Friday, February 10, 2017

Did the regime pay its creditors 5.29 billion?

Did the regime pay its creditors 5.29 billion?
ROBERTO ÁLVAREZ QUIÑONES | Los Ángeles | 10 de Febrero de 2017 - 14:56 CET.

The anxiety affecting the dictator and military higher-ups in charge of
Cuba is palpable, eager to dispel their bad international reputation for
non-payment, as they yearn to attract unwary foreign investors and
receive loans so that they can line their pockets as soon as possible,
as they see time running out on them.

This can be inferred when, according to former Economy Minister José
Luis Rodríguez, in 2016 the Government paid over 5.29 billion dollars to
its foreign creditors. However, many doubts and questions remain in the
air that, of course, will never be answered, given the regime's secrecy.

To begin with, it is astonishing that the Government was able to pay its
creditors that kind of money, a huge sum given the size and very poor
performance of the Cuban economy, which had its worst year in a long
time, to the point that, for the first time in decades, it actually
admitted that the Gross Domestic Product (GDP) had decreased.

This payment was, apparently, made in the context of plummeting
subsidies from Venezuela and Brazil, and the low prices for Cuba's few
exportable assets, while nearly 40% of the country's land remains
unharvested, idle and overrun by marabou. Its industrial sector,
meanwhile, is burdened by a lack of raw materials and the inexorable
deterioration of the economy as a whole. Without cash for imports, the
chronic economic crisis worsened dramatically.

No less shocking is that this good news for the financial image of the
regime was not publicly announced by a high-ranking Government official,
but by a former minister who is now writing the same kind of boring,
nonsensical, rigidly socialist articles he drafted when in the 80s he
was the deputy director of the World Economy Research Center (CIEM),
where he is now an advisor.

The fact that it was Rodríguez who gave the figure to CubaDebate (which
debates nothing) raises doubts, as he was the minister (1995-2009) to
which Castro assigned the task of skewing, more than anyone, the
official economic statistics and figures.

It suffices to recall that in December 2006 Rodríguez claimed, without
blushing, that Cuba's GDP that year had grown by 12.5%, the highest
increase recorded in the recent history of Latin America, and the
highest in the world that year, outperforming even China, whose GDP grew
by 10.7%. Of course, shortly thereafter leading economists on and off
the Island in 2006 concluded that Cuba's GDP had actually risen 3.2%, a
third of that officially announced.

Where did they get so much money?

In any case, such a large sum of payments to creditors does not seem
credible, and we must take into account here the Castroist practice of
falsifying statistics for political purposes.

This culture of statistical manipulation was introduced by Ernesto "Che"
Guevara in the early 1960s. As the fledgling president of the National
Bank he was incensed to learn that Cuba's GDP in 1959 had grown by only
1%, so he ordered that it be calculated in another way, so as to inflate
it and project a "good image" of the Revolution.

The questions in this case are: where did so much money to pay creditors
come from? To what extent did the dictatorship further impoverish the
people in order to pay? Was there some behind-the-scenes benefactor who
gave that money? Or is Castroism just lying again?

The only good news would be a Disney-like fantasy: that Houdini suddenly
reappeared and turned the CUC into a genuine freely convertible
currency. Any other answer entails a maneuver exacerbating poverty and
hunger in Cuba. Or the Government is lying.

32 years ago, in 1985, Fidel Castro established himself as a
standard-bearer for Third World countries' refusal to pay their debts.
He organized international conferences in Havana as he promised not to
pay a penny more to creditors, because it was they who had a "huge moral
and financial debt" for their 400 years of "colonial and neocolonial

In July of 1986 Cuba stopped payments: no principal, no interest. But
the regime instantly became an international pariah with which no one
wanted to do business. And it didn´t have a "friend" in the
international community willing to back it up.

It is normal for developing countries to post trade deficits and
negative international payment balances, as they need to import
technology, capital goods, raw materials, and equipment. For this they
receive loans, which they pay back through economic growth. However, in
a centrally planned economy technological and capital resources are not
taken advantage of, as there is waste, theft at factories, and very low
labor productivity. The economy does not grow, loans are not paid back,
and suppliers stop selling and lending money. That's just the way it is.

Cuban debts increased due to unpaid interest. From an original debt of
some 6 billion dollars with the Club de París (in 1986), according to
AFP, by the end of 2014 it had risen to 15 billion. In March of 2015 the
head of this group, Bruno Bezard, travelled to Havana. There were
negotiations and other creditors did the same.

The elite want to get rich, and now

Creditors, convinced they were no longer going to collect anything,
decided to cut their losses: Japan wrote off 80% of Cuba's debt just to
collect at least 20%; Mexico forgave 70%; and other countries followed
their leads. Russia went further and forgave 90% of the 35 billion
dollars that Cuba owed the former Soviet Union, debt that Moscow had
already given up on recovering.

In exchange for these debt cancellations, Havana promised to gradually
pay back the unforgiven balances, with the corresponding interest. The
ruling caste must follow through on these commitments if it wants to
receive any loans in the future.

Several conclusions are possible from all this, all of them speculative,
because there is no way to verify anything when it comes to Castro's
financial authorities. First, it is likely that the figure cited of over
5.29 billion was inflated, and that the amount paid was much lower.

If that amount was really disbursed it is because the commanders,
generals and leaders of the Communist Party (PCC), the owners of the
country, are truly desperate for loans and investments. They know that
they do not have much time left to get rich, as the Castro regime is
faltering, in every way.

And those officers might be asked: Do you truly believe that you are
going to secure the 2.5 billion a year you want in investments and loans
without dismantling Cuba's structure of Stalinist, anti-capitalist
legislation? Please…

But, apparently, they believe they will, so they probably sacrificed
imports of food, medicines, consumer goods, etc., thereby aggravating
the misery of the Cuban people.

It could also be that Colombia's FARC drug traffickers, grateful for
Castro's role in the peace agreement, favorable for the guerrillas, and
in response to pressure by Caracas, spurred them to "lend" General
Castro a good portion of those billions of dollars, to pay his creditors.

Source: Did the regime pay its creditors 5.29 billion? | Diario de Cuba

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