It doesn’t seem very credible that a powerful creditor is hurrying up to negotiate with its debtor, but it can happen. The development of the most recent contacts with Cuba suggest that the Paris Club has modified the tone of its demands in the face of such a small country in size as well as hard put in financial terms. If the matter is examined with equanimity, neither is it showing signs of the European power pose that imposes conditions.
The press reports were inclined to say that Cuba came to an agreement with that informal group of creditor countries. Prejudices aside, I see it the other way around. The Club was the one that gave in. It is probably concerned with the manoeuvres with which the Raúl Castro government is tending to isolate the most intransigent members of that forum.
The chairman of the Paris Club, Bruno Bézard, travelled to Havana early this month to study a renegotiation of Cuba’s strong debt with several countries of that creditor group. Judging by his statements, the conflict that has been dragging on since 1987, due to the island’s suspension of payments, can be resolved in a question of weeks.
“We have advanced rapidly. On Cuba’s part and the creditors’ part there is a will to carry out this task,” said Bézard. “We are going to close the reconciliation in a few weeks, and some weeks or months later we will have a negotiation,” added the also director general of the French Treasury during his stay in the Cuban capital.
After a long rupture, both parties have submerged themselves in a respectful bargaining to define the exact amount of the debt and the interests that Havana owes to each of the group’s creditors, a necessary step before initiating official negotiations.
Cuba stopped its payments to the Paris Club almost three decades ago because of that forum members’ attempt to meddle in the Caribbean island’s domestic economic policy. Havana did not accept this, the creditors then reduced to a minimum the allocation of credits and the Cuban government suspended or finally immobilised the payment of the debt service in 1987.
Any attempt of a subsequent dialogue failed. In 2001, the Cuban government proposed to the Club to seek a “reasonable solution”, but considered the conditions this 19-country forum demanded as “totally unacceptable”.
According to European sources, Cuba owes that group between 15 and 16 billion dollars. It owes around a third of this to France. Bézard, in fact, got ahead to prepare the visit to Cuba of French President Francois Hollande. Previewed for May 11, both governments’ highest level meeting includes settling the financial dispute.
Why are Havana and the Paris Club trying to come to an understanding now?
For some five years, the Cuban government has set about to recover its foreign financial discipline. “We will continue strictly honouring the commitments assumed in the reorganisation of the debts with our principal creditors,” President Raúl Castro reiterated before the National Assembly of People’s Power last December. That policy responds to an explicit objective: “contributing,” said the president, “to the gradual recovery of the Cuban economy’s international credibility.”
Havana has scored significant successes along that line. It has successively restructured debts with governments of several countries, such as China (in 2010) and Mexico (in 2013). The agreements do not escape the eyes of the Paris Club because some of them were also sealed with members of that forum of creditors: Japan and Russia.
Behind closed doors and bilaterally, Cuba was reached with each one of those two countries the agreements it has not achieved with the Club as a whole. In 2012, Tokyo wrote off 80 per cent of a debt of some 1.4 billion dollars and last year Moscow reprogrammed Havana’s biggest foreign debt: it exempted it from paying 90 per cent of the 35.2 billion dollars it owed since the times of the Soviet Union.
The Cuban manoeuvres have divided and weakened the Club. Analyst Richard Feinberg, of the Washington-based Brookings Institute, warned after the agreement with Russia that Cuba would be in a stronger negotiation position for the restructuring of its remaining debts with the western countries of the Paris Club.
The prospect of renewing diplomatic relations with the United States, another member of the financial group, would put the long-established and absentminded Europeans in an even more uncomfortable position, while their banks are still among the objectives most targeted by Washington’s economic blockade on Cuba.
The German Commerzbank joined the sanctioned financial institutions: in early March it accepted a U.S. fine of 1.71 billion dollars for maintaining financial operations in USD with four countries, including the Caribbean nation. The punishment was announced by the daily Financial Times last December 16, one day before presidents Raúl Castro and Barack Obama announced the start of talks to settle relations between the two countries.
Though Cuba is going to the negotiating table with the Club with obvious disadvantages, it is also evident that its position is much more solid today. The Europeans delayed. The terms of the agreement that both parties will probably present or channel in May will say it all. (2015)
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