Photo by Art Rachen

3rd May 2022

Cuba’s Central Bank (BCC) has published a decree law that establishes the procedures that those providing virtual assets (cryptocurrencies) must comply with to operate legally in the country. The regulation follows another gazetted last year which established a general framework (Background Cuba Briefing 6 September 2021).

The new law makes clear the basis on which individuals and companies will be able in future to operate cryptocurrency exchanges and custody services. It confirms that the BCC is the only institution able to approve virtual asset service provider licenses to individuals or companies. The Bank will also be responsible for evaluating the legality, opportunity, and socioeconomic interest of any proposal, along with assessing the probity of the applicant, and their experience.  

The regulation requires all license holders to comply with BCC rulings in relation to the prevention, detection, and combating of money laundering, terrorism financing, weapons proliferation, and other similar concerns. An application will require the approval of the General Directorate of Investigation of Financial Operations of the BCC.

Significantly, in relation to how cryptocurrencies may be bought, sold, or used in Cuba, the BCC said that it will determine which cryptocurrencies or digital assets can be listed on Cuban exchanges through the provision of the license. 

Licenses will be approved for a period of one year, extendable for a second year, given the experimental and innovative nature of this type of activity, the Bank said, and only after consulting with a seemingly new body, the ‘Grupo de Criptoactivos’. Anyone holding a licence for existing crypto currency operations outside Cuba, whether a Cuban or a foreigner, must apply for a licence to operate in Cuba. 

Exceptionally, in the case of state interests, the BCC can grant a license without the entity having to meet the requirements. In addition, virtual asset service providers will not be allowed to cease their operations without authorisation from the BCC. The new regulation also defines the activities that virtual asset service providers may engage in.

Violation of the regulation’s provisions, of complementary regulations, or the license granted, and those operating without a license will incur ‘a punishable administrative liability’. 

Last August the BCC gazetted a resolution establishing rules for the use of cryptocurrencies. This made clear that the BCC, “for reasons of socioeconomic interest,” may agree to “the use of certain virtual assets in commercial transactions and grant a license to virtual asset service providers for operations related to financial, exchange, and collection or payment activity’ in and from Cuba.” 

Taken together the two regulations suggests that Cuba is moving towards the wider use of cryptocurrencies, possibly in response to the direct and indirect impact of US sanctions on international financial transfers and many financial institutions unwillingness to manage remittances and other payments to Cuba. The popularity of cryptocurrency has recently grown in Cuba in response to the difficulty of sending remittances from the US to the island. Among the most popular crypto currencies in use are Bitcoin, Ethereum Litecoin, and USDT.

The new regulation can be read in Spanish at 

https://www.gacetaoficial.gob.cu/sites/default/files/goc-2022-o43pdf.pdf

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

Photo by Jose Fontano

11th April 2022

President Díaz-Canel has suggested that Cuba should not be afraid of entering into a dialogue with the US, citing comments made in 2009 by the country’s former President, Fidel Castro.

In a Tweet with no clear context or explanation other than the coincidence of a date thirteen years ago when Fidel Castro wrote a reflection accepting the validity of dialogue with the United States, President Díaz-Canel wrote: “Fidel: It is not necessary to emphasise what Cuba has always said: we are not afraid of dialoguing with the United States. We do not need confrontation to exist either, as some fools think; we exist… because we believe in our ideas, and we have never been afraid of dialoguing with the adversary. 5/4/2009″.

The 5 April Tweet was accompanied by a picture of Cuba’s former President dressed informally.

There has been no further comment from Cuba’s President or from the US Administration. Although the message and its historic context were noted in Cuba’s state media, it was largely ignored beyond the island. 

The reference to the late President’s reflection was to a published column in which Fidel Castro used the identical words, before praising the then US Senator, Richard Lugar, for calling for a new US policy of engagement. In his 2009 column, Castro noted that Lugar has “his feet on the ground” and does not fear that he will be called “soft or pro-socialist” in making the argument that “the measures of the United States against Cuba, throughout almost half a century, constitute a total failure.” The commentary, made after Cuba’s former President had retired after a period of illness, was influential within the Cuban Communist Party and seen as endorsing change.

Castro, then eighty-nine years old, wrote that dialogue was the only way of procuring friendship and peace between peoples.

At the time, Lugar, a senior Republican on the Senate Foreign Relations Committee, urged President Barack Obama to “recast a policy that has not only failed to promote human rights and democracy, but also undermines our broader security and political interests”. In doing so he called for the creation of a special envoy to begin direct talks with Cuba on issues of mutual concern.

That month, Obama signed into law a congressional spending bill which eased some economic sanctions and travel restrictions on Cuban Americans traveling to Cuba. The decision was widely interpreted as a first step towards the gradual normalisation of relations. 

Later that month on 17 April at the Summit of the Americas held in Trinidad, President Obama said: “The United States seeks a new beginning with Cuba. I repeat today that I’m prepared to have my administration engage with the Cuban government on a wide range of issues, from drugs, migration, and economic issues to human rights, free speech, and democratic reform.”  

Although a commentary on the official online Cuban platform Cubadebate suggested that Díaz-Canel’s intention to be open to dialogue was “more like crying out in the desert”, the sudden and so far unexplained reference by Cuba’s head of state may suggest that a dialogue is under active consideration. If this is so, it may be intended to indicate within a Cuban collegiate political context that there is an historic precedent for engagement, endorsed by Cuba’s former leader whose thinking remains influential within the Cuban Communist Party and State.

President Díaz-Canel’s comments came in a week when a high-level US delegation of agriculturalists visited Cuba (see report below). 

Describing its members as bipartisan and made up of the most prestigious institutions in the US agricultural sector, he told the group that US agriculture had always been “at the forefront of understanding promoting and fostering relations”, noting the work US agriculture undertook in 2000 to promote a debate on Cuba in the US. 

The issue of the US embargo on Cuba is expected to be raised by some nations at this year’s Summit of the Americas to be held in June in Los Angeles.

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

4th April 2022

Photo by micheile .com

The Cuban government has said that despite the many difficulties it faces, it believes it will be able to achieve its target of a 4% increase in GDP this year.  

Noting this, the Minister of Economy and Planning, Deputy Prime Minister Alejandro Gil, observed that in the first three months of 2022 there had been a “gradual recovery” but that this would not be able to make up for the 13% overall fall in GDP that occurred in 2020 and 2021. 

In his reported remarks to meetings of the Council of Ministers, the trades unions, and  provincial governors, Gil said that the country had begun a gradual recovery from the impact of COVID-19, the intensification of the US embargo, and the more recent impact of the conflict between Russia and Ukraine. He cautioned, however, that as the price of food and fuel increased internationally, Cuba’s internal market would have to become more efficient and productive.  

Gil noted that while exports were increasing, the country must also address negative economic factors such as the poor sugar harvest, a drought in many parts of the country, and the negative effect of the conflict between Russia and Ukraine on tourism arrivals from Russia.  

Speaking to the Central de Trabajadores de Cuba (CTC) on 26 March he made clear that to achieve forecast growth, much would depend on being able to meet tourism visitor forecasts. Although February arrivals were only 66.3% of what had been planned, he said, Cuba had no intention of giving up its objective of seeing 2.5mn international visitors this year.   

Telling union leaders that his immediate economic priorities were addressing the cost of power generation and inflation, Gil indicated that the challenge government faced was maintaining existing  electricity rates and the price of fuel at a time when cost of fuel had increased substantially. 

He also  expressed concern about the inflationary effect that the informal exchange of convertible currency was having, in part resulting from tourism. On the battle against inflation, he was quoted as saying that government had “bet on a growth in supply” but warned that the results would not be seen quickly. 

“Our economic model recognises the market but regulates it. It is not a free market – it is limited- there must be rationality in prices,” he told CTC delegates attending an annual evaluation meeting.  

Subsequently, Gil noted when he addressed a Council of Ministers meeting on 29 March, that although “certain economic indicators” for February had been more favourable than January, the overall economic situation remained “tense”. Despite this, he said, control of the pandemic was enabling the goods export plan to be fulfilled, tourism was showing “ discreet progress”, and more agricultural products were coming to market  

Speaking about exports, he said that in the first two months of 2022 the best-performing sectors were rum, lobster, sea shrimp, other fisheries products, honey, and nickel. Running counter to this, he noted that planned national production of rice, beef and pork had not been met in February, but milk production was improving because of an increase in the price paid to producers. Although there was now “greater stability in supply”, an essential factor in controlling inflation in the country, Gil said that production was still far from satisfying demand.  

Addressing the measures needed to tackle inflation, he said that more direct action was required. “It is not just about issuing a resolution from the Ministry of Finance and Prices that establishes certain parameters, [but] we must combat this, arguing with cost sheets in hand,” Cuba’s state media reported him saying. 

At the same meeting President Díaz-Canel made clear that while Cuba could not “renounce compliance with the economic plan”, government must undertake constant and realistic updating, taking into account what is being experienced. He also reportedly called for “expanding in a more efficient and effective way, foreign investment in the country.” 

Earlier, Gil had outlined to a meeting of provincial governors the details of a revised 2022 plan containing 158 priority actions they will be expected to implement to help stabilise the economy.  

These he said included: the adoption of measures to end losses by state enterprises; the creation of commercial contracts with both state and non-state enterprises able to undertake the large scale production of goods containing a low import component; stronger fiscal controls; the gradual establishment of a single price policy for both the state and non-state sectors; the provision of more quality employment in services; developing the participation of the non-state sector as a supplier of goods to stores and store chains selling in CUP; and the transformation of the governance of state enterprises. 

“Each territory is responsible for preparing its implementation and compliance programme, broken down to the level of popular council and neighbourhood,” Gil told participants. 

Photo by Philip Myrtorp 

28th March 2022

Cuba’s Prime Minister, Manuel Marrero, has said that in the absence of Russian visitors, it will be vital to strengthen the presence of tourists in Cuba from traditional source countries such as Canada, the UK, France, and Germany. He also noted that it will be necessary “to bet on the Latin American market and do more to promote offers for the domestic market.” 

Speaking at the annual ‘audit’ meeting for the sector, Marrero, formerly Cuba’s Minister of Tourism, said that to achieve the sector must apply new methods to promotion and marketing to demonstrate internationally the diverse and natural character of the product Cuba has to offer.  

It will also be necessary to study the competition more, he told participants from the industry and government. “Marketing is more aggressive; it is necessary to dare more and rejuvenate [tourism]. We live in different times and therefore we must act differently, revitalise ourselves, and not continue using conventional methods”, he said. 

Accepting that Cuba is experiencing problems in obtaining the supplies necessary to ensure a high quality of service, he said that the country “cannot lose a second in looking for alternatives and finding solutions utilising national resources.” 

In his reported remarks, Marrero set out several priorities aimed at revitalising tourism. These included designing new offers; encouraging multi-destination tourism; transforming the Cuban tourism business system by developing more innovative companies in the sector; consolidating existing businesses to increase efficiency; and seeking out the largest possible number of linkages within Cuba with other sectors such as agriculture. He also stressed the importance of those in the industry promoting the idea of continual maintenance, recovering rooms that are unserviceable, and computerising every aspect of tourism. “We need a more efficient and sustainable tourism”, Marrero stressed. 

Introducing the event, President Díaz-Canel, had told participants that the sector’s recovery was essential for the country’s economy. Tourism, he said, needed to be more innovative, do more to encourage social interaction with visitors, ensure good experiences, and involve Communist Party cadres in encouraging improvements in the quality of services. Tourism he said, “gives us prestige and shows our country with all its potential.”  

Cuba’s President additionally highlighted the need for the industry to take advantage of new measures introduced by government which enable independent management and decision making in the state and non-state business system. Tourism entities, he said, “have the function of leading the chain with the non-state sector”. 

The greatest investment dynamics in the country in recent years, he noted, had been in tourism, a fact “not always understood by a part of the population.” He also stressed the importance of increasing the number of individuals in the industry with doctorates and master’s degrees related to organisational and managerial issues, who are able to innovate and find solutions to the problems the sector needed to address. 

Other speakers observed that despite the uncertainty following the exit of Russian visitors from the Cuban market, Germany and the UK had begun to fill the void, arrivals from Poland and Belgium were increasing, and the Canadian market, previously Cuba’s most important, was recovering. They also noted that there was a need for municipalities where tourism existed to include the industry in their development strategies in order to promote investment in productive chains.   

Cuba continues to forecast some 2.5mn arrivals this year, despite the loss of the Russian, Belarusian, and Ukrainian markets. Data from Cuba’s National Statistical Office (ONEI) show arrivals increasing in January and February, with 281,286 Cuban ‘travellers’ living overseas (who are counted separately) and 185,749 visitors (largely international tourists) arriving in the country. Pre-pandemic, in January and February 2019, Cuba saw a total of 949,035 arrivals and in 2020, 792,505.  

Cuba lost its rapidly growing Russian tourism market almost overnight at the end of February following its invasion of Ukraine and subsequent overflight bans, currency transfer restrictions, and other sanctions imposed on Russia and Belarus by the US, Europe, and other nations. 

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

Photo by Remy Gieling 

21st March 2022

Cuba’s leadership has launched a process that will analyse on a company-by-company basis why state enterprises projecting losses for this year have done so, and see measures introduced to reverse the situation. 

Announcing this to a meeting involving company representatives, President Díaz Canel said that it would be necessary for each loss-making enterprise to prepare for the audit and have ready their best talent to respond on how they intend to move forward.  

According to Deputy Prime Minister, Alejandro Gil, the Head of Economy and Planning, the process will begin rapidly, starting with state companies projecting losses for 2022, and then move on to those not forecasting such an outcome but which are expected to be loss making. The process, he said, will conclude before the end of May and result in the presentation of a final report that will detail the outcome, the measures to be taken, and the deadlines for their execution. 

To this end, Gil said, temporary multidisciplinary working groups will be formed that will include representatives of the Superior Business Management Organisation (OSDE), the University of Havana, the National Office of Statistics and Information (ONEI), and the National Association of Economists and Accountants of Cuba (ANEC). Others to be included are representatives of state business and the unions in the form of the CTC. Similar working groups are to be established in Cuba’s 15 provinces and the special municipality of Isla de la Juventud. 

The announcement of the extraordinary audit follows a presentation by Gil indicating that while many state companies were exceeding projections in relation to profits and sales and are close to expected levels of exports, more than 400 state companies planned to operate at a loss this year. According to Cubadebate, Gil told the meeting that financial statements captured in January by ONEI had shown that of the 1,232 entities that had reported (273 had not done so), 1,178 were from the state system, and of the 457 companies ending the month with losses, 446 belonged to the state business system. 

Observing that “446 is an astronomical figure” and that just 16 enterprises accounted for 50% of the losses, Gil said that 93% of the loss-making  state companies were concentrated in agriculture, the sugar industry, the food industry, construction, transportation, and local subordinate companies. He indicated that the losses involved amounted to more than CUP12.6bn (US$525mn). 

Planning for losses, he was quoted as saying, “is a strategy that cannot continue” because the design established for the state business system required it to be efficient and to operate “with reasonable, fair profits”. Unprofitability, he added, stood in opposition to the measures government had adopted, requiring the state business  sector to be productive, efficient, and autonomous.  “This has to be a year of transformation of the state company”, he said. 

In his reported remarks, Gil made clear that solutions will have to be found through cost savings and will avoid problem solving involving transferring losses and costs to prices. Explaining that any such an approach would have an inflationary impact, he said that increasing prices would not guarantee that state companies remained the countries principal economic actors. All socialist state companies must now provide favourable results to the economy, he said.

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.