2024-07-29 06:08:38
Cuba is banning entrepreneurs from opening U.S. bank accounts to keep dollars in the country as it battles its worst economic crisis since the collapse of the Soviet Union.
As of last week, all payments to foreign suppliers must go through local banks. It is the latest measure against companies that the communist regime believes are causing inflation (31% in 2023).
Shortages and depopulation
The move on the private sector is unlikely to solve food and fuel shortages that have fueled discontent among Cubans and sparked demonstrations against the government. The island’s population has fallen by 10% since 2021. Some have even joined the Russian army and fought in Ukraine, lured by big bonuses and Russian passports.
President Miguel Díaz-Canel has denied any “witch hunt” against the private sector. In a July 20 speech, he said too many small businesses simply import goods and sell them at a premium, “which meets the short-term needs of the people but does not contribute to the sustainable development of the country.”
Photo: ELIANA APONTE TOBAR, New York Times Archives
Brothers Ricardo and Oscar Fernandez founded Deshidratados Habana in 2022 to produce and export dehydrated foods. Since 2021, more than 11,000 small businesses have opened in Cuba.
The ban comes a month after the Biden administration opened the U.S. banking system to Cubans. Oneil Diaz, CEO of Auge, a business consulting firm with more than 300 clients, said it has hit entrepreneurs on the island hard. Unable to obtain hard currency in the local market, many use accounts Offshore Do business.
“The regulations have not been announced yet and we don’t know their scope, but we have seen people restricting imports, especially food,” he said.
Aldo Alvarez, founder of Cuban food import, distribution and production company Mercatoria, said entrepreneurs are nervous: “Some think the state wants to shut us down, others think the government simply wants more control in a context of widespread tax evasion,” explained Mr. Alvarez, who is also a member of the U.S.-Cuba Research Group. “The economic situation is extremely difficult and the legal framework is constantly changing. »
Photo: ELIANA APONTE TOBAR, New York Times Archives
Workers carve wood in the workshop of Dforja Creaciones, a small private furniture company in Havana on February 10, 2024.
The ban on U.S. bank accounts is part of a broader effort to conserve dollars. Prime Minister Manuel Marrero announced on July 18 that hotels and other tourist destinations would accept foreign currency.
The Trump factor
The political uncertainty brought about by Donald Trump’s possible return to the White House – combined with an economic recession – does not bode well for the Cuban government.
Michael Bustamante, a history professor at the University of Miami, said he probably wanted to “raise as much money as possible before things got really bad.”
Cuba experienced a brief period of growth and optimism when Barack Obama normalized U.S.-Cuba relations in 2015. But it fell back into despair after Donald Trump’s election in 2016 and the imposition of crippling sanctions. Then COVID-19 devastated the tourism industry – a mainstay of the economy – depriving the government of foreign exchange.
Photo credit: RAMON ESPINOSA, File: AP
The epidemic has dealt a heavy blow to Cuba’s tourism industry.
Faced with discontent and protests, the Cuban government authorized the creation of small businesses in 2021. Since then, more than 11,000 small and medium-sized enterprises have been created, but hundreds have been closed by the state for violating regulations.
Mark Entwistle, Canada’s former ambassador to Cuba and a fellow at the University of Toronto’s Munk School of Global Affairs and Public Policy, said the recent restrictions don’t change the fact that the government needs new businesses to keep the economy going.
“The private sector will remain in Cuba, supported primarily by the government,” he said in an email. Of course, the devil is in the details. »
This article was published by Bloomberg.
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