Manuel Marrero’s announcements have generated both pessimism and uncertainty, the last thing the private business sector wants
14ymedio, Madrid, 29 July 2024 — Fear has quickly spread among the island’s small business owners who, just a few months ago, were looking forward to a modest thaw in relations between Cuba and the United States. Prime Minister Manuel Marrero’s July 17 announcement of the government’s intention to “collect excess currency in circulation, advance the partial dollarization of the economy and banking, and increase tax and fiscal collection” generated not only pessimism but also the last thing the private sector wants: uncertainty.
“We are facing an incredibly difficult economy, with a legal framework that is constantly changing,” said Aldo Álvarez, founder of Mercatoria, in an interview with Bloomberg Linea a few days ago. His business is involved in the importation, distribution and production of food — specifically wheat, chicken and cooking oil — on the island. Last November, Álvarez was part of a delegation of Cuban business owners living on the island who attended an event in Miami sponsored by Cuban-Americans to promote Cuba’s private sector.
The new regulation could help mitigate the problems of inflation and make it easier to import products that our population so urgently needs”
Among the most talked-about initiatives at the meeting was the possibility that Cuban business owners could open accounts in U.S. banks, a measure that was approved by the Biden administration in May. Although there were still doubts about how the decision would be implemented without violating the embargo, the news encouraged not only the owners of small and medium-sized companies (SMSEs), but also some opposition groups such as D Frente. “The new regulation could help mitigate the problems of inflation and make it easier to import products that our population so urgently needs,” the platform noted, adding that it might also unravel some bottlenecks in production.
The package of measures announced by Marrero in the National Assembly states that all funds and payments from “non-state forms of management” — the government’s preferred euphemism for the private sector — will be collected from accounts in Cuban banks.
The measure “strikes at the heart of the island’s business community,” says Oniel Diaz from the consulting firm Auge, which has more than 300 clients in Cuba. He explains that Cuban businesses need foreign accounts in order to make payments abroad because they have no legal access to foreign currency on the island. Their only option is the black market, where the price of the dollar is skyrocketing despite having experienced a notable decline since hitting its peak in May and early June, when it it traded at 400 pesos.
Though both the dollar and the euro seemed to be in free fall on the informal exchange market throughout July, both appear to have stabilized. On Monday the European currency was at 340 pesos, while the dollar was at 330.
“The regulations have not yet been issued. No one knows how they will work but we are already seeing how people are cutting back on imports, especially of food,” Díaz told Bloomberg Línea.
The measure “strikes at the heart of the island’s business community,” says Oniel Diaz from the consulting firm Auge
Like his boss, Miguel Díaz-Canel, Marrero emphasized that they were not trying to harm the private sector but simply trying to “put it in order,” though Cuban businesspeople do not share this view.
“The perception of some people is that the government wants to put us out of business. Others think it just wants more control,” said the owner of Mercatoria, referring to efforts to curb tax evasion. In his address to the National Assembly the prime minister accused “non-state management” of avoiding payments totalling 50 billion pesos, noting that this accounted for a third of the country’s fiscal deficit, though the government itself puts the figure at 98 billion.
In addition to these measures, which have yet to be finalized, Cuban officials have already implemented other measures that have, to some degree, have partially paralyzed the private sector, which still has not figured out how to handle the situation. In addition to a 30% limit on retail profits, there are also price caps on six products, a measure whose rollout has been erratic. To make matters worse, it will be revised as events play out, which adds even more uncertainty to the situation. All this has led many businesspeople to horde food as they wait for greater clarity in the face of widespread inspections and sanctions, imposed at breakneck speed, which loom over them.
Mark Entwistle, former Canadian ambassador to Cuba and member of the Munk School of Global and Political Affairs at the University of Toronto, told Bloomberg Línea that, come what may, the government will not give up on the private sector because it is the only thing keeping economy afloat. “The private sector is here to stay in Cuba. It is widely supported by the government. Of course, the devil is always in the details.”
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