Foreign suppliers in Cuba fret over payments crisis
Tue Sep 29, 2009 12:20pm EDT
* Many foreign business accounts remain blocked in Cuba
* Businessmen complain government offers no explanations
* Cash squeeze after global downturn, hurricane cleanup
By Marc Frank
HAVANA, Sept 29 (Reuters) - Many foreign suppliers and investors in Cuba are still unable to repatriate hundreds of millions of dollars from local accounts almost a year after Cuban authorities blocked them because of the financial crisis, foreign diplomats and businessmen said.
The businessmen, who asked not to be identified, said they were increasingly frustrated because the Communist authorities refused to offer explanations or solutions for the situation, which stems from a cash crunch in the Cuban economy triggered by the global downturn and heavy hurricane damage last year.
"I have repeatedly e-mailed, visited the offices and sent my representative to the offices of a company I did business with for years and which owes me money, and they simply refuse to talk to me," a Canadian businessman told Reuters.
Delegations from foreign banks and investor funds holding commercial paper from Cuban state banks have repeatedly traveled to Cuba this year seeking answers from the central bank or other authorities -- without success -- the sources said.
Representatives of some companies with investments or joint ventures on the island said they were bracing for the possibility of not being able to repatriate year-end dividends paid to their accounts in Cuba.
The sources said the lack of official information had resulted in many rumors, including one that the government may seek to close accounts at a discount or is preparing a three-year payment plan.
The Cuban government, after running up a huge trade deficit in 2008, has cut imports by at least 30 percent this year, but was still expected to purchase more than $10 billion in goods and services abroad. Most of the business is reportedly taking place offshore as Cuba's partners seek to avoid local banks.
Some 90 percent of the country's economic activity is in state hands. Cuba has a dual monetary system under which a foreign exchange equivalent called the convertible peso (CUC) circulates along with the domestic Cuban peso.
Foreign businesses must operate within the country using the CUC, pegged at 1.08 to the U.S. dollar and 24 times the domestic peso's value, depositing them in state banks, where they are available as foreign exchange for transfer or withdrawal.
Since last year, the country has been faced with scarcer credit as the global crisis increasingly hit home and has been burdened with the cost of cleaning up after three hurricanes last year. As a result, the state banks began informing foreign businesses their funds were simply not available for the time being.
SUPPLY PROBLEMS GROWING
Foreign economic attaches and commercial representatives in Cuba said most of their nationals doing business with the Caribbean island still faced payment problems.
"Suppliers to the military and its companies, public health and a few other areas are having the fewest problems being paid," one Western diplomat said.
"Those involved with tourism, foreign exchange stores and spare parts and machinery for industry are negotiating partial payments in exchange for more supplies, but the little guy, for example with supplies on consignment, has simply been abandoned," he said.
In July, the central bank issued what it called instruction No. 3, which allowed the transfer or payment of foreign exchange from the frozen accounts with the approval of a government ministry, effectively removing the responsibility of the state banks.
While renewed access to accounts was welcomed by businessmen in Cuba, even if it was only partial, the sources said it was offered with the proviso that they continue to do business and with the payment due date for new goods and services provided extended from 360 days to up to 720 days.
They said the government and state-owned firms appeared to be reaching out because of mounting supply problems in the country as foreign traders and companies balked at doing new business unless accounts were unblocked.
"Despite our firm desire to honor every obligation, we have been forced to renegotiate debts, payments and other commitments with foreign entities, something quite common these days all over the world," President Raul Castro told the National Assembly last month.
"As a rule, we have found understanding and confidence in our partners, to whom we now reaffirm our recognition and the security that we will meet the agreements reached," he said.
Raul Castro, who took over the Cuban presidency from his older brother Fidel Castro last year on health grounds, has announced a series of austerity measures in recent months and said the country must learn to live within its means.
(Editing by Pascal Fletcher and Jeffrey Benkoe)
Foreign suppliers in Cuba fret over payments crisis | Markets | Bonds News | Reuters (29 September 2009)
http://www.reuters.com/article/bondsNews/idUSN2913589420090929?sp=true
Tue Sep 29, 2009 12:20pm EDT
* Many foreign business accounts remain blocked in Cuba
* Businessmen complain government offers no explanations
* Cash squeeze after global downturn, hurricane cleanup
By Marc Frank
HAVANA, Sept 29 (Reuters) - Many foreign suppliers and investors in Cuba are still unable to repatriate hundreds of millions of dollars from local accounts almost a year after Cuban authorities blocked them because of the financial crisis, foreign diplomats and businessmen said.
The businessmen, who asked not to be identified, said they were increasingly frustrated because the Communist authorities refused to offer explanations or solutions for the situation, which stems from a cash crunch in the Cuban economy triggered by the global downturn and heavy hurricane damage last year.
"I have repeatedly e-mailed, visited the offices and sent my representative to the offices of a company I did business with for years and which owes me money, and they simply refuse to talk to me," a Canadian businessman told Reuters.
Delegations from foreign banks and investor funds holding commercial paper from Cuban state banks have repeatedly traveled to Cuba this year seeking answers from the central bank or other authorities -- without success -- the sources said.
Representatives of some companies with investments or joint ventures on the island said they were bracing for the possibility of not being able to repatriate year-end dividends paid to their accounts in Cuba.
The sources said the lack of official information had resulted in many rumors, including one that the government may seek to close accounts at a discount or is preparing a three-year payment plan.
The Cuban government, after running up a huge trade deficit in 2008, has cut imports by at least 30 percent this year, but was still expected to purchase more than $10 billion in goods and services abroad. Most of the business is reportedly taking place offshore as Cuba's partners seek to avoid local banks.
Some 90 percent of the country's economic activity is in state hands. Cuba has a dual monetary system under which a foreign exchange equivalent called the convertible peso (CUC) circulates along with the domestic Cuban peso.
Foreign businesses must operate within the country using the CUC, pegged at 1.08 to the U.S. dollar and 24 times the domestic peso's value, depositing them in state banks, where they are available as foreign exchange for transfer or withdrawal.
Since last year, the country has been faced with scarcer credit as the global crisis increasingly hit home and has been burdened with the cost of cleaning up after three hurricanes last year. As a result, the state banks began informing foreign businesses their funds were simply not available for the time being.
SUPPLY PROBLEMS GROWING
Foreign economic attaches and commercial representatives in Cuba said most of their nationals doing business with the Caribbean island still faced payment problems.
"Suppliers to the military and its companies, public health and a few other areas are having the fewest problems being paid," one Western diplomat said.
"Those involved with tourism, foreign exchange stores and spare parts and machinery for industry are negotiating partial payments in exchange for more supplies, but the little guy, for example with supplies on consignment, has simply been abandoned," he said.
In July, the central bank issued what it called instruction No. 3, which allowed the transfer or payment of foreign exchange from the frozen accounts with the approval of a government ministry, effectively removing the responsibility of the state banks.
While renewed access to accounts was welcomed by businessmen in Cuba, even if it was only partial, the sources said it was offered with the proviso that they continue to do business and with the payment due date for new goods and services provided extended from 360 days to up to 720 days.
They said the government and state-owned firms appeared to be reaching out because of mounting supply problems in the country as foreign traders and companies balked at doing new business unless accounts were unblocked.
"Despite our firm desire to honor every obligation, we have been forced to renegotiate debts, payments and other commitments with foreign entities, something quite common these days all over the world," President Raul Castro told the National Assembly last month.
"As a rule, we have found understanding and confidence in our partners, to whom we now reaffirm our recognition and the security that we will meet the agreements reached," he said.
Raul Castro, who took over the Cuban presidency from his older brother Fidel Castro last year on health grounds, has announced a series of austerity measures in recent months and said the country must learn to live within its means.
(Editing by Pascal Fletcher and Jeffrey Benkoe)
Foreign suppliers in Cuba fret over payments crisis | Markets | Bonds News | Reuters (29 September 2009)
http://www.reuters.com/article/bondsNews/idUSN2913589420090929?sp=true
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