Source: Reuters
When Cuba in early August announced it was taking a major step towards electronic banking and a “cashless” society, the offices of fledgling small businesses across the communist-run country were left scrambling to figure out how to respond.
Most alarming to many budding entrepreneurs was a new 5,000 peso ($20) daily cap on cash withdrawals for businesses, one of several measures the government said were aimed at forcing Cubans to do their transactions electronically, via transfer, online payment and bank cards.
The changes were needed to stem a cash shortage, Cuban central bank officials said, as the fast-falling peso and soaring consumer prices combined to drain bank reserves and ATM machines.
“The demand for cash was growing faster than what we could provide to our bank branches,” said Alberto Quinones, vice president of Cuba’s central bank. The changes are being rolled out gradually over the next six months, officials say.
But concerns over their impact are already causing difficulties, said Yulieta Hernandez, founder and manager of Pilares Construction, a private, Havana-based builder that employs 60 people.
“We understand there is a crisis, and the need for banking, but this is our money,” Hernandez said. Her business had already adopted electronic banking but she often needs quick access to cash to pay for emergencies on job sites, she added.
Even before the new restrictions, Cuban entrepreneurs faced what might seem insurmountable hurtles anywhere else: spotty electricity and internet, widespread fuel shortages, and no practical way to legally exchange large amounts of local currency into the dollars needed to import merchandise from abroad.
Just three days after the rules were put in place, Hernandez said, more bad news rolled in: Many of her suppliers, once amenable to electronic transfers, were now only accepting cash, for fear of losing access to the paper money they needed to operate – the opposite of what the law intended.
That has put businesses like Pilares Construction in a bind: The company needs cash to operate but is prohibited from extracting it in sufficient quantity from its local accounts.
“Right now the effect … is like paralysis,” Hernandez said, adding that many business owners were already freezing investments. “People are waiting to see … if a solution is found for the problems (the rules) have created.”
Five entrepreneurs Reuters spoke with said the measures could dampen enthusiasm for investment in private businesses that sell food, fix cars, build houses and provide other goods and services where state-run enterprises have faltered….