HAVANA — Cuba’s long-term trading partners are using debt forgiveness, swaps and new financing to try to win investment opportunities on the island before U.S. companies turn up following its detente with Washington.
France, Italy, Japan, Spain and Russia are among the countries seeking to convince Cuba to sign contracts with their companies for projects to update the Communist-led nation’s creaking infrastructure, in return for writing off debt.
In December, Cuba struck a general accord with the Paris Club of wealthy nations to forgive $8.5 billion of $11.1 billion in defaulted debt and it has since reached follow-up bilateral deals with most members.
Spain and France have pledged more than $700 million in outstanding Cuban debt for development projects on the island and Italy and Japan are expected to follow suit this month, their companies in line for any new business.
France, which is Cuba’s largest creditor in the Paris Club, agreed in February to drop more than $225 million of outstanding debt in a swap arrangement.
In return, Cuba opened an account in which the same amount will be deposited and used to finance investments that both countries agree on.
“If there is a proposed project, for example a joint venture, the Cubans can finance their part more quickly with this money in their account. It is an incentive to speed up decision making,” said a European diplomat with knowledge of the negotiations.
Cuba says it needs foreign investment to perk up its anemic economy but it remains cautious when it comes to finalizing new ventures. To date, no projects have been announced linked to any of the finance agreements.
A French diplomat said the debt his government swapped would be used for major development projects, including transportation and construction.
It was not clear what those projects might be, but Cuba is looking for investment in waterworks, rails, ports, renewable energy and new tourism resorts.
Belgium last week became the ninth of the 14 nations to sign a bilateral debt deal. Debt swaps are promoted under the general accord, despite being a financial tool that Cuba rejected in the past.
Paris Club members Australia, Austria, Great Britain, the Netherlands, Switzerland and Finland have also signed bilateral deals, although the accords, including Belgium’s, have not been made public and do not necessarily include swaps.
The broader Paris Club agreement, which was seen by Reuters, states “the government of each participating creditor country or its appropriate institutions may sell or exchange in the framework of debt swap” a large proportion of remaining debt.
Under the swap arrangement, Cuba must open an account and deposit the amount agreed upon “for allocation to projects which will be defined bilaterally.”
In addition to forgiving debt, the French diplomat said the Paris Club deal “wiped the slate clean”, allowing creditors to treat Cuba like any other poor to mid-level country and once more offer mid-term to long-term financing.
He said the French Development Agency would open an office this year in Havana and could offer credits unrelated to the debt swaps, joining forces on development projects with other parties, for example the European Union.
Cuba was economically isolated and suffered badly when the Soviet Union collapsed in 1991 and the United States tightened its economic blockade, making it harder for other nations to trade with the island.
President Raúl Castro is determined not to repeat the mistake of relying too heavily on one ally. He has restored relations with the United States, which Cuba hopes will eventually lift a half-century-old economic embargo.
With strategic ally Venezuela in crisis and Cuba hit by lower export earnings in 2015 due to falling commodity prices, improved relations with the United States and the European Union, have eased pressure on the cash-strapped Caribbean island.
Foreign Trade and Investment Minister Rodrigo Malmierca told a gathering of Spanish businessmen in Havana last month that restored diplomatic relations with the United States did not mean Cuba was turning its back on other partners.
“We will not return to dependence on a single market in the future,” he said, while encouraging them to invest before they have to compete for deals with U.S. companies.
Spanish businesses invested heavily in Cuban tourism in the “special period” of the 1990s when Soviet subsidies vanished.
Russia forgave some $30 billion in old Soviet debt in 2014, pledging to invest the remaining $3.5 billion in Cuba, and a Russian diplomat said a May visit by First Vice President Miguel Díaz-Canel to Russia was focused on future projects.
Díaz-Canel is expected to replace President Raúl Castro in 2018.
“The Cubans are tough negotiators and they are very cautious, but I think we will have some good news soon,” the Russian diplomat said.
Díaz-Canel also went to Tokyo last week in a visit that was expected to include discussions on debt, investment, financing and trade. On Wednesday, Mitsubishi Corp opened an office in Havana.