Daily Management Review

$270 Million Debt Could be Paid by Cuba in Rum


12/19/2016




$270 Million Debt Could be Paid by Cuba in Rum
Rum would be used by Cuba to pay off its Soviet-era debt.
 
Using rum and pharmaceuticals instead of money, a debt of $270 million is planned to be paid to the Czech Republic by the cash-strapped island nation.
 
The Czech finance ministry stressed that it would like at least part of the debt to be paid in cash and added that the negotiations over how the old debt will be paid are still in the "early stages".
 
"The Cuban side has offered a list of commodities, including medications and several brands of rum, to settle part of the debt," said ministry spokeswoman Katerina Vaidisova.
 
In 2015, $17 million worth of rum was imported by the Czech Republic. The supply of rum to the Chez republic would last for an estimated 15 years if Cuba's full debt were to be finally settled with the spirit.
 
Including the question of quantifying the debt, "part of which is still held in non-convertible currency", Ideas on solving the problem are still being presented, she explained.
 
But right now, exactly how much Cuba owes is still being worked out and calculated by the two parties, Vaidisova said. The sticking point is that most of the debt is counted in Soviet rubles and must be converted into an existing currency.
 
However what the Czech government would do with the rum is still not clear. Due to stringent European Union regulations, most pharmaceuticals cannot be used as payment.
 
There were no comments made from Cuban officials to the media reports.
 
During the Soviet era, commodities have been used as a mode of payment often by Communist countries. One notable example of this is the exchange of Cuban sugar for Russian oil on a regular basis. 
 
But during the Cold War, huge external debts were accumulated by Cuba. It defaulted on much of it in the 1980s.
 
Cuba still remains cut off from most international financing even though the U.S. reestablished formal diplomatic relations with the country last year. And after the country itself had withdrawn from the IMF and the World Bank in the 1960s, Cuba still remains excluded from the organizations.
 
Now, before being readmitted into the institutions, Cuba will have to settle its debts -- or at least reach an agreement on them.
 
Cuba owed its members more than $11 billion, the Paris Club, an informal group of rich creditor countries, said last year.
 
Announcements of waving off of some payments and restructuring portions of their Cuban debt were made by several members of the club, including the U.K., Australia, Canada and France, after an agreement was reached last year. Cuba agreed to pay them $2.6 billion over the next 18 years in exchange.
 
Russia has written off 90%, or $32 billion, of Cuba's debt.
 
Alongside the Cuban convertible peso (CUC) which is pegged 1:1 to the U.S. dollar and used by tourists and Cuban pesos (CUP), which are used by locals, are the two currencies that are in use in Cuba 

(Source:www.money.cnn.com) 






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