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Cuba's Foreign Debt
As reported by the Banco Central de Cuba, Cuba’s official hard-currency foreign debt reached a record-high U.S.$12.210 billion by late 2002. It has another $1 billion in commercial credits in “arrears” being renegotiated; roughly $20 billion in debt owed to Russia; over $6.3 billion in unsatisfied certified claims by American citizens; and an unknown, but very large, set of liabilities to Cuban nationals whose property was confiscated by the regime.
Dunn and Bradstreet rate Cuba as one of the riskiest economies in the world: only Angola, Congo, Sierra Leone, Zimbabwe and Iraq are worse.
There are widespread reports of payment problems with Japan, Spain, France, Britain, South Africa, Argentina, Chile, Mexico, Venezuela and others. Citing chronic delinquencies and mounting short-term debts, Moody’s lowered Cuba’s credit rating to Caa1 – “speculative grade, very poor” – in late 2002. For example, Cuba defaulted in October 2002 on a $750 million refinancing agreement with Japan’s private sector after having signed a debt restructuring accord with Tokyo in 1998. Japan, Cuba’s single-largest creditor, had expected to see the first payments in 2003 on part of the $1.7 billion owed to Japan by the Castro regime.
-- Cuba suspended all payments in October 2002 on $380 million owed to Bancomext, the Mexican Government’s export financing bank.
-- Cuba’s petroleum debt with Venezuela’s State Oil Company, PDVSA, rose to $266 million by May 2003. The Castro regime has fallen behind on payments to PDVSA repeatedly since Fidel Castro and Hugo Chavez signed a trade agreement in October 2002. PDVSA supplies approximately 35% of the island’s oil under generous financing terms that amount to a 25% price subsidy over 5 years.
-- In 2002, Cuba fell into arrears on $100 million in short-term credit lines from Panamanian banks and trading companies based in the isthmus’s Colon Free Zone.
-- In May 2003, Madrid acknowledged in response to a Spanish parliament inquiry that Cuba is Spain’s top foreign debtor government, presently in default on an estimated $816 million.
-- France’s export financing agency, COFACE, suspended Cuba’s $175 million credit line after Havana fell more than a year behind on annual loans for the purchase of French agricultural products and capital goods in 2001.
-- The Italian Government withdrew a proposed $40 million aid package in early July 2003 in response to Castro’s crackdown on internal dissent. The Cuban Government had already accumulated a short-term debt of $73 million with Italy.
(All amounts are converted to U.S. dollars.)
EUROPE: $10.9 billion. Paris Club creditors (Source: Banco Central de Cuba.) In 1986, Cuba suspended payments of the debt. Despite on-going negotiations, Cuba has yet to service its debt to the Club since issuing a moratorium in 1987.
Eastern Europe: $2.2 billion.
Russia: Estimated at roughly $20 billion.
Canada: $73 million (Excludes short and medium-term commercial debts to Canadian suppliers.)
Japan: $1.7 billion (Japan is Cuba’s principal creditor, excluding the former Soviet Union.)
China: $400 million.
Argentina: $1.58 billion. (Cuba’s second largest creditor behind Japan.)
Mexico: $380 million.
Chile: $20 million.
Venezuela: $266 million. (Mostly in unpaid petroleum purchases, even under highly favorable terms.)
South Africa: $85 million
Cuba’s foreign debt per capita is approximately $3,000.
Latin America and the Caribbean:
Argentina: $3,517 (2002 est.)
Cuba: $3,000 (2002 est., including ruble debt)
Mexico: $1,584 (2001 est.)
Brazil: $1,503 (2002 est.)
Ecuador: $1,184 (2001 est.)
Colombia $836 (1997 est.)
Haiti: $151 (1997 est.)
Assertion: A commercial tourism opening would be a win-win situation. Cuba would earn income; U.S. exporters would gain a market with foreign exchange reserves with which to pay debts. Interaction between Americans and Cuban nationals would influence internal developments in the island.
Fact: There is no reason to expect that U.S. firms would be the primary beneficiaries of a commercial tourism opening. The Castro government has over $12 billion in largely overdue debt; those creditors will have first claim on new money.
Fact: If U.S. tourists were allowed to visit Cuba, the Castro government will follow the same practices of the former Soviet Union and Eastern Europe. American tourists will have limited contact with Cubans, thus their influence would be limited. Travel would be controlled and channeled into the tourist resorts built in the island away from the major centers of population. (Cubans cannot stay at resort hotels or patronize them.) Tourists will be screened carefully to prevent “subversive propaganda” from entering the island.
In Cuba’s stagnant economy there is one growth sector that is expanding: the “sex-tourism” industry. The sex tourism industry in Cuba is anything but hidden. Any casual stroll along the Malecon, central Havana and around the major tourist hotels will show that the sex business in Cuba is “big business.” A 2002 Johns Hopkins University Study reported, “Canadian and American tourists have contributed to a sharp increase in child prostitution and in the exploitation of women in Cuba.” Despite the regime’s lip service to the goal of abolishing prostitution, the growing economic desperation during the Castro regime has fueled the sex tourism industry.
Also, the impact of U.S. tourism on the Cuban population at large would be limited. On the other hand, it would provide the Castro government with much-needed dollars. Dollars will flow in small quantities to the Cuban poor; state and foreign enterprises will benefit most.
Strengthen the state enterprises because the money would flow into the businesses owned by the Cuban Government. (Most businesses are owned in Cuba by the state, and in all foreign investment the Cuban Government retains a partnership interest.)
Lead to greater repression and control since Castro and the rest of the leadership would fear that U.S. influence would subvert the revolution and weaken the Communist Party’s hold on the Cuban people.
Delay instead of accelerate a transition to democracy in Cuba.
Guarantee the continuation of the current totalitarian structure.
Send the wrong message to the enemies of the United States: that a foreign leader can seize U.S. properties without compensation; allow the use of his territory for the introduction of nuclear missiles aimed at the United States; execute thousands of his political enemies, including U.S. citizens; espouse terrorism and anti-U.S. causes throughout the world; and eventually, the United States will “forget and forgive” and reward the regime with tourism and investment.This Administration is committed to the use of the embargo to encourage a rapid transition to a democratic government characterized by strong support for human rights and an open market economy.