Private banking, usufruct land and end of subsidies: the keys to historic reforms in Cuba

BarcelonaAmidst the negotiations with the United States, and in a social situation on the brink due to the hardening of Washington's historic embargo, Cuba has approved a package of economic reforms aimed at liberalizing and decentralizing its economy. The measures involve significant modifications ranging from the approval of private banking to changes to attract capital from the diaspora. In summary, they mean shifting the centrality of the state, evolving a socialist model that for years had remained almost intact, beyond specific reforms like those of Raúl Castro in 2011.

the hardening of Washington's historic embargoPrivate banking

Cuba has announced that it will authorize private banking operations, under the supervision of the Central Bank of Cuba (BCC) and on equal regulatory terms with state banking. It will also allow the establishment of non-bank or non-financial private capital institutions, both national and foreign, for microcredits.

Likewise, other capitalization channels for banks will be designed, in addition to the resources from the State budget, and restrictions on foreign currency payments between businesses with foreign capital and their national suppliers will be eliminated. In line with this opening to the global private market, State authorization will no longer be required to open foreign currency accounts.

Foreign investment

Another of the areas that until now were highly controlled and planned was that of investments on the island. This is now changing. The Cuban government will allow Cubans residing abroad to invest directly in the country on equal terms with Cubans living on the island. The executive also proposes to eliminate commercial bureaucratic obstacles, to make foreign bank accounts more flexible, and to extend the limit for the granting of surface rights up to 99 years and usufruct rights for more than 50 years for foreign investment. It will also allow foreign investment in Old Havana and in other heritage areas.

Private companies

The flexibility that castrism had already promoted in the past to open small and medium-sized enterprises in the country now goes a step further: the administration will authorize all pending applications. 7,254 requests from economic actors that were stalled, of which 3,505 have already been certified, according to official data. In addition, private companies will also be allowed to exceed the current limit of 100 workers.

Despite occasional openings to the private sector, control over business concentration had been strict until now: a person could only be the owner of a private company. This also changes now, as this limit also falls, and the opening of micro-enterprises in the agricultural sector is allowed, in which only cooperatives could operate until now.

Agricultural production

The national agricultural production has been experiencing years of sustained contraction due to a lack of inputs (raw materials), fuel, and foreign currency, which has led to a surge in inflation for the basic food basket and dependence on very costly imports. The reforms propose granting the real right of usufruct over land to state, private, mixed, or natural legal persons for an indeterminate period. This affects all agricultural, forestry, and tobacco production, as well as ecotourism and agrotourism development projects.

Tourism

Cuba plans to restructure one of its economic engines: tourism. Reforms in this sector anticipate the entry of new investors under new business modalities and the international expansion of Cuban franchises. In this regard, among other activities, real estate development will be permitted in all tourist areas of the country, as well as the possibility of developing real estate businesses in Havana and other areas linked to this sector.

Subsidies

Another not insignificant change is found in the aid system. Until now, the prices of basic products were set by the State (with what was known as the rationing booklet). But with the approval of the new measures, prices will be set according to the market. In this way, economic aid will cease to be universal and product-focused to become personal and targeted at citizens in situations of social exclusion or vulnerability.