PARIS (Reuters) - France agreed on Monday to convert half of Cuba's debt arrears to Paris into investment projects during a visit by Cuban President Raul Castro to the French capital to forge closer ties.
Though Cuban leaders have been to France before, Castro's is the first state visit and follows on from a visit by French President Francois Hollande last year to the island nation.
As relations between Washington and Havana warm, France has been eager to build closer financial and commercial ties with Cuba.
As chair of the Paris Club of creditor nations and Cuba's biggest creditor, the French government helped the Communist-run country secure a debt relief agreement in December.
France and other Paris Club creditors have agreed to forgive $8.5 billion of interest payments that is 30 years late on Havana's $11.9 billion in debt, including $4 billion in late payments owed to France.
"France is going further than what was agreed at the Paris Club level. We want to convert arrears that we have so that it is useful for investment," Hollande told journalists, flanked by Castro.
Half of the outstanding arrears owed to France will be converted into a 212 million euro joint Cuba-French fund to finance projects in the country.
"We welcome France's wish to actively take part in Cuba's economic and social development," Castro said, also thanking France for its traditional stance against the U.S. trade embargo against the country.
The Paris Club agreement lifted a major obstacle to investment in the cash-starved economy by clearing the way for export credit agencies from creditor countries to underwrite business with the country.
France could see exports to Cuba grow by $100 million dollars annually in the coming years as a foreign investment boom lifts growth to 5-6 percent over 2016-2020, French trade insurance company Euler Hermes estimates.
Among the French companies with important interests in Cuba, hotels operator Accor (PA:ACCP) is building hotels there and beverages group Pernod Ricard (PA:PERP) makes Havana Club rum through a joint venture with the Cuban government.
French shipping firm CMA-CGM also has agreed to set up a logistics centre in the new port of Mariel, a special trade zone Havana hopes will become a cargo traffic hub.