Mexico and Cuba patch up relations, settle debt

HAVANA (Reuters) - Mexico and Cuba put six years of testy relations behind them this week with a visit by Mexican Foreign Minister Patricia Espinosa and the rolling-over of $400 million in Cuban debt.

Mexico's Foreign Trade Bank (Bancomext) has opened a new $25 million credit line aimed at kick-starting stagnant trade with Cuba, the state bank's director general Mario Laborin said on Friday.

The two governments agreed to meet in April to crack down on the mounting flow of Cubans entering Mexico on smugglers' speedboats en route to the United States.

A senior Mexican official said 10,000 Cubans arrive each year in Mexico illegally. The two countries agreed to exchange more information and improve repatriation procedures.

Mexico was the only Latin American country that did not break diplomatic relations with Cuba under pressure from the United States after Fidel Castro's 1959 revolution.

But ties soured when Mexico became part of NAFTA and former president Vicente Fox voted to condemn Cuba at the U.N. Human Rights Commission in 2002.

Fox and Castro feuded publicly, with the Cuban leader calling the Mexican a U.S. pawn. To prove his point, Castro revealed a secretly taped telephone conversation in which Fox had urged him to leave a summit in Monterrey early so as not to embarrass U.S. President George W. Bush.

The two countries temporarily withdrew their ambassadors in May 2004. Fox left office in December 2006 and Fidel Castro, sidelined by illness, was replaced last month by his brother Raul Castro as Cuba's first new leader in 49 years.

Mexico's conservative President Felipe Calderon has mended fences with Havana. His government removed a major bone of contention by renegotiating Cuba's debt.

Laborin said repayment of the $400 million will be spread over 15 years, at 6 percent interest and a five-year grace period before principal is due. The new credit line will be increased with more trade, which sank to $200 million in the absence of financial guarantees.

"I can say, with satisfaction, that relations between Mexico and Cuba are fully normal once again and a new period of cooperation and renewal of our historic friendship has begun," said Cuban Foreign Minister Felipe Perez Roque.

(Editing by Alan Elsner)