By Marc Frank | Reuters
HAVANA - Cuba is meeting restructured short-term debt payments to some governments, diplomats said on Monday, apparently using increased tourism and nickel revenues, as well as cash gleaned from recently imposed hard currency controls.
But the same sources cautioned the effort was not sufficient to free the Communist nation from its status as one of the world’s worst credit risks.
A Japanese diplomat said Cuba had paid on time $50 million in principal under a 2002 restructuring of $120 million in short-term official debt.
European diplomats said Havana was paying France’s and Germany’s restructured short-term debt on schedule too.
Other European Union governments also reported some payments, though at times late and on an irregular basis, with Spain an exception and owed more than $300 million in short- and medium-term trade cover.
Cuba began defaulting on around $500 million in government trade guarantees in 2001 after the attacks on the World Trade Center and Pentagon cut into tourism and Hurricane Michelle battered the Caribbean island.
Cuba is under a U.S. embargo and not a member of the International Monetary Fund or any other multilateral organization that might have lent money to tide the country through.
“We are trying to be realistic. Even with the economy picking up and the forex controls, Cuba has no money. The situation remains very serious,” a European diplomat said.
TOURISM AND NICKEL REVENUES
The Central Bank last July barred state companies from using the dollar for transactions within Cuba.
Businesses were ordered to hand over their dollars for convertible pesos, a local currency that is pegged at par with the dollar but has no value outside the country.
Authorities said the foreign exchange controls are aimed in part at meeting financial obligations.
Cuba’s main hard currency earner, tourism, increased more than 13 percent in the first quarter, according to a government report seen by Reuters.
Top officials have told foreign bankers they expect nickel plus cobalt profits to be around $400 million this year due to high international prices.
Tourism generates more than 40 percent of Cuba’s hard currency, or some $2.1 billion in 2003, while nickel has replaced sugar as the top export earner.
“The first three months of the year were very good, especially because tourism put in a strong showing on top of last year’s record arrivals,” said Juan Triana, head of Havana University’s Center for the Study of the Cuban Economy.
Most foreign and Cuban analysts expect Cuba’s GDP to increase at least 3.5 percent this year, compared with 2.6 percent in 2003 and 1.1 percent in 2002.
They said Cuba’s foreign debt, excluding former communist countries, has increased from $11 billion in 2001 to between $13 billion and $14 billion due to borrowing, accumulated interest, and a weaker dollar.
Cuba reports its foreign debt in dollars, but two-thirds is held in yen, euros and other currencies.
The government has not reported on its current account or foreign debt since 2001.