http://havanajournal.com/business/entry/cuba-continues-to-block-access-to-foreign-business-bank-accounts/

HavanaJournal.com: Cuba Business

Cuba continues to block access to foreign business bank accounts

Posted September 30, 2009 by publisher in Cuba Business.
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By Marc Frank | Reuters

Many foreign suppliers and investors in Cuba are still unable to repatriate hundreds of millions of dollars from local accounts almost a year after Cuban authorities blocked them because of the financial crisis, foreign diplomats and businessmen said.

The businessmen, who asked not to be identified, said they were increasingly frustrated because the Communist authorities refused to offer explanations or solutions for the situation, which stems from a cash crunch in the Cuban economy triggered by the global downturn and heavy hurricane damage last year.

“I have repeatedly e-mailed, visited the offices and sent my representative to the offices of a company I did business with for years and which owes me money, and they simply refuse to talk to me,” a Canadian businessman told Reuters.

Delegations from foreign banks and investor funds holding commercial paper from Cuban state banks have repeatedly traveled to Cuba this year seeking answers from the central bank or other authorities—without success—the sources said.

Representatives of some companies with investments or joint ventures on the island said they were bracing for the possibility of not being able to repatriate year-end dividends paid to their accounts in Cuba.

The sources said the lack of official information had resulted in many rumors, including one that the government may seek to close accounts at a discount or is preparing a three-year payment plan.

The Cuban government, after running up a huge trade deficit in 2008, has cut imports by at least 30 percent this year, but was still expected to purchase more than $10 billion in goods and services abroad. Most of the business is reportedly taking place offshore as Cuba’s partners seek to avoid local banks.

Some 90 percent of the country’s economic activity is in state hands. Cuba has a dual monetary system under which a foreign exchange equivalent called the convertible peso (CUC) circulates along with the domestic Cuban peso.

Foreign businesses must operate within the country using the CUC, pegged at 1.08 to the US dollar and 24 times the domestic peso’s value, depositing them in state banks, where they are available as foreign exchange for transfer or withdrawal.

Since last year, the country has been faced with scarcer credit as the global crisis increasingly hit home and has been burdened with the cost of cleaning up after three hurricanes last year. As a result, the state banks began informing foreign businesses their funds were simply not available for the time being.

Foreign economic attaches and commercial representatives in Cuba said most of their nationals doing business with the Caribbean island still faced payment problems.

“Suppliers to the military and its companies, public health and a few other areas are having the fewest problems being paid,” one Western diplomat said.

“Those involved with tourism, foreign exchange stores and spare parts and machinery for industry are negotiating partial payments in exchange for more supplies, but the little guy, for example with supplies on consignment, has simply been abandoned,” he said.

In July, the central bank issued what it called instruction No. 3, which allowed the transfer or payment of foreign exchange from the frozen accounts with the approval of a government ministry, effectively removing the responsibility of the state banks.

While renewed access to accounts was welcomed by businessmen in Cuba, even if it was only partial, the sources said it was offered with the proviso that they continue to do business and with the payment due date for new goods and services provided extended from 360 days to up to 720 days.

They said the government and state-owned firms appeared to be reaching out because of mounting supply problems in the country as foreign traders and companies balked at doing new business unless accounts were unblocked.

“Despite our firm desire to honor every obligation, we have been forced to renegotiate debts, payments and other commitments with foreign entities, something quite common these days all over the world,” President Raul Castro told the National Assembly last month.

“As a rule, we have found understanding and confidence in our partners, to whom we now reaffirm our recognition and the security that we will meet the agreements reached,” he said.

Raul Castro, who took over the Cuban presidency from his older brother Fidel Castro last year on health grounds, has announced a series of austerity measures in recent months and said the country must learn to live within its means.

Member Comments

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On September 30, 2009, publisher wrote:

“...which stems from a cash crunch in the Cuban economy triggered by the global downturn and heavy hurricane damage last year.”

but really just standard operating procedure for the Cuban government.

“Despite our firm desire to honor every obligation, we have been forced to renegotiate debts, payments and other commitments with foreign entities, something quite common these days all over the world”

Since when has Cuba had a “firm desire to honor every obligation”? Let me think. Oh, right. NEVER.

When Raul says “something quite common these days” I have to laugh. What other countries are renegotiating debt with foreign entities?

Cuba continues to be a dead beat nation because of Fidel’s failed ideas and centrally controlled economy that DOES NOT WORK anywhere in the world.

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On September 30, 2009, John wrote:

Desparate conditions call for desparate measures.
It’s almost a complete comedy
No toilet paper, meagre basic foods, electricity and water service a joke, stealing money from the hand of business, homes falling apart and brutal retaliation to those brave enough to speak out.
This is the Castro legacy, an outstanding achievement of the complete destruction of the finest nation in the Caribbean.
Fidel Castro, a monstrous madman soon to join the likes of Stalin and Hitler.

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On September 30, 2009, chuck bailey wrote:

There is a solution to the Cuban debt problem!!  Obama will grant a stimulus check to Raul and company. About $10 Billion should do fine.
Communists will steal about $9 billion and the other will go to General Electric for past due payments.  G.E. will then sell Cuba a new electric generation system on 40 year credit terms, with the note secured by the U.S. government.
There that was easy grin)
Chuck

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On October 01, 2009, HavanAndrew wrote:

The problems some foreign companies in Cuba are having with the releasing of funds is due to their own stupidity or greed. Doing business in Cuba is simply a dumb thing to do and if you are going to do, do it right.

Firstly, if you have a product(s) that Cuba must have there are ways to protect yourselves. This process has been used by Maple Leaf Foods and other wise companies. The Cuban government needs fifty container loads of frozen chicken legs. A courier is dispatched to Havana to pick up the CASH for the order and when the cash is landed in Canada the chicken legs are shipped.

Secondly, cash before delivery is the ONLY term the Cuban government can be trusted with.

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On October 01, 2009, chuck bailey wrote:

Havana gets their cash from Venezuela, when U.S. buys oil from Chavez.
U.S. is one of Cuba’s largest suppliers of food.
I read somewhere that Fidel has never completely paid for any outside service to his country.
In a couple of more years the portable electric generators Cuba bought to provide electric for public buildings will start to breakdown and then things will get much darker for the dictatorship.
Fidel and friends may have thought that they could make a better Cuba, but they ignored one common trait in man. The need to screw over their fellow man.
Chuck