“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.
The $40 million payment was due October 31.
The Cuban government announced earlier this year that France will be involved in Cuba’s largest airport renovation.
That news surfaced weeks after the announcement of the opening of a French Development Agency office in Cuba for projects stemming from funds connected to Cuba’s debt settlement negotiations.
France is Cuba’s largest single creditor. Cuba’s bilateral creditors are different from the US claims issue that remains unresolved between the two countries.
Aeroports de Paris, the French government-owned firm that runs Charles de Gaulle, will receive a concession to operate Jose Marti that will include a renovation by the French firm, Bouygues.
Background on Cuba’s Debts
Cuba defaulted on all its debts in the 1980s and is estimated to have restructured about $50 billion in old debt in the past few years. The country’s pace of resolution is gathering steam under highly favorable repayment terms offered by its creditors.
A country’s debt is made up of official debts it has with other countries (bilateral) and commercial debts with banks and other private creditors. When a country defaults, creditors have traditionally organized themselves into two groups based on the type of debt. Official bilateral creditors, called “Paris Club” creditors, often organize themselves into a non-binding rescheduling framework. Each member negotiates the particulars bilaterally with the debtor in question, and the honor system compels the members to abide by the club’s terms. Commercial creditors often organize into a “London Club.”
Restructuring a country’s burdensome debt obligations (or “workouts”) is a common occurrence. As of 2012, worldwide sovereign debt restructurings have been a pervasive method of resolution, amounting to more than 600 cases in 95 countries. Of these, 186 debt exchanges were with private creditors while 447 agreements restructured bilateral debt with the Paris Club structure.
Cuba is no exception. Last year, the country concluded a favorable debt restructuring with most of its Paris Club creditors (representing 14 of its 19 bilateral creditors). France is the largest single creditor. The US was not part of the Paris Club creditors included in this negotiation.
In the Paris Club deal, creditors forgave $8.5 billion of Cuba’s $11.1 billion bilateral debt. The deal covers official debt defaulted on through 1986, plus interest, service charges and penalties. All the debts were denominated in euros and other currencies.
The Paris Club calculated Cuba’s total debt to its members at $11.1 billion, which is less than the previously reported $15 billion. Interest is forgiven through 2020, and after that interest is just 1.5% of the total debt still due.
Subsequent to the Paris Club deal, France expanded its arrangements with the remaining balance of its Cuban debt. Half of the outstanding arrears owed to France will be converted into a 212 million euro joint Cuba-French fund to finance projects in Cuba, cited above.
In 2014, Russia’s parliament ratified an agreement whereby Moscow wrote off 90% of Cuba’s $35.2 billion debt stemming from loans made by the Soviet Union. The agreement stipulates that Cuba must pay back $3.2 billion over a 10 year period in exchange for Russia forgiving the remaining $32 billion.
Earlier this year, visiting British foreign minister Philip Hammond reached an agreement on restructuring its Cuban debt. The agreement deals with Cuba’s mid and long-term debt with Britain, according to a Cuban government statement. Details were not disclosed, but a statement reads that the agreement, “should contribute to the development of economic, commercial and financial relations between the two nations.” This language suggests that Britain may convert its debt into developmental financing like France’s recent debt conversion.
Finally, in March 2016, reports indicated that Cuba’s commercial creditors (its London Club) have hired Rodrigo Olivares-Caminal, a professor at Queen Mary University of London, to help organize an effort to negotiate settlement terms for Cuba’s defaulted private sector claims. This typically does not happen unless the debtor country has given an indication of a willingness to talk.
