Cuba

Cuba paid more than $5 billion in foreign debt last year but the economy is still dragging

In This file photo Ruben Font carries a scaffold piece to his home in Havana, Cuba.
In This file photo Ruben Font carries a scaffold piece to his home in Havana, Cuba. AP

The Cuban government reportedly paid $5.2 billion in 2016 to meet its commitments after an extensive restructuring of its foreign debt in the midst of an ongoing economic crisis not likely to improve this year.

Despite growth in tourism — with a 15 percent increase in revenues for the first half of 2016 that amounted to some $1.2 billion — the Cuban economy will remain in the red this year, dragged down by foreign debt obligations and the economic crisis in Venezuela, which provides significant oil subsidies to the island nation.

While the Cuban government and the Economic Commission for Latin America and the Caribbean, which uses the same official figures, predicted that the Gross Domestic Product (GDP) will grow by two percent this year, economist Pavel Vidal predicts a decrease of between -1.4 and -0.3 percent, according to the latest report by the Cuba Standard Economic Trend Index (CSETI).

The economic reforms undertaken by Cuban leader Raúl Castro “had promised a GDP growth of 5.1%, which was then adjusted to 4.4%. But the true average growth from 2008 to 2016 was barely 2.3%,” the report states. “The ending couldn't have been any more discouraging, with a recession in 2016 (-0.9%), and very uncertain projections for 2017 in terms of a rapid reemergence from the crisis and of what could happen with the Trump administration.”

Vidal, a professor at the Javeriana University in Colombia and a former official at the Cuban Central Bank, is the creator of the CSETI, an index to measure the Cuban economy — published quarterly by Cuba Standard — that correctly predicted the economic contraction in 2016.

Vidal estimates that the Cuban government missed a payment of nearly 800 million dollars to providers and short-term debt contracts last year. However, the government did pay the annual amount agreed after the restructuring of its external debt with several members of the Paris Club, according to former Cuban Minister of Economy, José Luis Rodríguez.

“...to attract important volumes of foreign investment and new credits in more favorable conditions, it was planned to pay around 5,299 million of dollars ($5.2 billion) last year, a figure that according to the information provided in the ANPP (National Assembly of People's Power) was fulfilled, although a share of the short-term trade credits could not be paid,” Rodríguez said in an article posted on the Cuban website Cubadebate.

Castro assured the Assembly at the end of last year that there would be a “strict fulfillment of the obligations incurred as a result of the rearrangement of the Cuban external debt,” without providing figures. He added that it was not possible to “overcome the temporary situation that we are going through in the delay of payments to providers.”

The reported foreign debt payment would have far exceeded revenue from tourism last year, which Cuban economist Carmelo Mesa Lago estimates at nearly $3 billion, as the official numbers have not yet been released. The government provides no official figures of remittances from Cubans abroad to relatives on the island, another important source of revenue that could amount to another $3 billion, according to the Havana Consulting Group.

But oil supply from Venezuela significantly decreased to 55,000 barrels per day in 2016, as reported by Rodríguez — from 120,000 during the best of times. Cuba has also lost around $1.3 billion in revenue from exports of medical and other services to Venezuela, according to projections made by island-based economist Omar Everleny Pérez.

“Whether Cuba overcomes its economic and financial crisis or whether it deepens will depend, more than anything, on whatever happens with the Venezuela agreements,” the CSETI report concludes.

“The eternal problem of Cuba is that it is a parasitic country, first parasite of the Soviet Union and then Venezuela,” Mesa Lago said. “After 58 years of government, they have failed to develop an economic structure that is capable of producing enough to import and develop,” he added.

Nora Gámez Torres: @ngameztorres

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