Cuba creditors hopeful as storm season nears end
2010-11-24 14:44:46 GMT (Reuters)
* Creditors hoping Cuba has unused cash reserve for storms
* Cuba said gradually opening up frozen bank accounts
* Still dragging feet on foreign debt payments, dividends
By Marc Frank
HAVANA, Nov 24 (Reuters) – With hurricane season almost over and Cuba
having passed its second year in a row without a major storm, creditors
are hoping the communist country will be in better financial shape to
pay its bills.
Diplomatic and business sources said this week the Cuban government may
have a cash reserve that it set aside in case of hurricanes and could
now use at least part of it to cut debt or reopen frozen bank accounts.
"We had been building up reserves since 2009. Hurricanes could have cost
us billions this year," a local economist said.
This year, despite an unusually active Atlantic hurricane season, Cuba
was struck only glancing blows by three storms that did little damage.
The Atlantic hurricane season officially runs June through November, and
there are no late season storms in sight.
"President Raul Castro is a military man. I'm sure he has been putting
aside what he can and expecting the worst," a Western diplomat said.
"So perhaps now they are breathing a little easier and will pay some of
our companies what they owe them. At least the situation will not get
worse," the diplomat said.
Cuba's economy was battered when two devastating hurricanes struck in
2008, causing what the government said was $10 billion in damage, and
then the global financial crisis hit the island hard.
Those events combined with poor planning and inefficiency within the
Cuban system left the country without enough cash to pay its bills and
few places to turn for help.
Cuba is under a strict U.S. trade embargo and excluded from most
international lending organizations that could help in a pinch, while
many creditors have tired of its repeated rescheduling of debt.
UNPAID DEBTS, FROZEN BANK ACCOUNTS
Many debts to governments and business were restructured or went unpaid,
foreign company bank accounts frozen, dividends owed joint venture
partners postponed and imports drastically reduced beginning in 2009.
Western diplomats and businessmen said Cuba was gradually unblocking the
funds, but at the same time still dragging its feet on foreign debt
payments and dividends owed its foreign partners operating in the country.
Cuba last reported its foreign debt at $17.8 billion in 2007. Most
analysts agree it is now well over $20 billion — or close to 50 percent
of the gross domestic product and some 25 percent more than annual
Castro has pounded away at the need for Cuba to get its economic house
in order and pay its bills since taking over from his brother Fidel
Castro in 2008.
The country's growing debt service payments are a key reason for
Castro's push to overhaul Cuba's Soviet-Style economy, according to
The reforms, to be discussed at a Communist Party congress in April,
include drastic budget cuts and layoffs and ending most state subsidies.
They would also grant state-run companies more autonomy and give an
opening to small private businesses and foreign investment, cooperatives
and other "non-state" forms of running enterprises.
"Work with the maximum rigor to increase the country's credibility in
international economic relations through strictly fulfilling contracted
obligations," a discussion document for the congress states, while
emphasizing the need to increase exports and cut imports.
Castro has reportedly established a blue-ribbon commission to figure out
Cuba's foreign debt troubles.
"Short, medium and long term debt should be reprogrammed as quickly as
possible," and this time around "new payment schedules met," the
congress document states.
For that, more than one diplomat said, the country should start by
returning to the negotiating table with the Paris Club of creditor
nations. Negotiations broken off in 2001. (Editing by Jeff Franks and