Global crisis, storms hit Cuba finances

Global crisis, storms hit Cuba finances
Wed Dec 17, 2008 10:47am EST
By Marc Frank

HAVANA, Dec 17 (Reuters) - Three hurricanes and the global financial
crisis have left Cuba strapped for cash, forcing the government to
juggle debt payments and seek new financing, diplomatic and business
sources say.

France is the latest government to receive notice from Cuba that it
needs to reschedule upcoming debt payments, European diplomats said.

"A few months ago, Cuba told Japan and Germany it could not meet debt
payments but those problems apparently have been worked out. Now France
has received the same news," a diplomat said. The information was
confirmed by French business sources.

Cuba, whose foreign debt rose by $1.1 billion to $16.5 billion in 2007,
recently rescheduled some debt with China.

The government did not immediately respond to a request seeking comment,
but Cuba's planning and economy minister, Jose Luis Rodriguez, recently
said the island, like all countries in the region, faces a difficult
year ahead due to the global financial crisis.

Various foreign businessmen, who like the diplomats asked that their
names not be used, said payments had slowed from Cuban state-run banks,
with cash transfers that usually took 48 hours now sometimes put off for
weeks.

"It appears they do not have the cash on hand so they delay and then pay
you and delay payment to someone else," one Western businessman said.

Despite the problems, few think Cuba is in such dire straits that it
will stop payments altogether because, as another businessman said,
"that would send a very negative signal."

TOUGH ENVIRONMENT

Cuba's economy has recovered in recent years after more than a decade of
crisis that followed the demise of its former benefactor, the Soviet Union.

But hurricanes Gustav, Ike and Paloma caused an estimated $10 billion in
damage this year, the equivalent to 20 percent of annual economic
output, and the country has suffered from a dramatic drop in nickel
prices, its main export.

The international financial crisis has tightened credit conditions for
the communist-run nation that faces a U.S. economic embargo and depends
heavily on imports.

Cuba is not a member of the International Monetary Fund or any other
multilateral lender and the rating on its debt by Moody's is Caa1, or
"speculative and poor."

The deepening recession in many countries and falling oil prices are
fueling concern among foreign businessmen in Cuba as 75 percent of
Cuba's foreign exchange comes from tourism and the export of services,
mainly to oil-rich Venezuela and to a lesser extent Angola and other
countries.

Times are tough, but Cuba has survived worse and has taken steps that
should help it through the global crisis, a local economist said.

"The situation is very difficult, but nothing like the crisis of the
1990s when the Soviets collapsed," he said.

"We have strategic partnerships with Venezuela and China to fall back
on, are part of regional integration efforts, and are mending fences
with the European Union and Russia."

An expected increase in visits and remittances from Cuban-Americans
under U.S. President-elect Barack Obama's administration could also
help, the economist said. (Additional reporting by Esteban Israel;
Editing by Kieran Murray and Jeff Franks)

http://www.reuters.com/article/companyNewsAndPR/idUSN1244996520081217?sp=true