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  • Writer's pictureThe San Juan Daily Star

Biden moves to open US banks to Cuba’s private sector

Costumers at Deshidratados Habana, a private dried food business in Havana, on Feb. 12, 2024. The Biden administration, in a major move to support Cuba’s expanding private sector, announced on Tuesday, May 28, 2024, new regulations allowing Cuban entrepreneurs on the island to open bank accounts in the United States for the first time and to make remote online transactions. (Eliana Aponte Tobar/The New York Times)

By David C. Adams

The Biden administration, in a major move to support Cuba’s expanding private sector, announced earlier this week new regulations allowing Cuban entrepreneurs on the island to open bank accounts in the United States for the first time and to make remote online transactions.

The loosening of banking rules could help entrepreneurs to grow and encourage more Cubans to start small businesses, Biden administration officials said, and is meant to help support Cubans facing hardship amid the country’s economic crisis.

Until now, as part of the strict economic embargo the United States has long maintained against Cuba, private owners could not access U.S. banks and have largely had to rely on cash remittances from relatives in the United States to finance their businesses.

The U.S. Treasury Department said the new rules applied only to “independent private-sector entrepreneurs” who had no connection to the Cuban Communist Party, the military, members of the Cuban National Assembly, or anyone on a list of officials sanctioned by the United States.

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

In a major reversal that came decades after Cuba’s revolutionary leaders nationalized the economy and outlawed private companies in the 1960s, the Cuban government in 2021 authorized the establishment of small- and medium-size private businesses.

Since then, those enterprises have significantly grown, importing roughly the same amount of goods last year as the Cuban government, according to Cuban officials.

Cuban economists estimate that the private sector now accounts for nearly one-third of all employment on the communist-run island, with more than 11,000 licenses issued for private companies. Each private business is allowed to hire a maximum of 100 employees.

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

The announcement also removes a ban on cloud-based communications services over the internet such as videoconferencing, e-gaming and e-learning platforms, as well as remote data storage.

The new rules will also make remittances to Cuba easier by reversing a measure imposed by the Trump administration that prohibited U.S. banks from processing transactions involving Cuba by sending money to banks in third countries that would then transfer over the funds.

Younger Cubans prefer earning private-sector wages instead of working for the state, said one senior administration official who briefed reporters Tuesday and spoke on the condition of anonymity to discuss sensitive diplomatic relations.

A class of independent business leaders is rising, the official added, and in an ironic twist, the communist government is relying on private businesses to provide food and other basic necessities.

The Biden administration said it believed the measures were needed in part because of the dire economic conditions in Cuba that have led more than 500,000 Cubans to leave the country in the past two years, a vast majority of them bound for the United States.

The official said the private sector was serving as a life preserver for many Cuban people.

The United States still places many other restrictions on Cuba, including travel to the island. While the Obama administration had largely opened Cuba to U.S. visitors, some of those restrictions were put back in place under former President Donald Trump, limiting American tourism.

The 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, since it allows it to legally operate its payments collections in the U.S.,” said Aldo Alvarez, a lawyer based in Havana who runs a private food wholesale business.

The regulations were originally floated last year, but the administration backed away after a backlash from some Cuban Americans, including lawmakers, in South Florida. They argued that the Cuban government’s move to legalize private businesses was a ruse by communist leaders to ride out the economic crisis and cling to power.

Rep. Maria Elvira Salazar, a Cuban American Republican representing a South Florida district that includes part of Miami, responded that the Biden administration’s measures ignored the human rights situation in Cuba.

“This would make a mockery of American law, considering no progress has been made toward freedom on the Island and repression has intensified,” Salazar posted on the social platform X.

But other Cuban leaders in South Florida lauded the action.

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

Cuba policy experts say the measures could be a game changer for Cuban entrepreneurs who have had to resort to financial triangulations, like remittances, to pay for imports they need to run their businesses. They include a wide array of enterprises, including supermarkets, restaurants, bars, warehouses and tech companies.

A large part of their business relies on Cuban exiles who make purchases online for relatives on the island or send cash remittances.

It remains unclear, however, how eager U.S. banks will be to do business in Cuba.

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

Cuba experts said that could give banks reason to pause before opening accounts under the new regulations.

Pedro A. Freyre, a lawyer and chair of international practice at a major law firm in Miami, said the terrorism designation “has a chilling effect and banks engage in overcompliance.”

“But the new regulations will provide more clarity regarding the private sector,” he added. “Until now, we’ve been stumbling in the dark.”

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