Exclusive: Cuba and its wealthy creditors hope to salvage landmark deal
HAVANA (Reuters) – The main Cuban debt negotiator is in France Thursday for a critical meeting aimed at renegotiating a deal with 14 rich countries grouped together in the Paris Club, according to diplomats from four of the countries concerned.
The communist-led country, after signing a landmark deal with the group in 2015, defaulted on payments last year and only partially honored them in 2019
Cuban Deputy Prime Minister Ricardo Cabrisas was to say his government is not to blame for new US sanctions and the pandemic and explain why the country could still default this year, diplomats said, who requested anonymity. .
Negotiations will focus on unpaid deadlines and penalties, as well as the pattern of future payments.
Asked to comment, the Cuban government confirmed that Cabrisas was in Paris “on a working visit” without providing further details.
The Paris Club, which has received numerous 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 deal be suspended until 2022 without penalties on what would then amount to some $ 200 million in missed payments.
The creditor countries replied that they would impose sanctions and wanted to negotiate.
The Caribbean nation’s tourism sector is shut down, as it has been for most of the past 15 months, as it grapples with an increase in COVID-19 cases and new U.S. sanctions targeting its foreign earnings in more than a half-century-old embargo on trade links.
The two external shocks worsen the situation of an import-dependent economy known to be inefficient and currently suffering from shortages of food, medicine and other basic commodities.
Growth fell 11% last year after years of stagnation and, according to local economists, has most likely declined further so far in 2021.
For their part, creditors would like Cubans to be more transparent with their finances, which Havana considers a state secret, diplomats said, and will argue that for technical reasons the sanctions cannot be lifted.
THE REFORMS CONSIDERED AS INCENTIVES
A recent devaluation of the peso for the first time since the Cuban revolution in the 1950s, the ongoing deregulation of small and medium-sized businesses and other reforms are seen by creditors as positive first steps to improve economic performance and creditworthiness .
Pavel Vidal, a former Cuban central bank economist who teaches at Pontificia Universidad Javeriana Cali in Colombia, said all parties should be interested in saving the deal.
“The devaluation of the exchange rate helps resolve the international balance of payments crisis. In turn, international capital is essential to maximize the benefits of export devaluation and minimize its inflationary impacts, ”he said.
“Undertaking monetary reform amid the pandemic is a sign that should encourage international creditors to keep their commitment,” Vidal added.
The Paris Club deal, seen by Reuters, forgave $ 8.5 billion out of $ 11.1 billion, which is the sovereign debt that Cuba defaulted on in 1986, plus fees. The repayment of the remaining debt in annual installments has been postponed until 2033 and part of this money has been allocated to investment funds in Cuba.
Under the deal, interest was waived until 2020, and after that it only amounts to 1.5% of the total debt still owed.
The agreement states that if Cuba does not fully meet an annual payment schedule within three months of the October 31 annual deadline, it will be charged 9% late payment interest for that portion of the arrears.
Cuba last reported $ 17.8 billion in external debt in 2017, and experts believe it has grown significantly since then. The country is not a member of the International Monetary Fund or the World Bank.
The Cuba group of 22 Paris Club members includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Great Britain, Italy, Japan, the Netherlands , Spain, Sweden and Switzerland.
Reporting by Marc Frank; additional reporting by Leigh Thomas in Paris; edited by Richard Pullin