Cuba: risk assessment
Sovereign risk Currency risk Banking
sector risk Political risk Economic structure risk Country risk
February 2014 CCC CCC CCC
Kate Parker (lead analyst); Robert Wood (analyst).
Published 21 February 2014, 1530 GMT.
This sovereign rating is issued by The Economist Intelligence Unit
credit rating agency, registered in accordance with Regulation (EC) No
1060/2009 of 16 September 2009, on credit rating agencies, as amended,
and is issued pursuant to such regulation.
Even though the fiscal deficit is forecast to widen in 2014, it should
remain manageable assuming that support from Venezuela remains in place.
Official efforts to part-finance the deficit through bond issuance to
state banks will be supportive, although ultimately creditworthiness
will remain hampered by a poor payments record.
The process of aligning the two domestic currencies will accelerate over
the next 18 months. However, distortions created by the dual
exchange-rate system will continue to contribute to currency risk.
Banking sector risk
The Banco Central de Cuba (BCC, the Central Bank) is working to expand
the role of the banking system while ensuring that supervision remains
strict. However, the lack of available data adds significantly to risk.
The main risks stem from uncertainty over the political succession from
the president, Raúl Castro, to a younger generation of leaders;
relations with the US; and the potential for a backlash against economic
reforms. A full normalisation of relations with the US is highly
unlikely in the forecast period.
Economic structure risk
The main structural risk is a rollback of subsidies from Venezuela as
economic woes and instability mount in that country. Other significant
weaknesses stem from domestic economic imbalances caused by the
dual-currency system and the state’s centralised control of prices and