The week of October 15 Cuba paid $60 million of indebtiness to 14 wealthy creditor nations. Last year Cuba paid $40 million to the same group. The total debt is $2.6 billion after the creditors in 2015 forgave $8.5 billion of $11.1 billion upon which Cuba had defaulted through 1986 plus charges.[1]
These creditor nations known as the Club of Paris are the following: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom.
Under the 2015 agreement, Cuba agreed for the first time to grant the creditors equity in development projects, in areas like manufacturing and agriculture, in exchange for a portion of their debt holdings. Many of these restructuring agreements include the establishment of so-called counter-value funds, under which a percentage of debt is discounted in exchange for the potential profits stemming from participation by a creditor country’s firms in Cuba joint-development projects.
The counter-value funds have an estimated combined value of around $750 million of the $2.6 billion owed. Japan, Spain, France and Italy – Cuba’s largest Paris Club creditors – are furthest along in negotiating swaps.
- For example, a $46 million French project to develop cattle ranching and dairy products in central Camaguey province is ready to sign, according to France’s ambassador to Cuba, Jean-Marie Bruno.
- Another example is Spain which has a project ready to manufacture cardboard and another aluminium structures for construction capable of resisting earthquakes and hurricanes, both involving Spanish companies.
This access to Cuban development projects gives the European countries and companies an advantage over U.S. companies who are banned by various U.S. laws from such projects.
This payment happened during dire economic times for Cuba due to the political and economic crisis in its ally Venezuela, declines in Cuban exports and tourism due, in part, to the damages caused by Hurricane Irma.
Cuba’s payment in these circumstances showed the importance Cuba attaches to the 2015 agreement with this group of major creditor nations.
==============================================
[1] Reuters, Cash-Strapped Cuba Makes Debt Payment to Major Creditors-Diplomats, N.Y. Times (Oct. 18, 2017); Chow, Cuba Reaches Deal to Pay $2.6 Billion in Arrears to Paris Club, W.S.J. (Dec. 12, 2015); Paris Club, Agreement on the Debt Between Cuba and the Group of Creditors of Cuba (Dec. 12, 2015).
