Cuba Pays $60 Million of Indebtedness to Major Creditor Nations     

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.

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[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).

Request Temporary Loosening of U.S. Embargo of Cuba

As has been widely reported, Hurricane Irma caused major destruction of Cuba’s buildings, homes and roads. Now it needs to reconstruct and recover.

However, the U.S. embargo of Cuba hinders that reconstruction. Therefore, the U.S. should remove restrictions on the ability of U.S. companies to export needed relief and reconstruction supplies to the Cuban government and its people.

The Latin American Working Group (LAWG) [1] and the Washington Office on Latin America (WOLA)[2] are organizing a campaign asking President Trump temporarily to loosen the U.S. embargo in order to facilitate U.S. companies’ helping Cuba with its reconstruction and recovery from Hurricane Irma. Here is their proposed letter to President Trump with copies to the author’s U.S. senators and representative:

  • Dear President Trump,

    We are extremely saddened by the loss of life and destruction in the Caribbean from Hurricane Irma. Cuba was particularly hard hit: ten people perished and billions of dollars’ in damage was done to their already weak infrastructure and housing, in what was the strongest hurricane to hit Cuba in 85 years. Cuba absorbed much of Irma’s force, lessening the storm’s impact on southern Florida and the United States. Historical grievances should be put aside during a humanitarian crisis like this – the people of Cuba need urgent support to rebuild.

    Fortunately, there is a simple change you can make that would provide necessary support to the Cuban people while at the same time helping U.S. businesses: remove restrictions on the ability of U.S. companies to export needed relief and reconstruction supplies to the Cuban government and its people. Although current Treasury Department embargo regulations authorize U.S. companies to provide services related to infrastructure in Cuba (31 CFR 515.591), Commerce Department export regulations require that U.S. exports to support the provision of such services be approved on a case-by-case basis.  (15 CFR 746.2) Obama administration regulations specifically licensed only the sale of tools and construction materials to private entities, servicing only privately-owned buildings, thus excluding public facilities such as schools and hospitals. At this critical time, we should relax these restrictions to allow other appropriate entities in Cuba to purchase needed relief and reconstruction supplies and equipment, even if only temporarily during the rebuilding period.

    Companies like Caterpillar and Home Depot, a founding member of the U.S.-Cuba Business Council, have shown interest in providing needed supplies to Cuba in the past. Bill Lane, senior director of global government and corporate affairs for Caterpillar, has said that “Everything Caterpillar makes in the United States is needed in Cuba.” Making this regulatory change would not only help the Cuban people rebuild, but would provide a boon to companies in America who provide good manufacturing jobs to our people.

    This change would not be controversial. Even before Hurricane Irma hit Cuba, 90 percent of Americans supported increasing U.S. business engagement with Cuba. At this difficult time for the Cuban people, denying them the ability to purchase high quality, American-made construction, medical, and other crucial supplies is cruel and counterproductive.  We urge you to take action without further delay.

    Thank you kindly for your consideration. We look forward to your response.

    Sincerely,

    [Letter writer]

cc: U.S. Senators, U.S. Representative

So far over 20 members of Congress have co-signed the letter. We urge you to send such a letter and also copy LAWG (http://www.lawg.org/about-us) and WOLA (https://www.wola.org/get-involved/contact). 

====================================================[1] LAWG, which was founded in 1983, “leads one of the nation’s longest-standing coalitions dedicated to foreign policy. LAWG and its sister organization, the Latin America Working Group Education Fund, work with over 50 major religious to promote humanitarian, grassroots, labor and change in U.S. policies towards Latin America and to promote human rights, justice, peace and sustainable development throughout the region.

[2]  WOLA “is a leading research and advocacy organization advancing human rights in the Americas. We envision a future where public policies protect human rights and recognize human dignity, and where justice overcomes violence. WOLA tackles problems that transcend borders and demand cross-border solutions. We create strategic partnerships with courageous people making social change—advocacy organizations, academics, religious and business leaders, artists, and government officials. Together, we advocate for more just societies in the Americas.”

 

A New Travel Warning for Americans Traveling to Cuba 

 Last Wednesday (September 13), the U.S. State Department issued a warning about Americans traveling to Cuba that was discussed in an earlier post.

On September 18, the Department updated its Cuba Travel Warning after Hurricane Irma had hit and damaged the island.[1] It stated the following:

  • “The Department of State advises U.S. citizens to carefully consider the risks of travel to Cuba while Hurricane Irma recovery efforts are underway.  Major roads are now open in Havana and power and water service has been restored in most of the city, but some parts of the country may be without power and running water. North central Cuba suffered severe damage and should be avoided until further notice. On September 6, the Department authorized the voluntary departure of U.S. government employees and their family members due to Hurricane Irma.”
  • “Travelers should apprise family and friends in the United States of their whereabouts, and keep in close contact with their travel agency, hotel staff, and local officials.”
  • “U.S. citizens in Cuba in need of emergency assistance should contact the Embassy by telephone at +53- 5280-5791 or the Department of State at 1-202-501-4444. At this time, U.S. citizens should not attempt to go to the U.S. Embassy in Havana as it suffered severe flood damage.”

Meanwhile the Cuban government announced that it would help its citizens recover from Hurricane Irma’s devastating swipe at its north coast and rebuild their homes. The plan would have the government finance 50 percent of the cost of construction materials for such rebuilding. Defense councils will certify the extent of damages and the resources necessary to make repairs.[2]

For homes that collapsed or lost their entire roofs, the state will take over interest payments. Defense councils also will consider subsidies for victims whose incomes are too low to purchase all the required construction materials, and those who still owe money on previous construction loans may be granted subsidies.

Hurricane Irma will have a major negative effect on Cuba’s economy. Economist Carmelo Mesa-Lago, a professor emeritus at the University of Pittsburgh, is convinced that GDP will decline over the last six months of this year. Another Cuban economist, Pavel Vidal, who is a professor at Javeriana University in Colombia, thought the hurricane damage “may pump up inflation” and cause ‘financial complications.”

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[1] U.S. State Dep’t, Cuba Travel Warning (Sept. 18, 2017); Rosenberg, US warns would-be Cuban travelers: consider the risks following Hurricane Irma, Miami Herald (Sept. 18, 2017)

[2] Information for the population, Granma (Sept. 18, 2017); Whitefield & Torres, Cuba announces program to repair Irma-damages homes as experts assess damage to economy, Miami Herald (Sept. 18, 2017).

U.S. Tells Americans Not To Go to Cuba While It Recovers from Hurricane Irma 

                                                                                                           On On September 13, the U.S. State Department issued a “Cuba Travel Warning.”[1]

It stated that the Department “advises U.S. citizens to avoid travel to Cuba while Hurricane Irma recovery efforts are underway.  Large parts of the country, including many areas of the capital Havana, are without power and running water. Transportation is difficult and many roads remain impassable due to downed trees and power lines. in Havana. . . . Outside the capital, north central Cuba suffered severe damage and should be avoided until further notice. On September 6, the Department authorized the voluntary departure of U.S. government employees and their family members due to Hurricane Irma. “

“While Cuban authorities are working to clear the debris, it will be several days before roads are fully open.”

Separately the website for the U.S. Embassy in Havana has a September 13 statement that “Major roads are now mostly open in Havana. . . . The area around the U.S. Embassy in Havana suffered flood damage, and communication systems are down. Do not attempt to come to the Embassy seeking assistance at this time. [2]

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[1] U.S. State Dep’t, Cuba Travel Warning (Sept. 13, 2017). Previous posts have discussed Irma’s destruction on the island: Hurricane Irma Hits Cuba (Sept. 10, 2017); Update on Hurricane Irma’s Impact on Cuba (Sept. 12, 2017); Cuba’s Crumbling Infrastructure Battered by Irma (Sept. 13, 2017)(comment to 9/11/17 post).

[2] U.S. Embassy to Cuba, Security Message: Hurricane Irma Update # 4 (Sept. 13, 2017).

Update on Hurricane Irma’s Impact on Cuba

Now that Hurricane Irma has left Cuba, greater details have emerged about its impact.

Early Reports

On the morning of Sunday (September 10) Reuters reported that “waves of up to 36 feet (11 meters) smashed businesses along Havana’s sea-side drive, . . . pummeling famous hotels such as the Copacabana, which were evacuated along with flooded neighborhoods.  Although the hurricane “did not hit Havana directly and brought only moderate wind and rain, . . .  the storm surge was still driving giant waves over the sea wall.” Associated Press added, “Seawater penetrated as much as 1,600 feet (500 meters) inland in parts of the city. Trees toppled, roofs were torn off, cement water tanks fell from roofs to the ground and electrical lines are down.” As a result, “emergency workers in inflatable boats navigated flooded streets Sunday along Havana’s coastline, where thousands of people left their homes for safer ground before Hurricane Irma hit Cuba.”[1]

Late Sunday afternoon Cuban authorities warned that the floodwaters in Havana could linger for more than a day as waves as high as 20 feet (6 meters) continued to pound the city. The U.S. Embassy astride the Malecon was damaged; its black perimeter fence, exterior panels, windows and doors were damaged. High-end hotels Melia Cohiba and Rivera also were damaged.

72 miles (116 km) east of the capital, Varadero, the country’s most important tourist resort, was whipped by winds, but it appeared to escape the full fury of the storm. The head of civil defense for the province said, “Our preliminary estimate of damage in Varadero is that it was concentrated in metal structures, false ceilings, and some buildings.”

On Sunday morning Raúl Castro as the President of the National Civil Defense Council issued a statement that the hurricane “has strongly impacted electrical infrastructure in practically the entire country, which impedes the concentration of brigades of specialized linemen in a particular zone.”[2]

Early Sunday afternoon that Council’s Advisory No. 6 stated, “Although Irma is gradually moving away from the island, it continues to represent a threat to Cuba. Its outer bands continue to affect the country’s central and western regions, with heavy and locally intense rainfall. Tropical storm strength winds continue to be felt from Sancti Spíritus to Artemisa, as well as storm surges along the northwest coast from Matanzas to Artemisa, the northern coast of the provinces of Sancti Spíritus and Villa Clara, and the southern shoreline from Camagüey to Matanzas.”

The Miami Herald has been publishing photographs of the effects of Irma in Cuba.[3]

Center for Democracy in the Americas’ Special Report

On Monday, the Center for Democracy in the Americas issued a special report, which is reprinted here in its entirety.[4]

“Hurricane Irma slammed into Cuba over the weekend, leaving 10 dead and causing destruction and flooding across the island. Irma, which made landfall in the country’s northeastern provinces as a Category 5 storm, was the strongest storm to hit Cuba in 85 years, according to Reuters.”

Damages

“The hurricane wrought havoc in Cuba’s keys, badly damaging most structures and all but destroying the international Jardines del Rey airport in Cayo Coco. Cuba’s President Raúl Castro released a statement Monday, saying, ‘Given the immensity of [Irma’s] size, practically no region has escaped its effects.’”

“Though Havana avoided a direct hit, the capital city saw extensive flooding, with 36-foot waves rising well over the Malecón (seawall) and seawater reaching one-third of a mile inland, according to Reuters and the Associated Press. The U.S. Embassy in Havana, which is located along the Malecón, saw structural damage to its fence and severe flooding inside the building.”

“According to CubaDebate, 7 of the 10 reported deaths across Cuba occurred in Havana, mostly due to falling structures and live electrical cables lying in the city’s flooded streets. Much of the island remains without power or cell service.”

“Cuba had evacuated over 1 million people, including over 8,000 tourists, prior to the storm’s arrival.”

Economic Impacts

“Irma has brought consequences for a number of Cuba’s principle economic sectors, including the sugar and tourism industries.”

“According to Granma, 300,000 hectares of sugarcane crops and 40 percent of sugar refineries in Cuba suffered some degree of damage from the storm. Cuba harvested 436,000 hectares of sugarcane in 2015, the last year for which data was available.”

“Meanwhile, the extensive damage to the Cuban Keys has left many of the country’s most popular resorts uninhabitable. President Castro stated that damages ‘will be recovered before the start of the high season’ for tourism.”

Response

“In his statement, President Castro said, ‘It is not time to mourn, but rather to rebuild what the winds of Hurricane Irma tried to destroy.’ Countries including Ecuador, Bolivia, and Russia have stated their intention to deliver aid to the island.”

“Prior to the storm reaching Cuba, the country sent nearly 800 doctors to affected Caribbean islands, according to Granma.”

President Castro’s Public Statement

The previously mentioned statement on Monday morning, September 11, by President Raúl Castro.[5] said “practically no province was spared [Irma’s] effects,” especially “severe damage to [the island’s] housing, the electrical system, and agriculture.”

“It also struck some of our principal tourist destinations, but damage will be repaired before the beginning of the high season. We have on hand for this the human resources and materials needed, given that this constitutes one of the principal sources of income in the national economy.”

“The days that are coming will be ones of much work, during which the strength and indestructible confidence in the Revolution of Cubans will again be demonstrated. This is not a time to mourn, but to construct again that which the winds of Irma attempted to destroy.”

Economic Impact

New York Times reporters talk about the problem of rebuilding tourist infrastructure facing many Caribbean islands, including Cuba.[6] They report, “Travel and tourism accounts for a higher share of the Caribbean region’s gross domestic product than it does in any other region in the world, according to the World Travel & Tourism Council, supporting more than 2.3 million jobs. . . . In Cuba, the long-term implications could be even worse. The hardest-hit parts of the islands contain a significant share of its tourist infrastructure and bring in precious foreign currency for the communist nation. Without that, the country loses one of its primary sources of income to purchase items on the global market, including the construction materials it will need to repair the damaged infrastructure.”

On Monday, they report, “President Raúl Castro recognized the importance of resorts to the Cuban economy and promised they would be rebuilt before the start of the peak season, which runs from December to April. The target is ambitious, but with Venezuela, the island’s main economic partner, racked by its own crises, Cuba can’t afford to miss it. The Cuban government announced on Monday that 10 people had died as a result of the storm, bringing the death toll in the Caribbean to at least 37.”

Cuba’s sugar industry, another important Cuban industry for employment and export earnings, suffered significant damage. According to Liobel Perez, spokesman for AZCUBA, the state sugar monopoly,  “Some 300,000 hectares (740,000 acres) of cane were affected to different degrees” and 40 percent of the country’s mills were also damaged, as were warehouses and other parts of the industry’s infrastructure.[7]          

Conclusion

To meet the huge problem of rebuilding Cuba’s housing and infrastructure this blogger suggests that Cuba rescind its new restrictions on cooperatives that engage in construction that were discussed in a prior post.  Cuba needs all the help it can get as soon as possible.

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[1] Reuters, Irma’s 36-Feet Waves Slam Havana, Winds Pummel Varadero Resort, N.Y. Times (Sept. 10, 2017); Assoc. Press, Cuba Sees Devastation as Hurricane Irma Veers Toward Florida, N.Y. Times (Sept. 10, 2017); Assoc. Press, Waves from Irma Flood Havana Coast Even as Storm Moves Away, N.Y. times (Sept. 10, 2017); Advisory No. 6 from the National Civil Defense General Staff regarding Hurricane Irma, Granma (Sept. 10, 2017); Cuba responds to Irma, Granma (Sept. 10, 2017); Irma disappears the melecón of Havana, Cubadebate (Sept. 10, 2017) (photos of Havana); Irma: The sad trace of an unwanted visitor, Cubadebate (Sept. 10, 2017) (photos of Havana); In photos, trees shot down by Irma in several places in Havana, Cubadebate (Sept. 10, 2017); National Civil Defense Council General Staff announcement regarding deaths associated with Hurricane Irma, Granma (Sept. 11, 2017).

[2]  Instructions from President of the National Civil Defense Council, Granma (Sept. 10, 2017).

[3] Photo gallery: Hurricane Irma Cuba/Sun,. Sept. 10, 2017 , Miami Herald (Sept. 10, 2017); Hurricane Irma in photos: heavy flooding on the Cuban coast, from Matanzas to Havana, Miami Herald (Sept. 10, 2017); Photo gallery: Hurricane Irma strikes Cuba/Sat., Sept. 9, 2017, Miami Herald (Sept. 10, 2017).

[4] Center Democracy in Americas, Cuba Central News Brief Special Report: Cuba Recovers After Irma (Sept. 11, 2017).

[5] Castro,  A call to our combative people, Granma (Sept. 11, 2017).

[6] Ahmed & Semple, In the Caribbean, Rebuilding Nations—and the Tourism Industry, N.Y. Times (Sept. 11, 2017); Reuters, Hurricane Irma Kills 10 in Cuba, Castro Calls for Unity, N.Y. Times (Sept. 11, 2017).

[7] Reuters, Irma Severely Damages Cuban Sugar Industry, Crop: State Media, N.Y. Times (Sept. 11, 2017).

Hurricane Irma Hits Cuba

Although U.S. news media have reported that Hurricane Irma has been inflicting damage on the north shore of Cuba, they generally have not provided details, probably because they do not have reporters on the island.

However, early on September 10, Reuters reported that Irma uprooted trees and tore off roofs in Cuba . . . with 125-mile-per-hour (200-km per hour) winds that damaged hotels in the island’s best-known beach resorts and forced evacuations as far along the coast as low-lying areas of the capital Havana. Power was out and cellphone service was spotty in many regions as Irma neared the end of a 200-mile (320-km) trek westwards” on the north shore of the island. The hurricane was forecast to leave Cuba about 150 miles (240 km) east of Havana and head north toward Florida “late Saturday.”[1]

Associated Press, also early on September 10, added that “authorities on the island were assessing the damage and warning of staggering damage to keys off the northern coast studded with all-inclusive resorts and cities, as well as farmland in central Cuba.” In addition, late Saturday these authorities warned that flooding had reached more than 2,000 feet (600 meters) into Havana and was going to last more than 36 hours. There have been no immediate reports of deaths caused by the hurricane.[2]

Nick Miroff of the Washington Post on Saturday afternoon reported that the hurricane had been “swamping seaside towns and shredding the island’s rickety infrastructure, though there were no reports of deaths or injuries.” He had seen images of “downed trees and rubble-clogged streets” and “power lines and electrical posts . . . strewn across roads and highways.” Some towns “reported damage to 60 percent of homes, as the storm shredded zinc roofing panels and blasted apart old Spanish tiles.” [3]

The Miami Herald had a similar report early on September 10 with images of damage. It said there were reports of “heavy flooding” from Matanzas to Havana with “waves between 19 and 30 feet.”[4]

In addition, here is an abbreviated list of reports about Irma by Cuban media:[5]

Date Time Event
9/8/17 07:00 Heavy rain, high winds & waves in Punta de Maisi at eastern end of island.
09:45 Irma approaches Baracoa (Guantanamo) on eastern end of island.
10:55 Light rain from Irma in city of Guantanamo at eastern end of island.
13:08 Clouds over entre island; Irma’s “eye” is 300 km (180 miles) SE of Cayo Coco, (Ciego de Avila).
22:00 Irma landfall at El Romano (Camagúey/Ciego de Ávila).
9/9/17 09:00 Irma’s “eye” is 35 km (21 ni) NE of Caibarién (Vila Clara) & 160 km (96 mi) SE of Punta Hicacos (Matanzas).
09:20 Winds of 160 kmh (96 mph) with gusts < 250 kmh/150 mph & damaged buildings in Caibarién (Villa Clara).
09:35 Damaged buildings in Morón (Ciego de Avila).
10:40 Wind gusts >200 kmh (120 MPH) & 40% of buildings damaged in Yaguajay (Sancti Spiritus).
11:20 Damaged buildings & communications in Cayo Coco (Ciego de Avila).
11:30 Damaged buildings & trees in Santa Lucia (Camagûey).
11:35 Damaged buildings in Santa Clara (Villa Clara).
12:00 Wind gusts 200 kmh (120 mph); sea penetrations of 500 meters; damaged buildings, electrical and communications in Caibarién (Villa Clara).
13:00 Dams @ 84% capacity with 9 overflowing in Pinar del Rio Province.
13:10 “Eye” of hurricane is 200 km (120 mi) from Havana, but hard rain should start soon.
13:40 Heavy rains approaching Varadero, Matanzas, Cárdenas & Marti (Matanzas).
15:00 Villa Clara reports that it has been lashed all day by hurricane-force winds and rain with many damaged buildings.

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[1] Reuters, Havana Braced for Floods After Hurricane Irma Rakes Cuban Keys, N.Y. Times (Sept. 10, 2017).

[2] Assoc. Press, Cuba Surveys Toppled Houses, Flooded Cities in Wake of Irma, N.Y. Times (Sept. 10, 2017).

[3] Miroff, Hurricane Irma pounds Cuba’s north coast, Wash. Post (Sept. 9, 2017).

[4] Hurricane Irma in photos: heavy flooding on the Cuban coast, from Matanzas to Havana, Miami Herald (Sept, 10, 2017).

[5] Hurricane Alarm Phase decreed for the eastern and central provinces of Cuba, Granma (Sept. 8, 2017); First reports of damage by Irma in Gibara, Granma (Sept. 8, 2017); Advisory No. 4, National Civil Defense General Staff regarding Irma, Granma (Sept. 8, 2017); Minute by minute: Hurricane Irma in Cuba, Granma (Sept. 8-9, 2017); Irma remains an extremely dangerous hurricane, Granma (Sept. 8, 2017); Hurricane Irma makes landfall at Cayo Romano, Granma (Sept. 9, 2017); The capital intensified preparation for Irma, Granma (Sept. 9, 2017); Irma continues to pose a threat to Cuba, Granma (Sept. 9, 2017); A furious Irma hits Yaguajay, Granma (Sept. 9, 2017); Electrical specialists depart western Cuba to support recovery in central provinces, Granma (Sept. 9, 2017); Advisory No. 5 of the National Civil Defense General Staff regarding Hurricane Irma, Granma (Sept. 9, 2017).