Cuban Entrepreneurs Opine About US Measures That Benefit the Private Sector

The guidelines allow Cubans to open, maintain and remotely use bank accounts in the United States

There are more than 11,000 small and medium-sized businesses in Cuba, mostly private, authorized since September 2021 / IPS

14ymedio bigger14ymedio, Luis Brizuela/IPS, Havana, 15 June 2024 — Cuban entrepreneurs are cautious when evaluating the practical applications and sustainability of the new measures of the United States Government to favor the private sector on the Island, especially in the face of a possible change of administration in the neighboring country and the persistent bilateral dispute.

“I believe that all the measures that contribute to the development of commerce from entrepreneurship will always be welcome, but we need to materialize them,” says Suselmis Martín, general director and founder of the small private company SMG Branding, focused since 2019 on the creation, development and positioning of Cuban brands.

Martín highlighted the opportunity for Cuban entrepreneurs without a tourism or business visa to travel to the United States to open and use accounts remotely. “It is a facility both for the export of services and those of my company, or for colleagues and businesses to import equipment and raw materials from a very close market, with better prices and faster delivery times. But it is often difficult to pay” due to the provisions of the embargo, she claims.

Engineer Pavel Sánchez, general administrator of the medium-sized private company Ecomadeira Cubana, agreed that import and export activities “are made complex for us, especially in relation to financial movement to and from Cuba. Finding solutions to this situation is an everyday headache.”

Engineer Pavel Sánchez agreed that import and export activities “become complex for us”

Sánchez also emphasized that Washington’s measures “change some rules of the game, and although we would like a greater scope, it opens other channels for commercial operations. That is where we could benefit if, ultimately, they are implemented.”

Located in the municipality of Fomento, in the province of Sancti Spíritus, Ecomadeira Cubana has stood out since 2014 for the production of plastic or eco-wood, the result of the processing of different types of polymers with which boards, columns, rafters and beams suitable for different constructions are made.

Although the measures were announced two years ago, on May 28 the United States Department of Treasury’s Office of Foreign Assets Control (OFAC) authorized the access of independent Cuban entrepreneurs to internet services, applications and e-commerce platforms, along with channels for electronic payments and commercial activities with the US.

The guidelines allow independent Cuban private sector entrepreneurs to open, maintain and remotely use bank accounts in the United States. They also authorize services with operations on the Internet such as social media platforms, video conferencing and those that operate in the cloud. Likewise, they restore the authorization – suspended in September 2019 – for “U-turn” transactions, which are transfers of funds that originate outside the United States and also end outside the United States, in which neither the source nor the beneficiary are subject to the jurisdiction of that country.

According to the provisions, some officials and members of the Communist Party of Cuba (PCC), included on Washington’s regulatory lists, are excluded from the benefits.

In addition to considering them “limited” and seeking to “put the private sector in a situation of advantage,” a statement from the Cuban Ministry of Foreign Affairs stressed that the decisions “do not touch the fundamental issue of the blockade* against Cuba or the additional sanctions that make up the policy of maximum pressure” towards the Island. However, the Cuban Government indicated that “it will study these measures, and if they do not violate national legislation and if they create an opening that benefits the Cuban population, even if it is for only one segment, we will not hinder their application.”

For economist Omar Everleny Pérez Villanueva, “it is always complex to interpret any flexibility measure” from the United States towards Cuba “because the blockade is maintained, with a very complex legal framework, and the Island remains on the list of countries that sponsor terrorism.”

For the Cuban Government, such a designation, established in January 2021, seeks to justify the approval of sanctions. In addition to financial prohibitions and penalties for people and banks that carry out certain commercial exchanges with those included on the list, the risk for commercial operations increases.

For the Cuban Government, such a designation, established in January 2021, seeks to justify the approval of sanctions

Pérez Villanueva pointed out that the new measures come less than six months before the presidential elections in the United States. “In order for Cuban businessmen to open bank accounts, many legal aspects would have to be modified that may have to be changed if a new administration takes over. I doubt that they will materialize now – perhaps after the elections, depending on the party that wins,” the expert said.

The decisions of the White House are “a first step of many that must be taken,” says civil engineer Yulieta Hernández, president of the private medium-sized company Pilares Construcciones, specialized since 2021 in the construction, maintenance, repair, rehabilitation and remodeling of buildings.

Hernández told IPS that many Cuban entrepreneurs “do not have access to business visas that allow them to look for opportunities in the United States. It is something that these measures do not contemplate.” She also wonders “how many banks will allow the opening of accounts for Cuban entrepreneurs in the face of the perception of high risk for carrying out financial operations with the Island.

“There is a distinct probability that the commissions will be very high. In current conditions for the private sector in Cuba, this can have a negative impact, and the measure will not be used to the fullest,” the businesswoman argued.

The growth of the private sector in Cuba, a country of 11 million inhabitants with a centrally planned economy, has experienced advances, setbacks and criticism of its management from various ideological spectrums. Some have a grudge against the sector by considering it an instrument of groups in the United States to dismantle the political system on the Island and advance a process of the restoration of capitalism.

Others point to the import activity developed by some companies and the sale of final products without added value. There are even those that argue that their authorization serves to create private companies through “frontmen” as a “cover” for the Government to import products, circumvent the embargo and obtain foreign currency.

The creation of micro, small and medium-sized enterprises (MSMEs) is limited to non-strategic sectors. They are economic actors legitimized in the governing documents of the PCC and in the Constitution, as part of the socialist model of development. Their activity is considered complementary to that of the socialist state enterprise, classified as the driving force of the internal economy.

There are more than 11,000 enterprises, mostly private, authorized since September 2021 in an environment marked by COVID-19, the shortage of food and essential supplies, and the failed monetary system that accentuated the partial dollarization of the economy and caused a skyrocketing inflation .

The authorities have affirmed that the MSMEs act on equal terms with the rest of the recognized economic actors and that there will be no setbacks or obstacles to the opening of the non-state sector. However, many economists stress the absence of wholesale markets to supply the private sector, the lack of real incentives to export, the payment of high taxes on sales and profits, and the elimination of a tax exemption in the first year. In addition, unlike state entities, the private companies are not subsidized in case of losses.

The realization of an official foreign exchange market where mipymes acquire foreign currencies sufficiently and without irregularities remains unresolved

The realization of an official foreign exchange market where MSMEs acquire foreign currencies sufficiently and without irregularities, in order to carry out foreign trade activities through intermediary state companies, remains unresolved.

Official statistics indicate that the non-state sector on the Island represents 15% of Cuba’s gross domestic product (GDP) and accounts for 35% of the country’s employment. As for foreign trade activities, in 2023 these realized imports of more than $1 billion, but exports did not exceed $200 million, equivalent to 20% of the total exported.

“Not only does the United States Government have to respond affirmatively to banking institutions. We also have to see how Cuba expresses itself in the day-to-day of commercial operations and takes advantage of this small gap in the blockade to implement measures that benefit the Cuban business community,” said Pérez Villanueva.

In the economist’s opinion, “it’s not just about saying that Washington’s measures benefit a part of the private sector. The Cuban Government can also relax the Gordian knot it has on state companies to favor it.”

*Translator’s note: There is, in fact, no US ‘blockade’ on Cuba, but this continues to be the term the Cuban government prefers to apply to the ongoing US embargo. During the Cuban Missile Crisis the US ordered a Naval blockade (which it called a ‘quarantine’) on Cuba in 1962, between 22 October and 20 November of that year. The blockade was lifted when Russia agreed to remove its nuclear missiles from the Island. The embargo had been imposed earlier in February of the same year, and although modified from time to time, is still in force.

Translated by Regina Anavy


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