Cubans have a favorite saying: escoba nueva siempre barre bien – a new broom always sweeps well. Now a year old, the broom that swept in the first diplomatic relations between the US and Communist Cuba shows signs of fraying.
Last July, the US-Cuban clean break from the past was dramatic. Almost immediately after Presidents Barack Obama and Raul Castro reached agreement to reopen ties, embassies shut for five decades in Washington and Havana sprang to life. Business deals were sealed: Carnival Corp. in Miami sailed its 700-passenger Adonia cruise liner into the port of Havana, heralding the revival of transport connections including 110 scheduled flights a day between the US and Cuba; Starwood Hotels embarked on three developments on the island; and Nespresso committed to sell Cuban coffee in its US stores.
Musicians and artists followed – from shows and movies made in Havana being broadcast by Colorado-based TV company DISH, to the Mano a Mano Cuban gay men’s choir touring America.
But for most of the 11 million islanders, change has been achingly slow. Hundreds of political dissidents continue to be arrested every month. Shortages of the basics – food, electricity – are worsening, partly as a result of the political and economic chaos enveloping the country’s closest ally and benefactor: Venezuela.
For financial markets too, the impact from diplomatic change has been negligible. Cuba is still as ostracized as ever from international investors because of remaining sanctions, along with the sizable obstacle that the government is in default on billions of dollars of debt left unpaid for decades.
On this front at least, progress is on the horizon. Cuba hammered out a deal with the Paris Club of sovereign creditors late last year, agreeing to pay $2.6 billion of arrears in return for debt relief totaling $4 billion.
The deal was endorsed by President Castro himself. “I reiterate the willingness of the Cuban government to honor the commitments resulting from this and other agreements achieved during the rescheduling of our debt with other states and their private sector,” said the brother of the revolutionary leader, Fidel, in a speech last December.
It was the cue for a small core of investors holding loans to Cuba to take action. Money managers collectively owning $1.2 billion of debt – including Adelante Asset Management, CRF Ltd. and Stancroft Trust – appointed an expert on sovereign debt: Professor Rodrigo Olivares-Caminal.
Now, three months on, how much progress has the Argentine made in negotiating a deal for private creditors with the Castro government? Is the broom that swept in diplomatic change still working?
Professor Olivares-Caminal is our special guest on this week’s Emerging Opportunities radio show. Listen to the podcast: