South Florida Sun-Sentinel
August 7, 2003

Cuba probably won't repay all foreign debt, IADB says


MIAMI - Cuba's foreign debt has spiraled so high during its current economic crunch that creditors will probably have to forgive significant
portions during any post-democracy restructuring, an official from the Inter-American Development Bank said Thursday.

``I think there will be a forgiveness element,'' Dennis Flannery, executive vice president of the IADB said at a Cuban economic forum in
Miami. ``I think the terms of restructuring Cuba's debt will be highly concessional.''

The conference of the Association for the Study of the Cuban Economy addressed rebuilding Cuba after a transition to a market economy --
something none of the participants expect under the communist government of President Fidel Castro.

It painted a grim picture of the island's finances. Quoting from a State Department report, Flannery said Cuba's hard-currency foreign debt
reached a record $12.2 billion in late 2002.

The island has another $1 billion in commercial credits in arrears it is trying to renegotiate, owes Russia $20 billion, owes $6.3 billion on
certified claims by American citizens and inestimable amounts of similar claims for expropriated property from its own citizens, the report

``In the past couple of years they've pretty much spiraled out of control in terms of meeting these obligations,'' Flannery said.

Cuba's chronic delinquencies and mounting short-term debt have made it one of the world's riskiest borrowers -- credit analysts Dunn and
Bradstreet rates it behind only Angola, Congo, Sierra Leone, Zimbabwe and Iraq.


Most of the debt is in the form of export credits that allowed Cuba to buy food, fuel and other goods. Most exporters now insist Cuba pay in
cash, something it has little of. Its sugar harvest, once a major source of cash, has shrunk 40 percent since last year and tobacco exports also

The foreign debt breaks down to $3,000 per person, a ''catastrophic'' amount for a poor country, and comparable to Haiti's $151 per capita
foreign debt when viewed in relation to its overall economy, Flannery said.

``You have a bankrupt country,'' said Adolfo Franco, assistant administrator for the U.S. Agency for International Development.

If the trend continues a few more years, Cuba could require humanitarian donations of food to avert starvation, Flannery told reporters.

``They could at that stage wind up becoming a humanitarian case like some of the African countries,'' he said.

Humanitarian issues aside, the debt would still have to be settled in order for Cuba to borrow money for development post-Castro, Flannery and Franco said.

Some debt could be declared illegitimate. Cuba disputes Russia's claim to be owed $20 billion, maintaining the money was owed in rubles to the former Soviet

But the rest would have to be renegotiated, probably with lenders forgiving a large chunk, the panelists said.

``When you see what's ahead, it's going to be a considerable amount of work,'' Franco said.

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