CubaBrief: Castro again defaults on payments to the Paris Club, but purchases more U.S. products for cash than under Obama

The United States since 2000 has not provided credits to the Castro regime and maintained a cash in advance trade arrangement for the purchase of agricultural and pharmaceutical products. This protects U.S. taxpayers from having to subsidize the Cuban dictatorship when it defaults on its financial obligations. Their European, Latin American and Asian counterparts cannot say the same to their respective taxpayers.

Under this cash in advance agreement American companies sold over $6.3 billion to the Castro regime and have gotten paid. Despite billions in debt forgiveness  on its restructured debt less than five years ago by the Paris Club, the Cuban dictatorship in 2019 again defaulted on its payments, reported Reuters on February 11, 2020.

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How did the Castro regime raise the money to purchase U.S. goods?James Prevor, President and Editor in Chief of the publication Produce Business in the October 2002 article, Cuba Caution, reported that Cuba “had exhausted all its credit lines and, at best, was simply rotating the accounts. When the opportunity came to buy from the United States, Cuba simply abandoned all those suppliers who supported the country for 40 years and began buying from us.”  The suppliers were not the ones impacted by Cuba’s failure to pay its debts, the taxpayers of the suppliers’ home countries were the one’s left holding the bag.   

On November 1, 2013 the government of Mexico announced that it was ready to waive 70 percent of a debt worth nearly $500 million that Cuba owes it. The former president of Mexico Vicente Fox protested the move stating: “Let the Cubans get to work and generate their own money…They’re normally like chupacabras.  The only thing they’re looking for is someone to give them money for free.”

“Let the Cubans get to work and generate their own money…They’re normally like chupacabras." - Presidente Vicente Fox

“Let the Cubans get to work and generate their own money…They’re normally like chupacabras.” – Presidente Vicente Fox

In December 2015 it was announced that Spain would forgive $1.7 billion that the Castro regime owes it. In December of 2013, Russia and Cuba quietly signed an agreement to write off $29 billion of Cuba’s debt to the former superpower. Western governments pursued Cuban maritime debts seizing Cuban vessels and negotiating payment through Canadian courts.

The 2015 debt restructuring accord between Cuba and the Paris Club, according to Reuters, “forgave $8.5 billion of $11.1 billion, representing debt Cuba defaulted on in 1986, plus charges.”

The 19-member Paris Club owed money by Cuba is comprised of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Britain, Italy, Japan, the Netherlands, Spain, Sweden and Switzerland. Companies, with the exception of American companies, doing business with Cuba when they are not paid pass the costs off to their respective governments, who in turn pass the costs off to taxpayers.

This is something to consider when the Chamber of Commerce argues that U.S. laws should be changed and the United States should join the long line of governments seeking to collect from the Castro regime, a deadbeat dictatorship.

Lastly, it is important to note that the U.S. Census Bureau documented the collapse of trade in goods with Cuba under the Obama thaw and have actually improved during the Trump Administration, despite tightened sanctions.

Tyson Chicken solid in Cuba in 2019

Tyson Chicken solid in Cuba in 2019

Reuters, February 11, 2020

Exclusive: Cuba fails to make payment in key debt accord, sources say

By Marc Frank

HAVANA (Reuters) – Cuba failed to meet payments last year on its restructured debt to wealthy nations, putting a deal with the Paris Club of creditors in jeopardy, according to diplomats with direct knowledge of the issue.

Under the 2015 debt restructuring accord, considered an important step toward the Communist-run country’s reintegration into the international financial community, stiff penalties should kick in, they said.

The agreement with 14 countries working through the Paris Club of creditor nations was signed at a time when a brief detente with the United States was getting underway.

“The agreement is extremely beneficial for Cuba and that they could not pay speaks volumes about how broke they are,” said one diplomat with knowledge of the situation who, like three others consulted by Reuters, requested anonymity due to the sensitivity of the matter.

The diplomats said Cuban debt negotiator Ricardo Cabrisas, in Paris last month to meet with creditors, blamed new and unexpected U.S. sanctions for not making some of the payments.

The Cuban government did not respond to a request for comment. A Paris Club official declined to comment, saying it was not their policy to speak about individual cases.

The 2015 agreement, seen by Reuters, forgave $8.5 billion of $11.1 billion, representing debt Cuba defaulted on in 1986, plus charges. Repayment of the remaining debt in annual installments was back loaded through 2033 and some of that money allocated to funds for investments in Cuba.

Under the agreement interest was forgiven through 2020, and after that is just 1.5 pct of the total debt still due.

However, the agreement states if Cuba does not meet an annual payment schedule in full it will be charged 9 pct interest until payment, plus late interest for that portion in arrears.

Cuba owed an estimated $80 million last year, paying some countries in full, but not others, including the largest creditors Spain, France and Japan, the diplomats said.

France’s finance ministry declined to comment. Spain’s finance ministry did not respond to a request for comment.

Another diplomat said both sides were working to save the accord.

“It is too important for both parties,” he said, pointing out the deal included debt swaps that underpinned some European countries increased economic and political presence in Cuba.

“Everything is interrelated, and I assume those funds are now on hold,” he said.

Cuba began falling behind on payments to foreign suppliers in 2015 as support ebbed from ally Venezuela due to its own economic woes.

The administration of U.S. President Donald Trump has ripped up the detente and piled new sanctions on top of the decades-old embargo that are aimed at foreign investment and financing, oil supplies, tourism and other revenue sources.

The Caribbean island nation continues to be late paying traders and investors, and shortages of goods from fuel and personal hygiene products to food and medicines have plagued the country since last year.

Cuba last reported its foreign debt at $18.2 billion in 2016, and experts believe it has risen significantly since then. The country is not a member of the International Monetary Fund or the World Bank.

The Cuba group of the 19-member Paris Club is comprised of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Britain, Italy, Japan, the Netherlands, Spain, Sweden and Switzerland.

Reporting by Marc Frank; Editing by Daniel Flynn and Alistair Bell

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