Currently, U.S. sanctions prohibit persons and corporations subject to U.S. jurisdiction from such Cuba-related transactions.
But some U.S. hedge funds are now bringing out their best lawyers and lobbyists to persuade the Treasury Department (OFAC) to allow them to do so.
In the CNBC article, I was correctly quoted as expressing opposition:
"Mauricio Claver-Carone, Executive Director of Cuba Democracy Advocates and the U.S. Cuba Democracy PAC, said Cuban American members of Congress do not want to allow hedge funds to buy defaulted Cuban debt, because they fear it will give ammunition to the US agricultural community which wants to extend credit to Cuba.
Currently under U.S. law, the agricultural community is exempt from the embargo when selling foodstuff to Cuba, however, the Cuban government must pay cash up front. The agricultural community has long lobbied for that to change.
'It would send a horrible policy message,' Claver-Carone said."
However, the following was misconstrued:
"Additionally, Claver-Carone said, Cuban-American legislators’ first priority, in the event of normalized relations, will be compensation for the seized property of Cuban exiles now living in the United States.
Supporting hedge funds’ purchases of the defaulted debt might risk their standing with constituents who see the funds as competing with the future funds available for compensation."
Thus, allow me to clarify the position I stated:
Fist and foremost, it would be up to a future and freely-elected sovereign government of Cuba to decide how to handle the debt issue, which has been tragically compounded by the Castro regime during these last 50 years.
From a U.S. perspective, the claims by all U.S. nationals (not just Cuban exiles) of property illegally confiscated by the Castro regime should not be subordinate to the irresponsible debts of this dictatorship, which some hedge funds now want to speculate and profit from.
Finally, while it is true that owning such debt would not currently fund the Castro regime, the argument by hedge funds that it would actually "give the the U.S. a seat at some future negotiating table" is misleading.
The U.S. will already have a seat at such a table, as it holds the key to Cuba's access to international developments banks. According to U.S. law, the U.S. must oppose Cuba's access to these institutions until a free and democratically elected government is chosen by its people. We've all seen how corrupt dictatorships misuse and misappropriate such funds.
Moreover, if the primary interest of these hedge funds was to expedite the goal of a free and democratic Cuba, then perhaps. But hedge funds have a legal obligation to their investors to create value and profit. Thus, these hedge funds are more likely want to see the Castro regime enrich itself, with the hopes that it would pay these debts off.
As Caruso-Cabrera writes in a follow-up article today:
"Owners of this debt are optimistic that if President Obama is reelected, he will loosen up restrictions on trade with Cuba, as he would no longer need to worry about reelection."
And their worst nightmare would be what all Cubans should hope for:
That the international community write-down this debt to help a future free and democratic Cuba reconstruct itself from the five-decade totalitarian nightmare it has been subjected to.
