Cuba - risk assessment

Cuba: risk assessment

Sovereign risk Currency risk Banking

sector risk Political risk Economic structure risk Country risk

February 2014 CCC CCC CCC

CCC CCC

CCC



Kate Parker (lead analyst); Robert Wood (analyst).

Published 21 February 2014, 1530 GMT.



This sovereign rating is issued by The Economist Intelligence Unit

credit rating agency, registered in accordance with Regulation (EC) No

1060/2009 of 16 September 2009, on credit rating agencies, as amended,

and is issued pursuant to such regulation.



Sovereign risk



Even though the fiscal deficit is forecast to widen in 2014, it should

remain manageable assuming that support from Venezuela remains in place.

Official efforts to part-finance the deficit through bond issuance to

state banks will be supportive, although ultimately creditworthiness

will remain hampered by a poor payments record.



Currency risk



The process of aligning the two domestic currencies will accelerate over

the next 18 months. However, distortions created by the dual

exchange-rate system will continue to contribute to currency risk.



Banking sector risk



The Banco Central de Cuba (BCC, the Central Bank) is working to expand

the role of the banking system while ensuring that supervision remains

strict. However, the lack of available data adds significantly to risk.



Political risk



The main risks stem from uncertainty over the political succession from

the president, Raúl Castro, to a younger generation of leaders;

relations with the US; and the potential for a backlash against economic

reforms. A full normalisation of relations with the US is highly

unlikely in the forecast period.



Economic structure risk



The main structural risk is a rollback of subsidies from Venezuela as

economic woes and instability mount in that country. Other significant

weaknesses stem from domestic economic imbalances caused by the

dual-currency system and the state's centralised control of prices and

economic management."





http://country.eiu.com/article.aspx?articleid=1291547113&Country=Cuba&topic=Risk&subtopic=Credit+risk&subsubtopic=Overview