Cuba says Turkey and other allies pledge to end economic crisis

Reuters/Evgenia Novozhenina

China, Russia, Algeria and Turkey have pledged to restructure Cuba’s debt, provide new trade and investment financing, and help ease an energy crisis, Cuban president Miguel Diaz-Canel told state-run media following a rare trip abroad last week.

The Communist-run country has yet to recover from a precipitous drop in output during the coronavirus pandemic and is plagued by a litany of problems ranging from power blackouts to shortages of food, medicine and fuel.

Cuba’s debt with business partners and suppliers has ballooned, leading some to refuse to do business with Cuba unless it is in cash, according to foreign business and diplomatic sources with knowledge of recent transactions.

Cuba’s current foreign debt is considered a state secret. Prior to the pandemic, in 2019, the Caribbean island nation reported its foreign debt at $19.6 billion.

Diaz-Canel last week visited Russia, China, Algeria and Turkey in an attempt to drum up financial support from key foreign allies.

“We agreed to restructure the debt we had with those countries, which leaves us with payment facilities to move forward,” Diaz-Canel said on state-run TV.

No details on the debt restructuring were provided by Cuba or the four countries.

Pavel Vidal, a former Cuban central bank economist now based in Colombia, was skeptical the new deals would be a silver bullet, citing in particular Cuba’s reluctance to follow through with promised market-oriented reforms.

“Diaz-Canel’s international tour tried to unblock financial and commercial flows based on political agreements and blaming everything on US sanctions and the pandemic,” Vidal said.

“Confidence will continue to be limited by the mistrust that committing international resources naturally generates in an economy that shows no signs of being well managed and with dubious future prospects.”

Cuba ranks among relatively few nations globally that is not a member of a major multilateral lending organisation like the International Monetary Fund or World Bank, where many countries are seeking post-pandemic relief.

It has made some changes recently – such as legalising small and medium sized private businesses and granting greater autonomy for state companies.

But a reluctance to embrace more ambitious market reforms spooks potential lenders, analysts said.

Critical to emerging from the crisis is eliminating blackouts and increasing fuel supplies.

Diaz-Canel said on Sunday that Algeria and Russia had agreed to provide some regular oil supplies on top of the reduced amounts arriving from ally Venezuela, but gave no figures.

He said he had landed deals to fix decrepit power plants and finance the development of wind and solar energy.

Jorge Pinon of the University of Texas at Austin Energy Institute said the deals did not change the big picture.

“There is no short-term solution to Cuba’s electric power sector challenges; the system is old, tired and broken. The problems are structural which requires two things that Cuba does not have: time and money,” he said.