Cuba faces OAS hurdle

23/03/2010 | Lucien Chauvin

Multilateral institutions could only lend to Cuba if political issues such as acceptance of the Organization of American States (OAS) membership rules were addressed, policymakers said in Cancun this weekend

Multilateral institutions could only lend to Cuba if political issues such as acceptance of the Organization of American States (OAS) membership rules were addressed, policymakers said in Cancún this weekend.

The OAS agreed at its 2009 assembly to readmit Cuba as a member, reversing a 1962 decision to suspend it on the grounds that its political system was undemocratic – but Havana declined to reapply.

Canada’s minister of state for foreign affairs Peter Kent told Emerging Markets in Cancún that his country would like to see Cuba return to the inter-American system. But this depends on Cuba “embracing the democratic principles and practices that are included in the inter-American democratic charter” of the OAS, he added.

The Cuban authorities acknowledge that things are tough, he said, “but they still feel that they can go it alone.” Tough is an understatement for the Cuban economy. The government claims that GDP grew in 2009 by 1.4%, a number revised down from the original 6%, but analysts believe the number is inflated. The government admits that capital spending dropped in 25%, after an even steeper decline the previous year.

Panama’s deputy finance minister Dulcidio de la Guardia told Emerging Markets his country would support Cuba if it were to make the move to participate fully in the OAS or the IDB.

“Panama has a good relationship with the Cuban government and supports the Cuban government when we can. We have good commercial relations with Cuba and would like to see it advance,” he said.

Such sentiments of goodwill, nevertheless, would likely require endosement by the US if Cuba’s relations with the IDB and other lenders were to become normalized. This is distant prospect, despite moves in the US Congress to normal relations.

US Ambassador Craig Kelly, number two in the State Department for the western hemisphere and the point man on Cuba, told Emerging Markets that any move would be contingent on meeting institutional criteria.

“In terms of [Cuban] integration in the IFIs, institutions have to look at – you saw what happened in San Pedro do Sul [OAS’s decision to readmit Cuba] last year.

“The OAS lifted the ban that made clear that this discussion had to take place within the context of the principles and practices of the OAS, which include of course democracy and human rights.” Institutions “have their principles and procedures and so forth and they need to follow them,” he said.

Another issue that could become a stumbling block is Cuba’s lack of credit history.

H. Scott Fairley, an attorney with Canada’s Theall Group, representing clients owed money by Cuba, said: “The issue for an international institution would be the country’s reputation as a reliable borrower. The experience in the private sector is that Cuba is not a good customer.”

He said that Cuba has “the unenviable position of owing a lot of money to a lot of people and a lot of corporations. It has been able to dodge the bullet so far with sovereign debt, but the problem is huge.”

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