A woman shop at the private business “Bodegon 21” in Havana, on June 5, 2023. SMEs (small and medium-sized enterprises), approved only in 2021 in Cuba, are flourishing, displacing the sordid state-owned businesses that are becoming emptier by the day. Authorities decided in 2021 to accelerate the economic opening in the midst of the worst economic crisis in three decades, with shortages of food and medicine, derived from the pandemic and the tightening of Washington’s sanctions against the island nation.
YAMIL LAGE
AFP via Getty Images
The Biden administration will finally allow Cuba’s independent entrepreneurs to open bank accounts in the United States remotely from the island, among other measures to support the private sector on the island that were halted for months due to objections from Congress.
Senior administration officials told reporters on Tuesday that the Treasury Department crafted new regulations to modify the decades-old embargo on Cuba. The new regulations will allow private business owners in Cuba to open U.S. bank accounts and conduct authorized transactions, “including through online payment platforms,” removing a significant hurdle for the private enterprises.
The embargo imposed on Cuba in the 1960s cut the island off from the U.S. banking system. Currently, Cubans visiting the U.S. can open a bank account here, but they cannot access their money once they return to the island. The embargo restrictions were initially aimed at the Cuban government, but they are now limiting private entrepreneurs, who must come up with creative and expensive ways to pay for imports from abroad.
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A senior administration official said that it is “essential” for the Biden administration to make sure the private sector continues to expand on the island to encourage Cubans to become self-sufficient and more independent from the government. The official also said the policy would help to stem migration from the island and counter actions by other nations, hinting at Russia, which Cuban authorities tapped to help them manage the private sector on the island.
“Providing support for Cuba’s private sector will help to stem irregular migration from the island by creating more economic opportunity,” the official said. “We believe that engaging in support of Cuba’s independent private sector will ensure that these important continental actors are supported by the United States and make it more difficult for other state actors who wish to engage economically in Cuba only in support of the government and without supporting the private and entrepreneurial sector.”
Other new measures announced Tuesday include authorizing U.S. companies to provide internet services such as social media platforms, videoconferencing, e-learning, automated translation, I.T. managing services and cloud-based services to private business owners.
The changes would make it possible, for example, for Cuban software developers to have their apps available for download on the Apple or Google app stores.
The Treasury Department will also reverse a Trump-era measure prohibiting U.S. banks from processing transactions involving Cuba and banks in third countries, known in the banking industry as “U-turn transactions.” That will particularly benefit companies like Western Union, which sends remittances in dollars to Cuba.
Treasury will update its definition of an “independent private sector entrepreneur” to include owners of Cuban enterprises and private cooperatives so that they can benefit from the new policy initiatives.
The new regulations, which will be published Wednesday in the Federal Register, will also include restrictions on U.S. companies doing business or providing services to entities owned by the Cuban government or the military. One administration official said Tuesday that any private Cuban company whose owners include someone on Treasury’s list of “prohibited officials of the government of Cuba” will not be able to benefit from the new rules. That list includes members of the Council of Ministers; Council of State; the National Assembly; the Supreme Court; members of the military and the Ministry of Interior, and senior officials in all ministries. It also includes lower-level officials in the provincial assemblies, the Committees for the Defense of the Revolution, the leaders of the government-controlled unions and editors in state media.
Nevertheless, U.S. companies are authorized to provide popular communication services such as instant messaging, chat, email and social networking, among many others, to the Cuban government and prohibited officials, “provided that such services are widely available to the public at no cost to the user.”
These services are already available in the country, whose telecommunications and internet infrastructure are solely owned and managed by the state.
The Cuban private sector has rapidly expanded since it was first allowed in 2021, and there are now more than 10,000 small and medium enterprises, employing a third of all Cuban workers. Because the government is almost bankrupt amid a severe economic crisis, the private sector has taken roles previously unthinkable in a communist island that once banned all private property. These enterprises, known by their acronym mipymes in Spanish, have become major importers of food and other necessities in the midst of the widespread scarcity. They have become significant suppliers of the flour that state-owned bakeries need to produce bread for the public.
The Treasury policy package was ready to go in September, Biden administration sources told the Miami Herald at the time, describing in detail what was expected to be announced. But the new regulations were caught up in bitter congressional fights about the federal budget and faced the staunch opposition of Miami Republican Rep. Mario Diaz-Balart, who chairs a subcommittee overseeing the State Department budget.
Díaz-Balart and other Cuban-American members of Congress have voiced concerns that because the private sector is under government control, there is no legitimate free enterprise on the island. They also argue that all private enterprises are owned or controlled by people with ties with the government and the ruling elite.
While independent journalists and activists have found a few enterprises owned by relatives of government officials, several business owners who spoke to the Herald have denied having ties with government officials and rejected that characterization.
“We can congratulate the Biden administration on its commitment to helping civil society,” said former Congressman Joe García, who has pushed to step up U.S. support to private businesses on the island. “These new small independent players perhaps offer the only option for helping the Cuban people.”
Ric Herrero, the executive director of the Cuban Study Group, a Washington-based organization that provides training and support to Cuban independent entrepreneurs, said on X that the “excessive delay” in publishing the regulations “due to congressional extortion tactics has caused undue harm to independent Cuban entrepreneurs and to efforts to expand internet access in Cuba.”
John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, said the measures are a step in the right direction but don’t go far enough in regularizing banking transactions. While Cuban entrepreneurs can operate their U.S. accounts, it will be difficult for them to transfer money from and to their accounts using Cuban banks because there are no direct banking relations between the two countries.
“While useful for the Biden-Harris Administration to …authorize entrepreneurs to have bank accounts in the United States, there remains one glaring omission — the continuing prohibition upon direct correspondent banking,” Kavulich said. “As long as financing, investment, and payments need to be routed through third countries, the Biden-Harris Administration will be constraining precisely the activity it professes to support.”
The regulations’ announcement came after the State Department removed Cuba from the list of countries that do not “cooperate fully” with U.S. counter-terrorism efforts and news that Cuban officials were given a tour of secure Transportation Security Administration facilities at Miami International airport last week.
Asked by reporters on Tuesday, the senior administration officials did not say if the Biden administration is moving to remove Cuba from a separate list of countries that sponsor terrorism.
In a tweet sharing a Treasury Department press release about the new regulations, Republican U.S. Rep. Carlos Giménez of Miami accused the Biden administration of “blatant complicity with these dictators.” Miami U.S. Rep. María Elvira Salazar, who chairs the House foreign affairs subcommittee on the Western Hemisphere, said the new policy measures “would make a mockery of American law, considering no progress has been made toward freedom on the Island and repression has intensified.”
This story was originally published May 28, 2024 10:19 AM.
Nora Gámez Torres is the Cuba/U.S.-Latin American policy reporter for el Nuevo Herald and the Miami Herald. She studied journalism and media and communications in Havana and London. She holds a Ph.D. in sociology from City, University of London. Her work has won awards by the Florida Society of News Editors and the Society for Professional Journalists.//Nora Gámez Torres estudió periodismo y comunicación en La Habana y Londres. Tiene un doctorado en sociología y desde el 2014 cubre temas cubanos para el Nuevo Herald y el Miami Herald. También reporta sobre la política de Estados Unidos hacia América Latina. Su trabajo ha sido reconocido con premios de Florida Society of News Editors y Society for Profesional Journalists.
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