US banks get permission to serve Cuban companies

Cuban AmericansBanking and financial institutions Embargo and sanctionsUnited States International relationsSmall businessOffice of Foreign Assets Control (U.S. Treasury)Department of the TreasuryJoe Garcia (1963-)CubaUnited States

The new rules will allow Cuban businessmen to open bank accounts in the United States, which will facilitate their growth and encourage other Cubans to create companies.

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Joe Biden's government, in a significant measure to support Cuba's growing private sector, on Tuesday announced new rules that will for the first time allow businesspeople on the island to open bank accounts in the United States and conduct transactions online remotely.

Biden administration officials said easing banking rules could spur entrepreneurs to grow and encourage more Cubans to start small businesses, and is intended to help Cubans facing hardship amid the country's economic crisis.

Until now, as part of the strict, long-standing US economic embargo against Cuba, private homeowners had no access to US banks and had to rely heavily on cash transfers from relatives abroad to finance their businesses.

The US Treasury said the new rules would only apply to “independent private sector entrepreneurs” who have no connection to the Cuban Communist Party, the military, members of the National Assembly of Popular Power of Cuba or anyone on the list of sanctioned officials. US sanctions.

The Cuban government did not immediately respond to a request for comment.

In 2021, in a radical change that came decades after Cuban revolutionary leaders nationalized the economy and outlawed private businesses in the 1960s, the Cuban government allowed the creation of small and medium-sized private companies.

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Since then, these companies have grown significantly, importing the same amount of goods last year as the Cuban government, according to Cuban authorities.

Cuban economists estimate that the private sector now represents nearly a third of total employment on the island, with more than 11,000 licenses granted to private companies. Each private company can employ a maximum of 100 employees.

Under the new banking regulations, independent Cuban private-sector business owners will be able to “maintain and use a U.S. bank account to carry out authorized or exempt transactions,” according to an announcement from the Treasury Department’s Office of Foreign Assets Control.

The announcement also lifts the ban on online cloud communications services such as video conferencing, electronic games, and e-learning platforms, in addition to remote data storage.

The new rules will also make it easier to send remittances to Cuba by rescinding a measure imposed by the Trump administration that prevented U.S. banks from processing Cuba-related transactions by sending money to banks in third countries that would then transfer the money.

Younger Cubans would rather be paid in the private sector than work in the state, said a senior government official who spoke to reporters Tuesday and spoke on the condition of anonymity to discuss sensitive diplomatic relations.

The official added that a class of independent entrepreneurs is emerging, and in an ironic development, the communist government is now relying on private companies to provide food and other basic needs.

The Biden administration believes that these measures are necessary due to the difficult economic conditions in Cuba, which have caused more than 500,000 Cubans to leave the country in the past two years, the vast majority of them heading to the United States.

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The private sector has been a lifeline for many Cubans, the official said.

The United States continues to impose many other restrictions on Cuba, including travel to the island. While the Obama administration was able to create an opportunity for Americans to visit Cuba, some of these restrictions were reimposed under former President Donald Trump, limiting American tourism.

This announcement was met with surprise and praise by some Cuban private sector owners and their supporters in the United States.

“This announcement is very positive for the Cuban private sector, because it allows it to legally manage its collections in the United States,” said Aldo Alvarez, a Havana-based lawyer who runs a private food wholesale company.

Those regulations were introduced last year, but the government backed down after backlash from some Cuban Americans, including lawmakers, in South Florida. Many argued that the Cuban government's move to legalize private companies was a ploy by communist leaders to weather the economic crisis and cling to power.

Maria Elvira Salazar, a Republican Cuban-American representative who represents the South Florida district that includes part of Miami, responded that the Biden administration's actions ignored the human rights situation in Cuba.

“This would be a mockery of American laws, considering that no progress has been made toward freedom on the island and that repression has intensified,” Salazar wrote in X magazine.

But other Cuban leaders in South Florida praised the measure.

“I congratulate the Biden administration on its commitment to civil society, this economic engine that is helping to transform the lives of millions of individual Cubans,” said Joe Garcia, a Cuban-American from Miami and former U.S. actor who stands at the forefront. Strengthening the private sector in Cuba

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Cuban political experts say these measures could be a game-changer for Cuban businessmen who have had to resort to financial transactions, such as remittances, to pay for the imports they need to run their businesses. Among them are a wide range of businesses such as supermarkets, restaurants, bars, warehouses and technology companies.

Much of its business depends on Cuban exiles who make online purchases for relatives on the island or send cash transfers.

However, it is not clear to what extent US banks would be willing to do business in Cuba.

The country faces some of the toughest US economic sanctions in the world, including being designated a “state sponsor of terrorism.”

Experts in Cuba said this could give banks reason to pause before opening accounts under the new regulations.

The terrorism designation “has a chilling effect and banks are over-compliant,” said Pedro Freire, a lawyer and director of international affairs at a major Miami law firm.

“But the new regulations will provide more clarity regarding the private sector,” he added. “So far we've been stumbling around in the dark.”

Aileen Morales

"Beer nerd. Food fanatic. Alcohol scholar. Tv practitioner. Writer. Troublemaker. Falls down a lot."

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