The Government of Cuba is informing foreign companies that they will not be able to extract or transfer abroad the foreign currency they currently have deposited in the country’s banks, they confirmed to EFE multiple business and diplomatic sources.
In parallel, companies are being offered the possibility of opening a new type of bank accounts, called “real” ones. These must be fed with foreign currency from abroad and, in exchange, they may be used for transfers abroad and cash withdrawals.
The measure, a recognition of the non-explicit “corralito” that the country has been suffering for months, generalizes the model that the Cuban authorities tested in the first half of this year with a handful of foreign companies and that advanced EFE last April.
The plan is inserted within the new management, control and allocation mechanism of currency that was provided for, although without details, by the Government Program to Correct Distortions and Reboost the Economy, the recently published anti-crisis measures plan.
Some foreign companies have indicated, however, that problems are also occurring in these “real” accounts in withdrawing foreign currency in cash and repatriating money.
Spanish companies in Cuba pending the possible currency blockade
Restrictions on embassies
In addition, the Cuban Foreign Ministry met this Wednesday with the diplomatic corps to inform them of a similar mechanism to alleviate the financial difficulties suffered by the representations of other nations, although without having to open a “real” account.
It was explained to them that a watershed date for their accounts will be announced shortly: foreign currency received from that moment on can theoretically be withdrawn and transferred abroad. The availability of prior funds is not guaranteed, they added.
These announcements, which show the banking, economic and financial crisis that the island is suffering, take place at a time when many foreign companies are experiencing serious difficulties due to the lack of liquidity in the (state) banking system and serious distortions in the exchange rate (legal entities must operate at 24 pesos per dollar when the street exchange rate for the greenback is around 450).
The measure also takes place months after it was announced by surprise to all foreign entities that they had to start paying in dollars the rent for the properties they rent to state real estate companies and the salaries of their employees, which are paid through a state employer that receives a commission.
Neither the Cuban Government nor the Central Bank of Cuba – organically dependent on the Executive – have publicly reported these measures or explained the causes, although experts and observers believe that the authorities have resorted to the foreign currency previously in these accounts to be able to make payments abroad.
The Government makes public its program to “correct distortions and re-boost the economy”
Foreign deficit and crisis
Cuba imports 80% of what it consumes—largely due to the collapse of its agricultural and productive sectors—and consequently suffers a huge current account deficit. The Cuban Government holds a monopoly on foreign trade.
The decline in tourism and remittances sent through formal channels (always with state intermediaries) have significantly deteriorated the Cuban State’s access to foreign currency.
Cuba has been suffering a severe economic crisis for more than five years, the worst at least since the collapse of the Soviet bloc in Europe in the 1990s, or even worse, according to more and more analysts. The country is not a member of multilateral financial organizations that offer lines of credit.
Added to the economic contraction with high inflation is the shortage of basic goods – food, medicine, fuel -, prolonged daily blackouts, growing dollarization and mass migration.
The COVID-19 pandemic, the tightening of US sanctions and failed monetary and economic policies have exacerbated structural problems in the Cuban economy.
