MEXICO RESTRUCTURES CUBAN DEBT, SRE ESPINOSA TO

C O N F I D E N T I A L MEXICO 000676 SIPDIS SIPDIS WHA/MEX FOR ELIZABETH WOLFSON PASS TO WHA/CCA E.O. 12958: DECL: 03/04/2018 TAGS: ETRD ETTC PREL CU MX SUBJECT: MEXICO RESTRUCTURES CUBAN DEBT, SRE ESPINOSA TO VISIT CUBA REF: MEXICO 6005 Classified By: DEPUTY CHIEF OF MISSION LESLIE BASSETT FOR REASONS 1.4(b ) AND (d) ¶1. (C) Summary. On February 18, 2008, Mexico Bancomext announced that an agreement had been reached to refinance the USD 400 million in debt owed by Cuba. President Calderon had previous stated that restructuring the debt was important to strengthening ties between the two countries. Foreign Secretary Patricia Espinosa will be visiting the island on SIPDIS March 13-14. Mexican officials expect trade to increase, but only gradually, as Mexican exports still view the island with trepidation. End Summary. ¶2. (SBU) Officials at the Mexican Trade and Export Bank (Bancomext) recently announced that an agreement had been reached to restructure the USD 400 million dollars in debt owed by the state-owned Bano Nacional de Cuba (BNC). The money was originally provided for export promotion. The BNC stopped making repayments in 2002 which led to the closure of Bancomext's offices in Cuba and an increase in already present tension in the relationship between then president's Fidel Castro and Vicente Fox. At its worst point, President Fox expelled the Cuban representative and recalled the Mexican ambassador from Havana. In May 2006, also during the Fox Administration, the Mexican government used Italian courts to recover $35 million in defaulted debt from a Cuban escrow account held in Italy. At that time the Mexican government expressed a willingness to use other third country court systems to recover additional portions of the debt. ¶3. (C) Lic, Ricardo Dominguez Guadarrama, Head of the SRE Department covering Cuba, Haiti, and Dominican Republic confirmed that Espinosa will be visiting the island on March 13-14. He said that there are no current plans for a visit by President Calderon but did not rule out a future visit. A possible reciprocal visit between the Mexican and Cuban Foreign Affairs Secretaries had been discussed during their meeting on the peripheries of the UN General Assembly, but was only recently solidified. ¶4. (C) Bruno Ferrari, director of export and investment promotion agency, ProMexico, told Econoffs that, despite the agreement reached between BancoMext and BNC, he did not expect a rapid influx in export or investment to Cuba. He said that, in addition to the breakdown in official relations, Mexican companies had also experienced problems in their relations with their Cuban counterparts and that there exists a level of distrust between both sides that will slow any new growth. He also said that the lack of development in the country also contributes to Mexican companies' trepidation at sending pesos there. ¶5. (C) Comment: President Calderon, has sought to strengthen ties between the two nations. As reported in reftel, Calderon has said that he would seek a more constructive and less confrontational relationship with Cuba than prevailed under the Fox administration, a sentiment echoed by Foreign Secretary Espinosa. The debt resettlement package was step SIPDIS one towards improving bilateral relations. However, until Mexican companies feel that the country is a good investment, a large increase in trade should not be expected. End Comment. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / GARZA