying the bills for years and knowing about Cuba's "paying" morale, I cannot agree more.

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