HAVANA,Feb. 11th (Reuters) Cuba failed to meet payments last year on its restructured debt to wealthy nations, putting a deal with the Paris Club of creditors in jeopardy, according to diplomats with direct knowledge of the issue. Under the 2015 debt restructuring accord, considered an important step toward Cuba’s reintegration into the international financial community, stiff penalties should kick in, they said.
The agreement with 14 countries working through the Paris Club of creditor nations was signed at a time when a brief detente with the United States was getting underway.
“The agreement is extremely beneficial for Cuba and that they could not pay speaks volumes about how broke they are,” said one diplomat with knowledge of the situation who, like three others consulted by Reuters, requested anonymity due to the sensitivity of the matter.
The diplomats said Cuban debt negotiator Ricardo Cabrisas, in Paris last month to meet with creditors, blamed new and unexpected U.S. sanctions for not making some of the payments.
The Cuban government did not respond to a request for comment. A Paris Club official declined to comment, saying it was not their policy to speak about individual cases.
The 2015 agreement, seen by Reuters, forgave $8.5 billion of $11.1 billion, representing debt Cuba defaulted on in 1986, plus charges. Repayment of the remaining debt in annual instalments was backloaded through 2033 and some of that money allocated to funds for investments in Cuba.
Under the agreement, interest was forgiven through 2020, and after that is just 1.5 pct of the total debt still due.
However, the agreement states if Cuba does not meet an annual payment schedule in full it will be charged 9 pct interest until payment, plus late interest for that portion in arrears.
Cuba owed an estimated $80 million last year, paying some countries in full, but not others, including the largest creditors Spain, France and Japan, the diplomats said.
France’s finance ministry declined to comment. Spain’s finance ministry did not respond to a request for comment.
Another diplomat said both sides were working to save the accord.
“It is too important for both parties,” he said, pointing out the deal included debt swaps that underpinned some European countries increased economic and political presence in Cuba.
“Everything is interrelated, and I assume those funds are now on hold,” he said.
Cuba began falling behind on payments to foreign suppliers in 2015 as support ebbed from ally Venezuela due to its own economic woes.
The administration of U.S. President Donald Trump has ripped up the detente and piled new sanctions on top of the decades-old embargo that are aimed at foreign investment and financing, oil supplies, tourism and other revenue sources.
The Caribbean island nation continues to be late paying traders and investors, and shortages of goods from fuel and personal hygiene products to food and medicines have plagued the country since last year.
Cuba last reported its foreign debt at $18.2 billion in 2016, and experts believe it has risen significantly since then. The country is not a member of the International Monetary Fund or the World Bank.
The Cuba group of the 19-member Paris Club is comprised of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Britain, Italy, Japan, the Netherlands, Spain, Sweden and Switzerland.