Cuba seeks delay in debt repayment to 2022: diplomat

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Cuba seeks delay in debt repayment to 2022: diplomat

Sunday, May 24, 2020

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HAVANA, Cuba (AFP) — Cuba has asked the Paris Club of major creditors for a delay in repaying its debt until 2022, citing the impact of the coronavirus pandemic on its economy, diplomatic sources told AFP on Wednesday.

In a letter sent to 14 Paris Club countries to whom Cuba owes money including Britain, Canada, France and Japan, Deputy Prime Minister Ricardo Cabrisas proposed “a moratorium for 2019, 2020 and 2021 and a return to paying in 2022”, a diplomatic source revealed.

Two other diplomats subsequently confirmed the information. All sources spoke to AFP on condition of anonymity due to the sensitive nature of the matter.

Havana missed more than US$30 million in reimbursements in 2019.

In February, it committed to settling that debt by May, but the virus crisis has now put paid to those plans.

According to one source, the letter stipulates that Cuba would reassess its economic situation in 2021 to see if it could resume repayments.

The agreement with the Paris Club is crucial for Cuba, which has been subjected to punishing US sanctions since 1962.

After an easing of tensions under Barack Obama, sanctions have been ramped up under the administration of US President Donald Trump.

In 2015, Havana renegotiated its debt with 14 Paris Club countries, wiping out US$8.5 billion from an US$11 billion debt, with the repayments restructured gradually until 2033.

Cuba, which has suffered from food and fuel shortages, also benefited from several other creditors writing off debt: US$6 billion by China in 2011, US$500 million by Mexico in 2013 and US$35 billion by Russia in 2014.

Havana is increasingly reliant on the European Union, which has become its main investor with almost US$3.5 billion in trade in 2018.

However, lockdown measures enforced to combat the pandemic have badly affected Cuba's main sources of income, such as tourism and remittances sent from Cubans abroad.

Tourism brought in US$3.3 billion in 2018 but there has not been a single new visitor since March 24, putting a third of privately run businesses, and the 200,000 people they employ, at risk.

Tourist numbers had already dropped by 9.3 per cent in 2019 due to new restrictions on American visitors.

The year-on year fall reached 16.5 per cent in January and February— and that was before Cuba closed its borders.

HUMANITARIAN CRISIS

Remittances accounted for US$3.5 billion in 2017, according to an estimate by economist Carlos Mesa-Lago.

“If the economic damage in Florida (where many Cuban immigrants live) is significant, then (remittances) will fall and that will impact people's lives,” said the Inter-American Dialogue think tank, warning of “a humanitarian crisis”.

Another major source of income that has been hit is Cuba's export of health care workers, which brought in US$6.3 billion in 2018.

That has been cut by the return of 9,000 workers from countries with whom Cuba has strained diplomatic relations.

“It's time to work on our reserves,” said Economy Minister Alejandro Gil, because “we must save everything we can.”

The island nation, which imports 80 per cent of goods, “reduced by 75 per cent its first quarter imports” because of a lack of cash flow, said economist Omar Everleny Perez.

Cuba is desperate to avoid a default, like it suffered in 1986.

It is hoping for clemency, given that the Group of 20 largest economies put in place a one-year freeze on debt repayments for the world's poorest countries, including 40 in Africa.

The World Bank and International Monetary Fund have vowed to help vulnerable countries, but Cuba is a member of neither organisation.

The UN Economic Commission for Latin America and the Caribbean has said it expects Cuba's GDP to fall by 3.7 per cent in 2020, but many experts predict a greater contraction.


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