Cuba creditors hopeful as storm season nears end

* Creditors hoping Cuba has unused cash reserve for storms

* Cuba said gradually opening up frozen bank accounts

* Still dragging feet on foreign debt payments, dividends

By Marc Frank

HAVANA, Nov 24 (BestGrowthStock) – With hurricane season almost
over and Cuba having passed its second year in a row without a
major storm, creditors are hoping the communist country will be
in better financial shape to pay its bills.

Diplomatic and business sources said this week the Cuban
government may have a cash reserve that it set aside in case of
hurricanes and could now use at least part of it to cut debt or
reopen frozen bank accounts.

“We had been building up reserves since 2009. Hurricanes
could have cost us billions this year,” a local economist said.

This year, despite an unusually active Atlantic hurricane
season, Cuba was struck only glancing blows by three storms
that did little damage.

The Atlantic hurricane season officially runs June through
November, and there are no late season storms in sight.

“President Raul Castro is a military man. I’m sure he has
been putting aside what he can and expecting the worst,” a
Western diplomat said.

“So perhaps now they are breathing a little easier and will
pay some of our companies what they owe them. At least the
situation will not get worse,” the diplomat said.

Cuba’s economy was battered when two devastating hurricanes
struck in 2008, causing what the government said was $10
billion in damage, and then the global financial crisis hit the
island hard.

Those events combined with poor planning and inefficiency
within the Cuban system left the country without enough cash to
pay its bills and few places to turn for help.

Cuba is under a strict U.S. trade embargo and excluded from
most international lending organizations that could help in a
pinch, while many creditors have tired of its repeated
rescheduling of debt.

UNPAID DEBTS, FROZEN BANK ACCOUNTS

Many debts to governments and business were restructured or
went unpaid, foreign company bank accounts frozen, dividends
owed joint venture partners postponed and imports drastically
reduced beginning in 2009.

Western diplomats and businessmen said Cuba was gradually
unblocking the funds, but at the same time still dragging its
feet on foreign debt payments and dividends owed its foreign
partners operating in the country.

Cuba last reported its foreign debt at $17.8 billion in
2007. Most analysts agree it is now well over $20 billion — or
close to 50 percent of the gross domestic product and some 25
percent more than annual export revenues.

Castro has pounded away at the need for Cuba to get its
economic house in order and pay its bills since taking over
from his brother Fidel Castro in 2008.

The country’s growing debt service payments are a key
reason for Castro’s push to overhaul Cuba’s Soviet-Style
economy, according to government insiders.

The reforms, to be discussed at a Communist Party congress
in April, include drastic budget cuts and layoffs and ending
most state subsidies.

They would also grant state-run companies more autonomy and
give an opening to small private businesses and foreign
investment, cooperatives and other “non-state” forms of running
enterprises.

“Work with the maximum rigor to increase the country’s
credibility in international economic relations through
strictly fulfilling contracted obligations,” a discussion
document for the congress states, while emphasizing the need to
increase exports and cut imports.

Castro has reportedly established a blue-ribbon commission
to figure out Cuba’s foreign debt troubles.

“Short, medium and long term debt should be reprogrammed as
quickly as possible,” and this time around “new payment
schedules met,” the congress document states.

For that, more than one diplomat said, the country should
start by returning to the negotiating table with the Paris Club
of creditor nations. Negotiations broken off in 2001.
(Editing by Jeff Franks and Mohammad Zargham)

Cuba creditors hopeful as storm season nears end