According to a report by Reuters, Cuba is near a deal with 15 rich creditor nations of the Paris Club to restructure $16 billion in debt stemming from a 1986 default, with creditors expected to forgive most of the amount owed, diplomats close to the talks said.
The parties will meet in Paris later this week and, after two years of informal discussions, are close to a multilateral deal, the diplomats said.
“Cuba has agreed to pay the principal of around $5 billion owed since its 1986 default in exchange for forgiving $11 billion in service charges, interest and penalties,” said one diplomat from a major creditor nation. “Negotiations are now more about how much time they need to pay it and how much of the money will be reinvested in Cuba.”
Resolving Cuba’s external sovereign debt recently gained renewed enthusiasm with a meeting of the last “Paris Club” creditor nations – the first time since negotiations collapsed in 2000. Paris Club President Bruno Bezard estimated Cuba’s sovereign debt to be $15-16 billion, with France being the largest of the 17 sovereign nation creditors. A deal would likely reduce Cuba’s overall indebtedness and allow Cuba to potentially re-enter the international debt markets. However, without resolution of US sanctions, Cuba’s perceived credit standing and marketability would suffer.
Ex-Cuban central bank official Pavel Vidal, who is now a professor at Universidad Javeriana Cali in Colombia, estimates Cuba’s total foreign debt to be between $25-30 billion. Of this amount, approximately $15 billion represents sovereign debt presently under negotiation with the Paris Club.
In April, Cuba’s commercial creditors formed a “London Club” to negotiate Cuba’s debt held by the private sector. As a result, there has been a revival of Cuba’s publicly traded debt among private investors. According to Nicholas Berry, chairman of Stancroft Trust, Cuba’s debt has recently been trading at 25 cents on the dollar, having risen substantially in the last year.
In another important development, Cuba and the U.S. will meet on Tuesday in Havana to begin negotiations on settling decades-old outstanding property claims for the thousands of American citizens and companies whose assets were confiscated after Cuba’s revolution. These talks are bilateral and separate from the Paris Club.