‘Green Banking’ in Cuba Will Wither Before it Begins

Lines at Cuban ATMs grow on weekends (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 12 June 2023 — Another surprise arrives from the Island. A report in the state press says that “green banking is being encouraged in Cuba, aimed at promoting products and services focused on biodiversity,” from the incorporation of regulated risk management for the development of green financing and banking eco-efficiency practices.

What do you think? In a banking system controlled and managed by the state, inefficient, unable to encourage the use of electronic instruments by a population that distrusts these entities, they now announce “green banking.” It reminds me of that phrase of distraction used by Fidel Castro, before taking over the means of production and the property rights of all Cubans: “This revolution is green like the palms.” Well, no, it ended up being red and bloody, and history is there to confirm it.

So don’t believe it. This report on “green banking” is not very relevant. To begin with, I have my doubts that it can be launched on the Island under current conditions. This is just one more of the many examples of the regime’s propaganda to distract people from talking about the country’s real problem: the lack of food, gasoline and electricity.

As has already been pointed out, green banking is represented by a series of financial institutions that offer financing for renewable energy projects to activate the fight against climate change. The main reasons for investing in this type of project are concern for the future of the planet, climate change and the growth prospects of these energies.

Therefore, there is an increasing number of banks that are betting on investing in “green” projects that allow renewable energies to be a main source of energy around the world. In Cuba, it is worth remembering, renewable energies barely represent 5% of the country’s electricity generation, and the investments that must be made are conspicuous by their absence while waiting for some foreigner to opt for the Island.

In any case, it should be remembered that green banking arose as a result of the limited aid that the governments of many countries offered to the development of renewable energies, so that financial institutions, betting on their corporate social responsibility, started programs to support clean energy.

From there, green banks began to offer very attractive loans, under more favorable terms than the market average, to private individuals and companies that, by investing in these energies, began to pay lower bills for the use of renewables and even, in some countries, to supply the surpluses to the network, for which they obtained income. So green banking, while betting on profitable investment projects, boosted the economy and employment and managed to curb climate change. In many cases, the costs of financing the investment were covered by the benefits derived from energy savings, especially for large consumers.

And here comes another aspect to take into account. As in many other areas of modernization, green banking originated in the United States as a result of the lack of attention of the government of that country to support green energies with public funds. So the first entity that opted for this business model was the Connecticut Green Bank. These are public institutions, controlled by state governments, that invest through loans in renewable energy projects at the same time that they are dedicated to attracting the savings of private investors to this type of investment.

Another problem. Savings in Cuba are scarce, and in addition, they are subject to the financial priorities of the mechanism with which the regime covers its public spending needs, placing government bonds in banks. Therefore, it will be difficult to mobilize resources for green banking initiatives in Cuba.

However, the state press says in its report that the regime offers, until 2025, a training and awareness-raising process to guarantee the success of the progressive application in the national territory of green banking, meaning that the issue is still incipient and that it can end up being filed in a drawer if the demand, as expected, is not activated.

In this regard, the authorities point out the commitment to “promote products and services focused on biodiversity, from the incorporation of environmental risk management governed by regulations to developing green finance and banking eco-efficiency practices. In addition, they plan to encourage the mobilization of resources for such purposes as the sustainable management of biodiversity, climate change, the rational use of natural resources and environmental quality.” Resources? From where?

What’s more, producers or economic actors who think of these projects as a profitable option will not be attracted by advantages in interest rates or by some type of guarantees, because these indicators in the Cuban financial system do not adjust to supply and demand but are the result of administrative decisions. Also, the level of the productive business sector in Cuba is not in a position to place this type of initiative in its business plans, even less so at the individual level.

Taking into account which type of project can be financed with green banking, there are only those “aimed at the conservation of biodiversity; the reduction of pollution; the use of natural resources such as water, land degradation and desertification; strengthening agricultural systems to contribute to food security and credits for renewable energy purposes.” It is not easy to identify private economic agents, like small enterprises or self-employed workers, who can be eligible for this type of initiative.

Little is known about the facilities provided by the regime for the importation of renewable equipment, basically nothing. It’s another unsuccessful measure. Cubans are worried about other things that are very different. Understandably.

Translated by Regina Anavy


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