Cuba Is Mired in a Debt Debacle Once Again


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Good article. 

Nothing too new but a nice revision of where they are. 

Before too many of us throw stones.....try googling up our own countries debt obligations :D

As Castro Reign Ends, Cuba Is Mired in a Debt Debacle Once Again

By 

A private taxi driver wears a protective face mask while driving tourists around Havana.

 

For a brief moment, Cuba appeared poised to return to international capital markets. It was late in the Obama era, months after the historic U.S.-Cuba rapprochement. And Raul Castro vowed to clear the debt the country had defaulted on decades earlier, a first step toward re-entering the world of global finance and securing the funding needed to revive a moribund economy.

 
 

Six years after it restored diplomatic relations with the U.S., Cuba’s efforts at making peace with creditors have been derailed, and the island is as isolated as ever. The market for its old commercial loans is all but dead, and when they do trade it’s for just 10 cents on the dollar. That’s down about 70% from when optimism peaked in 2016.

CONTINUED

 

 

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19 minutes ago, El Presidente said:

Before too many of us throw stones.....try googling up our own countries debt obligations :D

Amen! Seems lots of places view debt as an asset. Go figure. 🤷‍♀️

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Such a difference between Cuba and a reserve currency country - Cuba has to slog it out in a brutal market, arguably selling the island in the process, which leads to... another revolution?

Reserve countries--US, China, Japan, Brits--have a whole different deal. Not sure, but is AUS considered a reserve currency in that part of the world?

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Just now, leebert said:

Not sure, but is AUS considered a reserve currency in that part of the world?

The Pacific Peso (AUD)  is the sixth most commonly held reserve currency – estimated to account for 1.8% of global reserves by value.

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Good article sum up :

“Both sides know that the Cubans can’t pay anything,” said John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, a New York-based researcher focused on the countries’ relationship.
 

 

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1 hour ago, El Presidente said:

The Pacific Peso (AUD)  is the sixth most commonly held reserve currency – estimated to account for 1.8% of global reserves by value.

But the Euro covers 40+ countries.....so it’s not REALLY 6th 😂

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Just spitballing...

So, some of these numbers are totally arb and could use a revision from people who know what they're talking about 😉 , but, if you assume:

  • Cuba produces 260M cigars per year (pulled from Google - cited Halfwheel)
  • ~25 cigars per box (not sure this is right, ties to 3 - ideally someone knows the contribution per cigar so we can skip the whole box thing)
  • $50 cash contribution per box (pulled out of my ass - help, please - Rob?)
  • 13 year term (~Paris Group current term, though, there's a bunch of qualifiers, I'm sure)
  • ~6% discount rate (SWAGED - Paris Group default rate is 9%, and current haircut puts them ~1.5%, so pick a number... any public debt guys on this board?)
  • AND (this is the big one because it will never happen) you give all Tobacco production over to a private entity who can run it the way they want, so one could squeeze through productivity improvements, pricing, yields, etc a 10% contribution improvement per year...

A rational person would pay ~10B to have all Cuban tobacco production (actual number was $9.3B).

Given the prestige of Habanos production, and that some investors would pay insane premiums to have a "piece of the leaf" (look at Pebble Beach pricing - "piece of the rock" multiples going on there IMO), I could see this value doubling. So, given Cuba is ~$20B in the hole (extrapolated from article Rob linked to), I could see a group taking over the sovereign debt in exchange for full tobacco ownership

heh, you guys can stop laughing now...

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2 hours ago, leebert said:

Such a difference between Cuba and a reserve currency country - Cuba has to slog it out in a brutal market, arguably selling the island in the process, which leads to... another revolution?

Reserve countries--US, China, Japan, Brits--have a whole different deal. Not sure, but is AUS considered a reserve currency in that part of the world?

Repeated defaults might also play a role in Cuba's situation. 

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