December 17, 2008 / 3:48 PM / 11 years ago

Global crisis, storms hit Cuba finances

HAVANA, Dec 17 (Reuters) - Three hurricanes and the global financial crisis have left Cuba strapped for cash, forcing the government to juggle debt payments and seek new financing, diplomatic and business sources say.

France is the latest government to receive notice from Cuba that it needs to reschedule upcoming debt payments, European diplomats said.

“A few months ago, Cuba told Japan and Germany it could not meet debt payments but those problems apparently have been worked out. Now France has received the same news,” a diplomat said. The information was confirmed by French business sources.

Cuba, whose foreign debt rose by $1.1 billion to $16.5 billion in 2007, recently rescheduled some debt with China.

The government did not immediately respond to a request seeking comment, but Cuba’s planning and economy minister, Jose Luis Rodriguez, recently said the island, like all countries in the region, faces a difficult year ahead due to the global financial crisis.

Various foreign businessmen, who like the diplomats asked that their names not be used, said payments had slowed from Cuban state-run banks, with cash transfers that usually took 48 hours now sometimes put off for weeks.

“It appears they do not have the cash on hand so they delay and then pay you and delay payment to someone else,” one Western businessman said.

Despite the problems, few think Cuba is in such dire straits that it will stop payments altogether because, as another businessman said, “that would send a very negative signal.”


Cuba’s economy has recovered in recent years after more than a decade of crisis that followed the demise of its former benefactor, the Soviet Union.

But hurricanes Gustav, Ike and Paloma caused an estimated $10 billion in damage this year, the equivalent to 20 percent of annual economic output, and the country has suffered from a dramatic drop in nickel prices, its main export.

The international financial crisis has tightened credit conditions for the communist-run nation that faces a U.S. economic embargo and depends heavily on imports.

Cuba is not a member of the International Monetary Fund or any other multilateral lender and the rating on its debt by Moody’s is Caa1, or “speculative and poor.”

The deepening recession in many countries and falling oil prices are fueling concern among foreign businessmen in Cuba as 75 percent of Cuba’s foreign exchange comes from tourism and the export of services, mainly to oil-rich Venezuela and to a lesser extent Angola and other countries.

Times are tough, but Cuba has survived worse and has taken steps that should help it through the global crisis, a local economist said.

“The situation is very difficult, but nothing like the crisis of the 1990s when the Soviets collapsed,” he said.

“We have strategic partnerships with Venezuela and China to fall back on, are part of regional integration efforts, and are mending fences with the European Union and Russia.”

An expected increase in visits and remittances from Cuban-Americans under U.S. President-elect Barack Obama’s administration could also help, the economist said. (Additional reporting by Esteban Israel; Editing by Kieran Murray and Jeff Franks)

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