According to a Reuters report yesterday, Cuba repaid a second installment to creditor nations of the Paris Club as per a debt restructuring agreement reached in 2015. The benefits are twofold. The repayment increases Cuba’s respect within the international financial community and creditor nations benefit by swapping debt for increased opportunities to participate in development projects on the Island.
The multilateral agreement with the Paris Club is a restructuring of Cuba’s 25 year old debt.
Creditors agreed to forgive $8.5 billion of late payment charges and Cuba would pay $2.6 billion of arrears over an 18-year period. The agreement opened a new era in the relations between Cuba and the international financial community.
Cuba’s creditor nations include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom. Over the last couple of years, Cuba has signed separate debt restructuring agreements with Russia, the United Kingdom, Japan, Italy and Spain.
Most of the creditor nations are willing to show flexibility in debt repayment due to their increased interest in participating in joint ventures and the foreseen profit of business ventures with Cuba.
European governments are not overly concerned with President Trump’s policies to reverse Obama’s advances for American business because it is seen as an opportunity to move forward in Cuba.
Marc Franc, reporting for Reuters, wrote:
“Cuba paid the second installment on a renegotiated $2.6 billion in debt to 14 wealthy creditor nations this week, diplomats from a number of the countries said, as some creditors prepare to swap debt for an equity stake in local development projects.
The diplomats, who spoke on condition of anonymity, said the payment showed the importance Cuba attaches to an agreement it reached in 2015 with the Paris Club group of major creditor nations.
The Paris Club agreement forgave $8.5 billion of $11.1 billion in official debt Cuba had defaulted on through 1986, plus charges. Repayment of the remaining debt was back-loaded through 2033, with around $40 million paid last year and nearly $60 million due by Oct. 31.
The accord was seen as a breakthrough, with Cuba agreeing for the first time to give rich capitalist countries equity in development projects, in areas like manufacturing and agriculture, in exchange for a portion of their debt holdings.
It was also seen as a step toward Cuba rejoining the international financial community, as the Obama administration moved to re-establish U.S. diplomatic and some commercial ties with the island.
The Paris Club deal also came as the European Union agreed to drop sanctions on development assistance to Cuba.
“If Trump wants to hold back U.S. companies from Cuba it simply gives us more time to establish ourselves here,” one European ambassador said in a recent interview.”
