Cuba begins to pay debts to Western creditors, beats deadline

October 27, 2016 2:14 PM EDT

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By Marc Frank

HAVANA (Reuters) - Cuba has paid ahead of schedule the first installment of a renegotiated $2.6 billion debt to 14 wealthy governments, according to diplomats from a number of the countries, as the Communist-run island seeks to overcome its chronic payment history.

Cuba reached a deal in December with members of Paris Club of creditor nations that forgave $8.5 billion of $11.1 billion official debt it had defaulted on through 1986, plus charges. Repayment of the remaining debt was structured over 18 years, and the first payment of about $40 million was due by Oct. 31.

The deal was seen as a step toward Cuba rejoining the international financial community in the context of detente with the United States and future competition from U.S. businesses.

"The Cuban government has paid the first installment, and done so early," France's ambassador to Cuba, Jean-Marie Bruno, said on late on Wednesday.

"This is a very important signal that Cuba intends to honor its commitments and a key first step in gaining access to the multilateral lenders," a foreign banker with years of experience in Cuba said on Thursday on condition of anonymity.

Cuba is not a member of any multilateral lending institution such as the International Monetary Fund.

Under the December agreement, the 14 nations had a year to sign bilateral restructuring deals which could include the establishment of local accounts where a percentage of money owed would be deposited for local joint development projects.

"The government of each participating creditor country or its appropriate institutions may sell or exchange in the framework of debt swap" a large proportion of remaining debt, according to the agreement seen by Reuters.

The four largest creditors, France, Spain, Japan and Italy, have all signed agreements, as have Australia, Austria, Belgium, Denmark, Great Britain, the Netherlands, Sweden, Switzerland and Finland. Canada has yet to sign.

During Japanese Prime Minister Shinzo Abe's visit to Cuba in September, the countries agreed that of the roughly $592 million owed Japan, $350 million would be paid directly to the government and another $242 million deposited in Cuba for use in development projects.

Spain, France, Italy, the Netherlands and perhaps others have signed similar deals, with total sums to be invested in Cuba, including Japan, topping $750 million of the $2.6 billion owed.

Payments, due annually by Oct. 31, gradually increase from 1.6 percent of the $2.6 billion owed to 8.9 percent in 2033.

(Reporting by Marc Frank; Editing by Richard Chang)



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