Cuban entrepreneurs to be allowed to open U.S. bank accounts, access internet services
For the first time in decades, Cuban entrepreneurs on the island are going to be allowed to open accounts in American banks and access their money remotely, in a move the U.S. government will announce in coming days to remove a significant obstacle to the expansion of the private sector in Cuba, highly placed sources in the Biden administration told the Miami Herald.
Cuban entrepreneurs will be able “to establish and remotely access U.S. bank accounts to conduct authorized transactions,” one of the sources said, which in turn would help the independent private entrepreneurs in Cuba “continue importing food, equipment, medicine and other essential goods that support the Cuban people.” The sources asked not to be identified because the regulations have not been officially announced.
Currently, Cubans visiting the U.S. can open a bank account here, but they cannot access their money once they return to the island because of the long-standing U.S. embargo. The embargo restrictions were aimed initially at the Cuban government, but they are now limiting private entrepreneurs, who must come up with creative and more expensive ways to pay for imports from abroad.
The new regulations have been in the works since President Joe Biden announced a new Cuba policy last year to support the Cuban people by expanding family travel and internet access and promoting a private sector independent from the state.
Some of the new measures will allow Cubans to catch up with the rest of the world.
For example, the administration will authorize providing internet services such as videoconferencing, e-learning, automated translation, I.T. managing services and cloud-based services, among others that are currently restricted.
“The authorization for cloud-based services is particularly important because they are now the backbone of the modern digital economy,” one source said.
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. “But we’re also hoping that the Cuban nationals will be able to access Google and Apple app stores,” another source said.
The U.S. 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 be particularly beneficial for companies sending remittances in dollars to Cuba, like Western Union, which had to shut its money transfer services to Cuba from third countries when the Trump administration issued the prohibition in September 2019.
Treasury is also expected to expand the definition of what constitutes an “independent private sector entrepreneur” to include owners of small and medium-sized companies, known in Spanish as pymes, so that they can benefit from the new policy initiatives.
The Cuban government first authorized small and medium-sized private businesses two years ago. Since then, those enterprises have grown dramatically, and are on track to import more goods by the end of this year than the government itself, Cuba’s economy minister, Alejandro Gil, recently told the island’s National Assembly. And in another first in the history of the Revolution, Cuban economists estimate that the private sector now employs more workers than state enterprises.
“Even under the limited opening that the Cuban government has allowed over the past two years, we have seen the private sector just take off and is now estimated to be responsible for about half of the container traffic going into Cuba,” one administration source said. “So the private sector really has expanded significantly the amount of food and other goods available to the Cuban people. Hopefully, the Cuban government will recognize and continue policies that enable the private sector to act.”
The policy updates will include restrictions on doing business or providing services to entities owned by the Cuban government and the military.
One administration source said 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 top Cuban officials, among them members of the Council of Ministers, Council of State, the National Assembly and 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.
The changes will not include authorizations for extending loans to private Cuban companies, as other outlets reported earlier.
“In order to make an investment in a private Cuban entity, you would still have to get a specific license,” one of the sources said.
The administration issued the first known license authorizing an American company to invest and provide finance to a Cuban private business in May last year. However, the Cuban government still needs to approve such a move.
John Kavulich, who obtained that license, said the regulations in the works are a positive development but might not be enough to convince U.S. banks and companies to engage with the private sector of a country that is still listed by the U.S. State Department as a state sponsor of terrorism.
“Authorizing the pymes to have an account in the United States is good, but there is nothing to require a bank to open that account, and the questions from the bank are going to be about compliance,” said Kavulich, who heads the U.S.-Cuba Trade and Economic Council. “Unless the regulations are incredibly clear about the responsibilities of the banks and their potential exposure, there are not going to be a lot of banks allowing these accounts.”
Those who urged the Biden administration to implement these measures are also waiting to see how companies respond.
“In theory, some of these measures, such as access to U.S. bank accounts from Cuba, could be a game-changer for Cuban entrepreneurs who deal with hyperinflation and severe limits on access to the international banking system,” said Matthew Aho, a business consultant with the Miami firm Akerman who has been closely tracking the growth of the private sector in Cuba. “The true impact of these rules will depend on how expansive the new authorizations are and whether they provide enough clarity for U.S. companies to act.”
This story was originally published September 19, 2023 at 5:30 AM.