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Updated on August 5, 2021 5:39 AM

Cuba and rich creditors hope to save historic deal

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HAVANA – Cuba’s top debt negotiator is in France for a critical meeting Thursday with the aim of renegotiating an agreement with 14 wealthy nations grouped within the Paris Club, according to diplomats from four of the countries involved.

The communist country, after signing a landmark agreement with the group in 2015, defaulted on payments last year and only partially met them in 2019.

Cuba’s Deputy Prime Minister Ricardo Cabrisas was expected to argue that his government is not to blame for the new U.S. sanctions and the pandemic and explains why the country may default again this year, said the diplomats, who requested the anonymity.

The negotiations will cover unpaid expiration dates and fines, as well as the future payment scheme.

When asked for a comment, the Cuban government confirmed that Cabrisas was in Paris “on a working visit” without providing further details.

The Paris Club, which received many requests for leniency from poor countries over the past year due to the pandemic and in some cases waived interest, did not respond to a request for comment.

Cuba proposed last year that the agreement be suspended until 2022 without penalties on what would by then be about $ 200 million in late payments.


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The creditor nations responded that they would impose sanctions and wanted to negotiate.

The Caribbean nation’s tourism sector is closed, as it has been for most of the past 15 months, as it struggles with a surge in COVID-19 cases and new U.S. sanctions targeting its foreign income in addition to an embargo. half a century. on business ties.

Both external shocks are making things worse for an economy dependent on imports, notorious for its inefficiencies and currently suffering from shortages of food, medicine and other basic goods.

Growth fell 11 percent last year after years of stagnation, and according to local economists, it has most likely declined further so far in 2021.

For their part, the creditors would like Cubans to be more transparent with their finances, which Havana considers a state secret, the diplomats said, and they will argue that sanctions cannot be avoided for technical reasons.


Creditors view the recent devaluation of the peso for the first time since the Cuban Revolution in the 1950s, the ongoing deregulation of small and medium-sized enterprises, and other reforms as positive first steps to improve economic performance and solvency.

Pavel Vidal, a former Cuban central bank economist who teaches at Colombia’s Pontificia Universidad Javeriana Cali, said all parties should be interested in saving the deal.

“The devaluation of the exchange rate helps to solve the crisis in the international balance of payments. At the same time, international capital is essential to maximize the benefits of the devaluation in exports and minimize its inflationary impacts, “he said.


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“Undertaking a currency reform in the midst of the pandemic is a signal that should encourage international creditors to maintain their commitment,” added Vidal.

The Paris Club deal, seen by Reuters, forgave $ 8.5 billion out of $ 11.1 billion, representing sovereign debt that Cuba defaulted in 1986, plus charges. The repayment of the remaining debt in annual installments was reversed until 2033 and part of that money was allocated to funds for investments in Cuba.

Under the agreement, interest was forgiven until 2020, and after that, only 1.5% of the total outstanding debt remains.

The agreement establishes that if Cuba does not comply with an annual payment schedule in full within three months after October. 31 annual term, a 9% delinquent interest will be charged for that portion in arrears.

Cuba last reported a foreign debt of $ 17.8 billion in 2017, and experts believe it has risen significantly since then. The country is not a member of the International Monetary Fund or the World Bank.

The 22-member Paris Club Cuba group is made up of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Great Britain, Italy, Japan, the Netherlands, Spain, Sweden and Switzerland. (Report by Marc Frank; additional report by Leigh Thomas in Paris; edited by Richard Pullin)


In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.


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