Why the FTC might block Cuba from paying $1.2B to Staples

If Staples, Inc. gets its way, not only will it purchase Office Depot, Inc. against the current wishes of the Federal Trade Commission, but it will also gain the rights to a five-decade old $1.2 billion reparations claim against the Cuban government. The two stories are unrelated, but feature an unlikely series of events for the world’s largest office retailers.

More than 7,000 claims have been filed by U.S. citizens and corporations against the Cuban government for assets that were seized in 1959 by Fidel Castro during the Cuban Revolution, according to a report released this week by the Brookings Institute. The claims total $1.91 billion and swell to $8.31 billion after 56 years' worth of 6% simple interest is included.

Claim sizes range from $1 to $268 million ($1.17 billion with interest). The largest claim is staked by the now-defunct Cuban Electric Company, which is owned by Office Depot. In an unrelated action, the FTC sued Staples on Monday over its planned purchase of Office Depot.

Other companies with claims include Exxon, Chevron, Coca-Cola, Colgate-Palmolive, Foot Locker, JPMorgan Chase, IBM, General Electric, Procter & Gamble, General Motors, and Sherwin-Williams.

Collection on any settlement reached between the U.S. and Cuba may prove difficult, however, as the Cuban government still lacks the funds to provide for basic services. According to Brookings, a cash settlement for claims is unlikely. However, Cuba may opt to pay claims in kind through issuance of government debt or by granting future access to the island nation’s resources.

Despite reforms initiated by Cuba over the last three years that have nominally liberalized the economy, the government still imposes strict capital controls and maintains a currency that is illiquid on the international markets.