Financial Storm Over Havana

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The ruling of the UK High Court judges that the CRF I Limited Investment Fund has the right to claim a debt of more than 72 million euros from a loan contracted by the National Bank of Cuba[i] , opens a pandora’s box by making it possible for creditors to claim Cuban assets abroad given the reluctance of the Cuban regime to pay its debt. The bad news comes at the worst moment for the regime, which, drowned in its low production, lack of liquidity and the collapse of several of the most important sectors of its economy, sees how its survival margin is considerably reduced, in what seems to be a decisive phase in its definitive extinction process. The London court’s ruling is a loud and clear reminder that the island is a very high-risk investment destination.

What is certain is that the financial survival of the regime is surrounded by the impact of four major irresponsibilities incurred by the Cuban power elite:

1. The irresponsibility of insisting on an obsolete regime of governance;
2. The irresponsibility of not having taken advantage of the many previous occasions to normalize bilateral relations with the U.S. by addressing and resolving the conflict created by the arbitrary confiscation of U.S. properties whose equivalent value in current prices amounts to a little more than 9 billion dollars;
3. The government’s irresponsibility towards the payment of its financial obligations, including the interests on the foreign debt.
4. The irresponsibility of freezing the repatriation of profits to those who bet on Cuba more than 30 years ago and who today are victims of a blatant embezzlement . [i]

Foreign debt scares off investments in the island

One of the main problems the Cuban regime has in attracting foreign investment is the heavy burden of being famous as a bad payer. Today, the country’s foreign debt is financially suffocating the country by turning it into an extremely high-risk market for investment.

The unpaid dues to the Paris Club already exceed 200 million dollars[i] of a pact made in 2015, in which -in the heat of the expectations of changes in the island promoted by the Obama administration- they condoned to the Cuban regime 8,484 million dollars of 11,084 owed to that organization, leaving 2,600 million dollars to be paid in annual installments until 2033. 

The truth is that Cuba has lost all credibility and has missed exceptional opportunities to regain trust with creditors.

Figure 1. Graphical representation of the cancellation of Cuba’s debt by various creditors.

Today, the Cuban government has practically run out of credit lines; the clean slate generated by the thaw with the United States was not enough. The Cuban regime has returned to its bad practice of not paying. This is taking its toll in these critical moments when the country is facing a multi-systemic crisis. Not even its political allies are giving it credit. China and Russia have taken a strong financial distance from the Cuban regime knowing that they will never be compensated, they no longer lend, now they donate to try to avoid the collapse of the regime.

By the end of December 2020, Russia had suspended 50 investment projects on the island due to lack of payment[i] .

In the period 2015-2020 imports of Chinese products fell by a drastic 74.57%.  From 1.9 billion reported in 2015 they declined to 483 million in 2020[i] . This data shows how strained financial relations between Beijing and Havana have become, which today have even worsened. See Figure 2.

Figure 2. Imports of Chinese products to Cuba, 2015-2020.

An example of the escalating financial tension between Beijing and Havana is the lawsuit filed by ICBC Standard Bank PlC -one of China’s largest banks- against the Cuban government for$ 224.8 million dollars owed by Havana to one of its branches in the United Kingdom, to which it shall be added  another $ 1,200 million in interest for the accumulated delay in payments obligations that have never been made.[i]

CFR I’s victory in London allowing it to collect the claimed$ 70 million is a small fraction of the$ 1.5 billion in claims that CRF I has purchased over the years from on behalf of its investors, so the London Commercial Court verdict could eventually extend to those claims as well in the coming weeks.

Foreign investment in limbo

While this is happening, foreign investment in the island is essentially stagnant. Fewer and fewer sectors are attracting foreign investment. The country’s industrial structure is obsolete and decapitalized. Its sugar industry is practically destroyed, to the point that the country has become a sugar importer. Its energy infrastructure is amid a seemingly endless crisis. This has created an energy generation deficit that oscillates daily between 45 and 60% of the demand, which has partially paralyzed the rest of the economy and has plunged a population of around 10 million people into despair due to the long and continuous blackouts. The decapitalization of the country has accelerated in the last five years due to poor planning, mismanagement of financial resources, low production, declining exports and non-compliance with foreign debt payments, which has led the country to bankruptcy.

On the other hand, the Cuban economic model shows no serious signs of engaging in deep structural changes. The criminal organization that controls the country (GAESA) resists making them.  The main obstacle to overcome this multi-systemic crisis is the totalitarian internal blockade imposed by the Cuban regime on its own citizens, who cannot freely generate wealth. The system does not allow it, nor does it promote it. They are denied the right to have private enterprises that do not pass the filters of State authorization. They must be approved by several instances of government. Therefore, citizens do not have access to register and own a company freely, as can happen in any open free market society. The state is the one who decides who is allowed to have a company, in which sector and under which conditions.

Sanctions on the rise

To the recurring issue of foreign debt, we must add the effects generated by the strong U.S. sanctions against the Cuban government, which have resulted in millions of dollars in fines to several international banks for channeling transactions related to Cuban government companies. This has resulted in the postponement and even the abandonment of the few potential investors in the island who valued the risk of doing business there.

In the period 2004-2018 the fines imposed on 13 financial entities for making transactions with Cuban companies reached the figure of$ 14,002 million dollars. In those 14 years, the annual average of sanctions was a little more than US$1 billion. See Figure 3.

Figure 3. Fines imposed on banks for violating the embargo on Cuba, 2004-2018.

Conclusions

The Cuban regime has collapsed more because of its political clumsiness and economic incompetence than because of external sanctions or even the action of an organized opposition. The power elite has dug the pit in which it is now trapped. The country’s current crisis situation is deteriorating by the minute. The possibility of a patron coming to the rescue does not exist. The status quo is unsustainable.

A country with practically all its industries collapsed, without productive capacity, with practically no exports is like a patient in a terminal state with irreversible multi-organ failure. In such a situation there is no medical solution for the patient, there is no cure, his death is inevitable.  This is a metaphor that resembles the current situation presented by the Cuban regime.

The power elite and its government are not only surrounded by sanctions, the Helms Burton Act, its Title III, financial sanctions, and the consequences of being a bad payer. They are hemmed in -first and foremost- by their own incompetence, by their political clumsiness in resisting change, even though it knows that its model does not work.

The power elite owes and does not pay. It does not attract investments; it scares them away. And to make matters worse, it is now stealing with impunity from its most loyal partners. They are alienating their historical allies in the business world. They are beginning to understand that they will be in better condition on the island with a change of regime than helping to prolong the agony of the current one.

Just 90 miles from the U.S., the island is currently in the eye of a devastating financial, political and social hurricane that could become another element of international disruption – in addition to those that already exist in Europe, the Middle East and Asia. The apparent tense calm that has been experienced on the island in recent months could break at any moment.

The Obama Thaw was an ideal opportunity for a change of strategy on the part of the Cuban government. It could have recognized at that time that the uncompensated confiscations it had carried out violated international standards and Cuba’s own 1940 constitution. This would have made it possible to open a negotiation to convert the claims into investments and recapitalize the country. But here too, however, they preferred to prolong a conflict they could not win rather than seek a negotiated solution. Now, under the presidency of Donald Trump, they must face the result of their own irresponsibility. The first lawsuit against the Cuban state formulated after the activation of Title III has been successful and others are already pending review by the U.S. Supreme Court.

On that occasion, as on many others up to the present, it was the autocratic political regime that prevented a solution to this economic crossroads. The solution to get out of the current catastrophe is to replace the Cuban totalitarian regime in an integral, comprehensive manner.

Cuba is not an Asian country with a millenary autocratic culture. It is not China, or Vietnam, or even Singapore. Before 1959 its position was comparable and often superior -both in economic and social terms- to the rest of the Americas and even many European countries. This was not by chance but the sedimentation of a trajectory of development and early modernity that rested on a system characterized by an open society with the rule of law and free markets. Its proximity and historical relationship with the United States is not a problem but an exceptional geostrategic advantage.

Those who advocate economic reform without replacing the political system are promoting an illusion based on false premises

References

[i] TELEMUNDO 51. “Cuban Government faces financial litigation in British Royal Court”. September 2022. https://www.telemundo51.com/noticias/local/gobierno-cubano-enfrenta-litigio-financiero-en-la-corte-real-britanica/2344953/

[i] Frank, Marc. “Cuba’s imports from China slump 40% in 2020, extending long decline”. REUTERS. February 2021. https://mobile-reuters-com.cdn.ampproject.org/c/s/mobile.reuters.com/article/amp/idUSL1N2K919P

[i] Penton, Mario J. “Russia cancels a large part of its investments in Cuba due to default”. El Nuevo Herald. December 2020. https://www.elnuevoherald.com/noticias/america-latina/cuba-es/article247858365.html

[i] Reuters. “EXCLUSIVE Cuba, Paris Club reach deal to skip 2021 debt payment – diplomats”. October 2021. EXCLUSIVE Cuba, Paris Club reach deal to skip 2021 debt payment – diplomats | Reuters

[i] EFE. “Cuba blocks repatriation of foreign currency to foreign firms based in the country”. APRIL 2025. https://www.swissinfo.ch/spa/cuba-bloquea-la-repatriaci%C3%B3n-de-divisas-a-firmas-extranjeras-asentadas-en-el-pa%C3%ADs/89144341

[i] 14andMedia. “Cuban regime suffers resounding defeat in British court over CRF debt”. April 2025. https://www.14ymedio.com/economia/regimen-cubano-sufre-derrota-rotunda_1_1112835.html