Cuba: Entrepreneurs prepare for the impact of a “cashless” economy

When in early August Cuba announced that he was taking a big step towards electronic banking and a “cashless” society, the red alerts began for the incipient and small companies of the Caribbean island.

Most alarming for many budding businessmen was a new cap of 5,000 pesos, about US$20, as a daily limit on cash withdrawals for companies, a measure the government said is aimed at getting Cubans to carry out their transactions. electronically, via transfer, online payment and bank cards.

The changes were needed to curb cash shortages, central bank officials said, as the rapidly falling peso and rising prices combined to drain bank reserves and ATMs.

“The demand for cash is growing against cash income that does not support the work of each of the bank branches”Alberto Quiñones, vice president of the Central Bank of Cuba, said on television.

Still, the changes have been a hard pill to swallow, said Yulieta Hernández, founder and manager of “Pillars Construction”a private company based in Havana that currently employs 60 people.

“We understand that there really is a crisis in the country and that there is a need for the bankarizationBut it’s the company’s money.” Hernández said, noting that his business had already turned to online banking even though he often needs access to cash to pay for work emergencies.

Even before the new restrictions, Cuban businessmen faced what might seem like insurmountable obstacles such as power and internet outages, fuel shortages, and no way to legally exchange large amounts of local currency for dollars needed to import goods from abroad.

Three days after the rules were implemented, he said, bad news came: Many of the providers began reporting that they were not accepting transfers, now only cash for fear of losing access to the paper money they needed to operate, contrary to what the law intended. .

This has put companies like “Pillars Construction”. The company needs cash to operate, but is prohibited from withdrawing a sufficient amount from its local accounts.

“Right now the effect (…) is an effect like paralysis”, said Hernández, noting that many business owners were already freezing investments amid growing uncertainty.

“People are waiting (…) waiting to see how (the law) is going to be implemented,” added.

Businessmen Reuters spoke to said the measures could dampen enthusiasm for investment in private companies that sell food, fix cars, build houses and provide a range of goods and services where state-owned companies have faltered.

Cuban officials are now scrambling to usher in the changes, which they have said will have a six-month extension to implement.

In Santiago de Cuba, some 900 kilometers east of Havana, the government this week summoned experts to take to the streets and train people in the basics of payments through cell phones.

“Novel concept”

The private company in Cuba, beyond the rental of rooms for tourists or some small-scale services, resurfaced in 2021, after decades of prohibition after its elimination by former president Fidel Castro. Since then, the Government has given the green light to the creation of thousands of small businesses.

For many Cubans born after Castro’s 1959 revolution, it has represented a major cultural shift, said Leonardo Rodríguez, who runs Kaibocu, a Havana-based company that specializes in processed foods and agricultural products.

Rodríguez said that he and other businessmen began using electronic banking long before the new measures to comply with tax laws that have evolved with the growing private sector were announced.

“(Cubans) have been doing business on the street for many years, without ever knowing what a tax system is,” Rodríguez said in an interview with Reuters in Havana.

“We are not adapted to a tax system, to declare sales, to declare income. We Cubans are not prepared (…) these concepts are very new”he added.

Ronald Venero, a 34-year-old fruit and vegetable merchant, said most farmers selling the merchandise don’t accept payments via electronic devices.

“The peasants trade their merchandise in cash. And if you tell them that you are going to pay by card or by transfer, they say no “pointed out in a central street in Havana.

Source: Reuters