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UPDATE 1-Cuba reports big jump in foreign debt
July 27, 2007 / 2:11 PM / 10 years ago

UPDATE 1-Cuba reports big jump in foreign debt

(Adds details and background throughout, Internet link to Cuban statistical Web site, 14th paragraph)

By Marc Frank

HAVANA, July 27 (Reuters) - Cuba's actively serviced foreign debt jumped nearly $2 billion in 2006 to $7.794 billion as foreign suppliers more than doubled their credits to the country, according to figures posted on the Web site of the National Statistics Office on Friday.

Most of Cuba's new debt was believed by local analysts to be due to fresh credits from China and Venezuela.

In 2005, Cuba's "active" debt, or debt on which Cuba pays interest and principal, stood at $5.898 billion. The so-called active debt was borrowed since the 1991 collapse of the Soviet Union.

Debt owed to suppliers jumped to 36.2 percent of the total last year, more than double the 16 percent share in 2005 as trade with China nearly doubled. Foreign supplier debt usually refers to financing extended with the shipments of goods to a country.

Venezuela extends up to 60 percent credit on its oil supplies to Cuba, thought it was not clear if all the loans were classified as being related to suppliers.

'INACTIVE' DEBT

Cuba last reported its "inactive" debt, or the debt it is not paying interest on and which was built up after Cuba defaulted on its obligations in the 1980s, as $8 billion in 2004.

That would mean total foreign debt could be close to $16 billion in 2006, given that most of the inactive debt is denominated in non-U.S. currencies that have appreciated against the greenback since then.

Cuba does not include debt to the former Soviet Union in its figures.

Venezuela has replaced the Soviet Union as the leader in supplying oil and finance to Cuba.

Cuba now imports all its petroleum products from Venezuela, currently 98,000 barrels per day, with up to 60 percent financing over 25 years at a 2 percent interest rate. Part of the bill is bartered through the export of Cuban medical and other services.

Meanwhile, China has increased its trade and development credits to the Communist-run Caribbean island nation, resulting in a near doubling of bilateral trade to $1.8 billion last year.

The financial support from Venezuela and China has also allowed Cuba to lower interest rates over the last few years, according to foreign bankers.

DEBT BREAKDOWN

In 2006, official state sector debt accounted for 18.6 percent of the active debt in 2006, the banking sector for 23.2 percent and debt to suppliers for 36.2 percent. The year before, 9.4 percent was official debt, 30.2 percent bank debt and 16 percent supplier debt.

The debt figures were contained in the National Statistics Office's 2006 statistical abstract: here. The equivalent abstract in 2005 provided external financial data only through 2004.

Cuba, which has been under a U.S. embargo since Fidel Castro defeated a CIA-backed assault at the Bay of Pigs in 1961, defaulted on long-term debt and interest payments in 1986. Official talks with the Paris Club of rich creditor nations were broken off in 1989, then resumed in 2000 only to be broken off again.

Cuba is not a member of the International Monetary Fund or any other multilateral lending organization. The country has a Moody's rating of Caa1, or speculative and poor.

However, local analysts and foreign businessmen and diplomats said that despite the added debt load the country had improved significantly in terms of its willingness and ability to pay, bar a few exceptions.

Cuba was in far better financial shape than a few years ago due to high nickel prices, lower interest rates, a guaranteed oil supply and billions of dollars now earned through service exports to Venezuela and other countries, they said.

The financial support from Venezuela and China has also allowed Cuba to lower interest rates over the last few years, according to foreign bankers.

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