Lunes, 23 de Octubre de 2017
02:21 CEST.
Economics

Did the regime pay its creditors 5.29 billion?

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 exploitation."

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.

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