Moody’s cuts Cuba credit rating

Posted on Monday, 04.28.14



Moody's cuts Cuba credit rating

BY JUAN O. TAMAYO

JTAMAYO@ELNUEVOHERALD.COM



The Moody's credit rating firm has dropped Cuba's low ranking even

further, saying that the island is vulnerable to an "elevated risk" of

an economic collapse in Venezuela as well as "abrupt and disorderly"

changes at home.



Although Cuban ruler Raúl Castro "recently indicated that his current

term will be his last and, at the same time, appointed a first vice

president … there is considerable uncertainty around the future state of

Cuba's political economy," the firm said.



Those factors create the risk of "an abrupt and disorderly political

transition" in Cuba, Moody's said in a report last week on how the

turmoil in Venezuela could affect its cheap oil exports to member

nations of the Petrocaribe program.



"Cuba relies heavily upon Venezuela for oil, which is imported with

favorable financing terms through Petrocaribe," the credit rating firm

said. It put the value of Venezuelan oil sent to the island in 2012 at

more than $6 billion.



"Given Venezuela's increasingly unsustainable macroeconomic imbalances

and elevated risk of an economic and financial collapse, the future of

this arrangement is uncertain, rendering Cuba vulnerable to a sharp

adjustment in the cost of energy imports." Moody's said.



Cuba pays for the Venezuelan crude by sending an estimated 40,000

medical professionals, teachers, sports coaches and other "advisers" to

work in Venezuela, although details of the arrangement remain largely

unknown.



Cuba's credit rating has been traditionally poor under the communist

government. Moody's dropped its rating last week from Caa1 to Caa2,

described as part of the category known as "highly speculative" and

"exotic."



Castro, 82, has been pushing reforms to move the island's economy away

from its centrally controlled and inefficient Soviet model and toward a

system that allows more room for small-scale private enterprise.



Venezuela, whose overall subsidy to Cuba is estimated at more than $6

billion, has been mired in weeks of violent street protests against

President Nicolás Maduro that have left more than 40 dead and 600

injured. Moody's dropped its Venezuela rating in December to Caa1.



The firm said Cuba, Nicaragua and Jamaica would be the most vulnerable

if Venezuela is forced to cut back its cheap oil exports under the

Petrocaribe program, while the Bahamas and Honduras would be the least

affected.



The other Petrocaribe members are Antigua and Barbuda, Belize, Dominica,

Grenada, Guyana, Haiti, Dominican Republic, St. Kitts and Nevis, St.

Vincent and Grenadines, St. Lucia and Suriname.



Source: Moody's cuts Cuba credit rating - Cuba - MiamiHerald.com -

http://www.miamiherald.com/2014/04/28/4085697/moodys-cuts-cuba-credit-rating.html