Cuba says it cannot pay debt to Brazil – 09/14/2023 – World

The Cuban regime told Brazilian authorities that it expects “some type of flexibility” from the Lula (PT) government to be able to resume late payments on Havana’s US$538 million debt with Brasília.

An internal document from the Brazilian government, obtained by Sheet, cites as measures for this possible renegotiation a discount on the total arrears, the use of alternative currencies to the dollar or even making payments in Cuban commodities.

According to the official record, regime authorities recently told Brazilian representatives that Cuba does not have the means to pay its obligations at this time.

President Lula arrives in Cuba this Friday (15) for a meeting between the G77 (coalition of developing countries) and China. The PT member is also expected to have a bilateral meeting with the leader of the Cuban regime, Miguel Díaz-Canel, in yet another effort to thaw relations with Havana after the governments of Michel Temer (MDB) and, mainly, Jair Bolsonaro (PL).

The meeting carries the symbolism of the rapprochement of the two countries, which under PT administrations have always had close commercial and political relations. Lula was a friend of Fidel Castro (1926-2016) and avoids criticizing the authoritarian nature of the Cuban regime. In previous terms, he visited the island four times.

Although the Cuban debt is on the radar, discussions are still in a preliminary phase, and there is no expectation of an announcement regarding renegotiation or the definition of a payment schedule.

Lula must travel to the island accompanied by ministers Mauro Vieira (Foreign Affairs), Nísia Trindade (Health) and Luciana Santos (Science and Technology).

Last Monday (11), a virtual meeting took place with members of Brazilian Executive bodies and public banks to discuss Cuba’s debt with Brasília. The meeting served as preparation for dialogue on the topic between authorities from both countries.

One of the participants at the meeting mentioned that the topic was discussed recently, during an official visit to the island, with the Vice Prime Minister of Cuba, Ricardo Caçás Ruiz, and Roberto Verrier, director of ProCuba, an export and investment promotion agency .

“The country’s authorities have stated that they do not currently have the means to pay their obligations. The authorities have signaled that they expect some type of flexibility from the Brazilian government — for example, a haircut comparable to that received in the treatment of the Paris Club debt in 2015 and, given the scarcity of dollars, use of alternative currencies or Cuban commodity receivables—to allow the resumption of payments”, says the record of the preparatory meeting.

Haircut is a term used to reduce a value in financial negotiations. The Paris Club is an international body that has existed since the 1950s to renegotiate countries’ debts. The case cited in the document refers to when the entity discounted US$2.6 billion of Cuba’s debt with the group totaling US$11.1 billion — interest included. The document also mentions that representatives of the Paris Club are skeptical about the prospects for Havana to resume payments in the short term.

Regarding commodities, the main products currently exported by Cuba to Brazil are cigars, cigarillos and cigarettes that contain tobacco, in addition to rum.

Brazilian law says that renegotiations of Executive debts must be approved by the Federal Senate.

After the PT years, relations between Brazil and Cuba cooled down and practically reached a freezing point during the Bolsonaro administration. Havana did not recognize the impeachment of former president Dilma Rousseff (PT), and Temer removed the Brazilian ambassador from the island. Since then, diplomatic representation has been headed by a chargé d’affaires — a lower level of representation. Afterwards, Bolsonaro intensified attacks on the Caribbean country.

Lula government authorities claim that the Cubans stopped honoring their payments also due to the distance between the countries. The PT member has already used this argument in a recent interview. He defended that the country is “a good payer” and that it will honor its obligations. “Cuba will get it right. And everyone will get it right, because they are all good payers and have never owed Brazil,” he told Rádio Gaúcha, in June.

The Chief Executive also defended investments on the island, claiming that, despite the default, there are positive returns. “When we finance a project abroad, we are exporting engineering, exporting machines, and we are earning a lot of money, in addition to what we will receive.”

The delays began in mid-2016 and worsened from 2018 onwards. Despite attempts to resume payments, there was no success. For a Brazilian diplomatic official, speaking with reserve, the debt issue is central to rapprochement with Cuba.

Since June 2018, the Caribbean country has not paid its financing installments for Brazilian exports with BNDES (National Bank for Economic and Social Development), which meant that the Union had to cover the hole.

The report obtained by Sheet mentions that the overdue installments amount to approximately US$538 million (considering the exchange rate between the euro and the dollar), resulting from operations under the Proex financing — Export Financing Program — and financing covered by the SCE (Export Credit Insurance). ).

In addition to the amount of debt, Cuba must still pay US$520 million by 2038. This means that the total amount that Brazil could lose in negotiations with the island is close to US$1.1 billion.

Most of the resources loaned via BNDES were used to finance the Mariel Port project, which is located around 40 km from Havana.

Cuba alleges economic and financial difficulties. In addition to a harsh embargo since the Cold War, the island faces more commercial difficulties as it was placed back on the American list of countries sponsoring terrorism in 2021.

The decision was made by former president Donald Trump and maintained by Joe Biden. The act is the target of criticism by Brazilian diplomats, who allege that the island is suffocating. In their view, Cuba is prevented from developing.

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What is the G77?

It is the abbreviation for Group of 77, a name that refers to its creation in 1964, at the end of the first session of the United Nations Conference on Trade and Development (UNCTAD), in Geneva, when it had 77 founding members — today there are 134. The group aims to promote a new, less “unjust” international order. According to the UN Secretary-General, António Guterres, “the G77 is the voice of the Global South, the largest group of countries on the international scene”.

What are the countries in the group?

Expanded, the G77 now brings together 134 nations from Asia, Africa and Latin America. China participates as a guest. The complete list is on the group’s official website.

What are the objectives?

The G77 aims to provide countries of the Global South with the means to articulate and promote their collective economic interests and to increase the capacity for joint negotiation on all international economic issues within the framework of the United Nations system. In addition to promoting South-South cooperation for development.

How it works?

In the organization, a president, who acts as spokesperson, coordinates the group’s action at each summit. The presidency rotates on a regional basis (between Africa, Asia-Pacific and Latin America and the Caribbean) and lasts one year, similar to the G20. Currently, Cuba is the president of the G77.