Why Does Cuba Ban Small Businesses From Using American Bank Accounts?

In the Cuban economic landscape, a question emerges: why are small entrepreneurs prohibited from using American bank accounts? This restriction raises major issues regarding the possibilities for small business development in Cuba, highlighting the complex challenges related to the country’s financial regulations.

The Cuban government recently made the decision to prohibit small entrepreneurs to use American bank accounts. The directive comes only weeks after the Biden administration allowed Cubans to use the U.S. banking system, a move that was intended to support the island’s burgeoning private sector.

An Unprecedented Economic Crisis

Cuba is currently going through its worst economic crisis since the collapse of the Soviet Union, with inflation reaching 31% last year. Faced with this situation, the Cuban government seeks to keep the dollars inside the country to stabilize the local economy. This results in severe restrictions on international financial transactions of small businesses.

International Payments via Local Banks

The new regulations require that all payments to international suppliers be made only through local banks. This measure aims to limit currency outflows and better control financial flows. However, this greatly complicates the operations of small entrepreneurs who are already struggling to obtain hard currency on the local market.

Effects on Cuban SMEs

Since 2021, Cuba has authorized the creation of small and medium-sized enterprises (SMEs), and more than 11,000 of them have emerged. These businesses, essential for economic growth, often depend on offshore accounts to bypass local restrictions and access necessary resources. The recent ban could potentially jeopardize their survival by making access to hard currencies even more difficult.

• Increased operating costs
• Difficulty accessing imported raw materials
• Increased risk of bankruptcy

The Government’s Intentions

Some entrepreneurs believe that this ban could be a deliberate attempt by the government to undermine the private sector. This perception is reinforced by a series of recent regulations that appear to specifically target private companies. For example, the P5,000 limit on cash transactions between public and private businesses and the ban on the use of ATMs.

The Biden Administration’s Measures

Last May, the Biden administration introduced regulations allowing Cuban entrepreneurs to open bank accounts in the United States for the first time. This decision aimed to promote internet freedom and support Cuban private entrepreneurs. However, Havana’s response appears to contradict these intentions, thus exacerbating the difficulties for local small businesses.

The current economic context in Cuba poses immense challenges for small entrepreneurs. Increasing restrictions on the use of American bank accounts add an extra layer of complexity, making their struggle for survival even more arduous.