* Many foreign business bank accounts still frozen
* Payments to some joint venture partners behind schedule
* Cuba providing little data on key economic indicators
By Marc Frank
HAVANA, June 23 Many of Cuba's foreign business
partners still have money stuck in state-run banks and do not
know when they will get it, 18 months after the accounts were
frozen by the cash-strapped Cuban government.
The issue is one of several pressing financial problems
that are straining Cuba's business ties, in a climate darkened
by the government's unwillingness to disclose key information
about its economic condition.
Hit by the international financial crisis, U.S. scrutiny of
its finances, damaging hurricanes and chronic inefficiencies,
the Communist-run nation failed to make some debt payments on
schedule beginning in 2008, then froze up to $1 billion in the
accounts of 600 foreign suppliers by the start of 2009.
It also delayed payments to some joint venture partners and
did not honor some commercial paper that came due thereafter.
State-run banks have offered to pay back the frozen
accounts at 2 percent annual interest over five years, but
sources said progress has been slow.
"From what I can gather they have yet to make good on some
50 percent of the frozen funds," said a European commercial
attache, whose estimate was backed by other diplomats and
business sources, all of whom asked not to be identified.
The pay-back offer does not apply to Cuba's joint venture
partners and foreign companies administering hotels, each of
whom are said to be trying to work out their own arrangements
to recover funds.
"Everybody I know working on the ground here has around 10
months outstanding payments due, ranging from a million dollars
to $50 million," said the foreign administrator of a Cuban
Foreign joint ventures in Cuba range from nickel production
and rum and cigar distribution to beer, bottled water and
Cuba is not a member of the International Monetary Fund,
World Bank or other multilateral organization it could turn to
for support, but its problems are to some degree
self-inflicted, according to Pavel Vidal, a monetary specialist
at the University of Havana's Center for the Study of the Cuban
In a paper delivered last week at a conference hosted by
the Catholic Church, he said a lack of regulation and
transparency had led to Cuba printing more of the convertible
pesos it uses for international transactions than it had
reserves to back them.
"Cuban banks have been affected by an excess emission of
the convertible peso well above the amount of foreign exchange
available for the payments system to function as it should," he
The result was that "Cuban banks find themselves in a
systemic liquidity crisis, from which they still have not been
able to completely emerge," Vidal said.
Aware of the crisis, President Raul Castro replaced his
economic cabinet in early 2009 and declared the country could
not spend more than it earned.
In December, Economy Minister Marino Murillo told the
National Assembly the government had stopped the hemorrhaging
of foreign exchange and turned 2008's foreign exchange deficit
into a surplus by cutting imports 37.4 percent.
Foreign businessmen said the country appeared to be
reducing imports further this year and that most new business
was being paid more or less on time.
But they say they cannot get a complete picture of the
Cuban economy because the government keeps a tight lid on key
indicators such as the amount of its reserves, debt and the
current account of the inflow and outflow of foreign exchange.
The Central Bank used to send a yearly review of the
country's economy and finances to creditors, but the report
last came out in 2008, covering 2007.
Cuba blames Washington for its lack of transparency, saying
the U.S. scrutiny of Cuba's economic activity as part of
enforcement of its longstanding trade embargo leave it no
choice but to cover its tracks.
But foreign businesses say the secrecy gives Cuba the upper
hand in their dealings, and leaves them in the dark about how
much money the island has and where it will be spent.
While they think Cuba's finances are improving, they are
not optimistic that means money will be coming their way soon.
"We think they will have a surplus this year of anywhere
from $1.5 billion to $2 billion, but it will go to replenish
reserves and prepare for the next hurricane," said a foreigner
involved in financial services.
(Editing by Jeff Franks and Frances Kerry)