HAVANA TIMES — Cuba will close 2015 with magnificent news for its ailing finances: this Saturday, Raul Castro’s government and the Paris Club reached an agreement on the island’s debt that will secure a US $ 4 billion relief in interests due and reduce Havana’s outstanding debt to US $ 2.6 billion, payable in the generous term of 18 years.
The agreement, announced in Paris, arrives after a long period of stagnation, and was catalyzed by the re-establishment of political exchange and economic cooperation between the island and European Union, and, especially, by the re-establishment of diplomatic ties with the United States.
The reduction of Cuba’s debt has been truly significant. In 2001, when talks with the Paris Club were suspended, Cuba’s total debt was estimated at US $35 billion, a figure which was later reduced to US $26 billion following direct agreements with a number of creditors. At one stage of the negotiations begun last March, the debt had been set at US $15 billion.
A New Stage within the Financial Community
The agreement was reached during a round of negotiations in Paris between December 10 and 12. The final steps were aimed at determining the payment term and amount payable by Cuba.
In fact, these concessions for Cuba are sustained by promises for the majority of creditors, who appear willing to relax their payment demands in exchange for advantages in terms of setting up businesses on the island.
“This agreement paves the road to a new stage in relations between Cuba and the international financial community,” French Minister of Finance and Public Accounts Michel Sapin announced in a communiqué.
The terms of the agreement could not be more favorable to Cuba’s strategy, aimed at inserting the island in the international financial system and securing generous credits for the mid-term to bolster its domestic economy.
Money won’t begin flowing into the island’s economy and banks right away, but this is a first step towards establishing the atmosphere of confidence that the Cuban government seeks to secure in its attempts to attract investors, following the promulgation of the Foreign Investment Law.
Money on the Horizon
Sapin announced that the French Development Agency will soon resume its activities, as President Francois Hollande promised during his visit to Havana last May.
Credit agencies that make up the Paris Club will also be able to resume their export credit activities immediately.
France is Cuba’s chief creditor. The Paris Club is made up of 15 of the world’s richest countries and also includes Australia, Austria, Belgium, Canada, Denmark, Finland, Italy, Japan, Holland, Spain, Sweden and the United Kingdom.
Sapin specified that France will cancel outstanding interests and will focus on the total sum owed, plus the original interests, calculated at around US $ 470 million. A total of US $ 240 million will be paid by Havana and the remaining US $ 230 million will be destined to bilateral development projects on the island.
The Cuban press divulged the news as an important step towards the normalization of financial relations between the two parties.
It remains to be seen whether the Cuban government will offer official information on the reserves kept at Cuba’s Central Bank. The island is expected to take that step as proof of transparency and reliability, indispensable to be granted international credits.