14ymedio, Madrid, 21 April 2021 — Today the Cuban government cannot meet the agreements to pay its foreign debt that it reached with its creditors after the thaw started in 2014 by then-US President Barack Obama. The conclusion reached by Bloomberg is final.
A note published by the Bloomberg this Wednesday insists that the market for commercial loans received by the island is “almost dead” and that when they are negotiated “they do so at only 10 cents on the dollar, 70% less than when optimism reached its peak, in 2016.”
The initial perspectives of then-president Raúl Castro, who in the recently closed Eighth Congress of the Communist Party of Cuba has yielded the position as first secretary to his successor in the presidency, Miguel Díaz-Canel, have come to nothing.
“Foreign support has dried up in recent years when the economy of Cuba’s former sponsor, Venezuela, collapsed,” says Bloomberg, in addition to the cooling of relations with the United States during the Donald Trump administration and the sharp drop in the economy, and the fall in tourism due to the Covid-19 pandemic. All of this exacerbates “the difficulties caused by a decline in exports, which have fallen by a third since 2014.”
“The combination of Cuba reducing the pace of reforms, the impact of the situation in Venezuela and the US sanctions is reflected in a balance of payments crisis,” Pavel Vidal, a former analyst for the Cuban Central Bank, and now Professor at the Pontificia Universidad Javeriana in Cali (Colombia), told the news agency. “That forced them to stop paying the foreign debt.”
Investors, Bloomberg continues, were encouraged when Raúl Castro assumed power after his brother Fidel, in 2011, “and advanced in the liquidation of old debts of the government and state companies, some of which date back to the 1970s.”
The agency notes that the Cuban government reached an agreement in 2015 with 14 members of the Paris Club by means of which they cancelled 8.5 billion dollars and left 2.6 billion owing, to be paid in 18 years. Meanwhile, Russia, Cuba’s sponsor before the fall of the Berlin Wall, had already forgiven the country 90% of the amount.
That optimism, the agency explains, caused “a rebound in the trade of old commercial loans, with prices of up to 36 cents on the dollar in 2016, as investors saw the opportunity for profit,” with the return of the island to the world stage. The financial world received another encouraging signal at the end of 2017 when Raúl Castro gave signals of “Cuba’s willingness to fulfill its commitments” to creditors.
However, these commitments did not materialize. Cuba owed $ 17.8 billion in foreign debt until 2017, according to the latest published official statistics, although it almost certainly has increased since then.
“Even if it could start paying off the debt,” says Bloomberg, “the country faces other obstacles, including US sanctions and questions about how to compensate for land and businesses that were expropriated during the Revolution.”
According to Bloomberg, there is “some hope” that the serious situation on the island will push its new political leaders to “intensify their efforts to solve the problem of the debt in default and attract foreign capital.” In this regard, it cites “the painful process of unifying a dual currency system that the country had for decades” and notes Miguel Díaz-Canel’s commitment to “continue with the transformations we need to update our economic and social model.”
Another window, according to Bloomberg, may open with Cuban-developed vaccine candidates against Covid. “If the vaccines are successful, the island could reopen to tourism and potentially export the vaccines,” they indicate, but they reiterate, citing Vidal again: “They have to put their finances in order to attract international investment, because that is what is needed.”
The outlook, therefore, bleak. There are currently no negotiations between the parties, Bloomberg concludes, citing an anonymous source involved in the talks, and John Kavulich, president of the United States-Cuba Economic and Trade Council, declared along the same lines: “Both parties know that Cubans cannot pay anything.”
This is the first Ibero-American Summit which the Cuban president has participated in — although virtually — 2001. The Government of the Island has requested financing from developed countries so that Cuba and other low-income countries can meet the sustainability goals of the 2030 Agenda, according to a report by EFE this Wednesday.
“The problems cannot be solved with their own resources,” Jesús Guerra, director of international relations of the Ministry of Science, Technology and Environment declared at a press conference. Together with the first deputy minister, José Fidel Santana, he highlighted the efforts made by Cuba in recent years in terms of science and innovation, such as “the creation of four new high-tech state companies,” the “approval of two science-technology park projects” and the “five vaccine candidates” against Covid.
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