Cuba Unfreezes Some Bank Accounts to Promote Trade
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- Business and Economy
- Politics and Government
- 07 / 23 / 2009
The Cuban central bank has authorized the release of some funds in foreign business accounts that have been blocked by the government for months and caused a growing reluctance to trade with Cuba.
Central bank Instruction #3 issued this month allows the transfer or payment of foreign exchange from the frozen accounts with the approval of a government ministry, business sources familiar with the resolution said.
While renewed access, even if only partial, to accounts is welcome, business sources said it is being offered with the proviso that they continue to do business with the island.
They said the government and state-owned firms were reaching out because of mounting supply problems in the country as traders and companies balked at doing new business unless their accounts were unfrozen.
"The ministries have set their priorities and are contacting suppliers. They are saying they can unblock some of the supplier's funds in exchange for new business which they are guaranteeing will be paid without further problems," a Spanish businessman said, asking not to be identified.
"That is better than nothing, but if you are not on the priority list you are out of luck for now, and if you don't strike a new deal forget your money for the time being, at the least," he said.
Another foreign businessman said it was unheard of for depositors to have to go to ministries to unblock accounts.
Cuba has a dual monetary system under which a foreign exchange equivalent called the convertible peso (CUC) circulates along with the peso.
Foreign businesses operate within the country using the CUC, pegged at 1.08 to the U.S. dollar and 24 times the peso's value, depositing them in state banks where they are available as foreign exchange for transfer or withdrawal.
A government report seen by Reuters this week said the country would be short around 30 percent of the resources it had planned on in 2009, or some $4 billion, and cut its growth forecast from 6 percent to 2.5 percent.
The report blamed the "global economic crisis", the decades-long U.S. trade embargo, hurricanes that hit the island last year and "the low efficiency of the economic model" for a liquidity crisis that has it also seeking to restructure debt with official and commercial creditors.
The new payment scheme appears to be part of a gradual decentralization of control over foreign exchange exercised by the Central Bank of Cuba, which previously had to approve any purchase of more than $10,000 by the state-run companies that account for more than 90 percent of economic activity.
In March, the government eliminated the central bank's control and began a process of assigning foreign exchange budgets to government ministries to spend as they see fit. It also authorized them to seek fresh credit.
The measures came after President Raul Castro replaced his economic cabinet following a dismal 2008 that saw the current account, or balance of payments that measures the flow of foreign exchange in and out of the country, go from a $500 million surplus to a deficit of more than $2 billion, according to various estimates.
Communist authorities often do not comment on internal reforms and official decrees announcing them are often published well after they are signed.
Source: Reuters
Central bank Instruction #3 issued this month allows the transfer or payment of foreign exchange from the frozen accounts with the approval of a government ministry, business sources familiar with the resolution said.
While renewed access, even if only partial, to accounts is welcome, business sources said it is being offered with the proviso that they continue to do business with the island.
They said the government and state-owned firms were reaching out because of mounting supply problems in the country as traders and companies balked at doing new business unless their accounts were unfrozen.
"The ministries have set their priorities and are contacting suppliers. They are saying they can unblock some of the supplier's funds in exchange for new business which they are guaranteeing will be paid without further problems," a Spanish businessman said, asking not to be identified.
"That is better than nothing, but if you are not on the priority list you are out of luck for now, and if you don't strike a new deal forget your money for the time being, at the least," he said.
Another foreign businessman said it was unheard of for depositors to have to go to ministries to unblock accounts.
Cuba has a dual monetary system under which a foreign exchange equivalent called the convertible peso (CUC) circulates along with the peso.
Foreign businesses operate within the country using the CUC, pegged at 1.08 to the U.S. dollar and 24 times the peso's value, depositing them in state banks where they are available as foreign exchange for transfer or withdrawal.
A government report seen by Reuters this week said the country would be short around 30 percent of the resources it had planned on in 2009, or some $4 billion, and cut its growth forecast from 6 percent to 2.5 percent.
The report blamed the "global economic crisis", the decades-long U.S. trade embargo, hurricanes that hit the island last year and "the low efficiency of the economic model" for a liquidity crisis that has it also seeking to restructure debt with official and commercial creditors.
The new payment scheme appears to be part of a gradual decentralization of control over foreign exchange exercised by the Central Bank of Cuba, which previously had to approve any purchase of more than $10,000 by the state-run companies that account for more than 90 percent of economic activity.
In March, the government eliminated the central bank's control and began a process of assigning foreign exchange budgets to government ministries to spend as they see fit. It also authorized them to seek fresh credit.
The measures came after President Raul Castro replaced his economic cabinet following a dismal 2008 that saw the current account, or balance of payments that measures the flow of foreign exchange in and out of the country, go from a $500 million surplus to a deficit of more than $2 billion, according to various estimates.
Communist authorities often do not comment on internal reforms and official decrees announcing them are often published well after they are signed.
Source: Reuters
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