Creditors still fret despite Cuba improvements

Mon Dec 21, 2009 2:37pm EST

Related Topics

* Cuba says trade balance in the black after 2008 deficit

* Little cash seen available to pay debts

* State loosens hold on export industries

By Marc Frank

HAVANA, Dec 21 (Reuters) - Cuba managed to stop the hemorrhaging of foreign exchange that left it unable to pay many bills the past year, officials said this weekend, but creditors who are owed an estimated $2 billion do not expect to be paid in full any time soon.

Cuban officials told the National Assembly over the weekend the country's economic crisis had stabilized, but government spending would be limited in 2010 as the island continues to deal with effects of devastating hurricanes in 2008 and the global financial meltdown.

Cuba, which is heavily dependent on imports, stopped paying many suppliers last year and froze the Cuban bank accounts of most foreign companies operating on the island as the crisis drained its cash reserves.

Economy Minister Marino Murillo told the assembly that the government had turned 2008's $2.3 billion trade deficit into a surplus of $400 million by cutting imports 37.4 percent, or $6 billion, this year.

That, he said, helped offset a 22.9 percent drop in exports, or $3.1 billion, caused by plummeting prices for Cuba's key export products including nickel, tobacco, lobster and technical assistance to oil producing clients such as Venezuela and Angola.

Murillo said Cuba's overall economy grew 1.4 percent in 2009, down from 4.2 percent the previous year, and would put in a similar performance in 2010.

Murillo did not say if the government had improved the country's cash reserves, which are never publicly disclosed, but did tell the assembly that spending would be dictated by a simple principle.

"The amount of foreign exchange we plan to spend in 2010 will be less than the income we expect," Murillo said.

Regarding debt, he said, "Negotiations with some countries and suppliers to restructure debts and guarantee payment under more favorable conditions have begun."

LITTLE TO CHEER

His words brought little cheer to creditors, who had hoped for a signal that the money they are owed would be forthcoming.

"I see nothing in Sunday's report that indicates significant amounts of money will be generated or put aside to pay fresh debt racked up to suppliers and banks this year," a foreign businessman, who asked his name not be used, said on Monday.

"Further, I see nothing indicating fresh money flows from current or new exports," he said.

There was a little bit of good news from President Raul Castro, who told the assembly that the government had unblocked about 30 percent of funds of the frozen bank accounts of foreign companies.

There have been estimates that as much as $1 billion has been locked up in the accounts.

Castro, who took over for his ailing brother Fidel Castro in 2008, has repeatedly called for making the communist system more productive and efficient to ease its chronic economic problems.

Murillo said in his speech the government would loosen its stranglehold on the finances of export industries such as nickel and tobacco, and foreign exchange earners such as communications and tourism.

Few details were provided, but it appears that the change will allow state companies to retain a percentage of their earnings instead of handing all profits over to the government, which then allocates them as is currently done.

Osvaldo Martinez, head of the National Assembly Economic Commission, said the new system was aimed at ensuring that the companies will have the foreign exchange they need to guarantee production "with priority over any other use" by the state.

(Editing by Jeff Franks and Vicki Allen)

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