Business Paralysis, Investment Curb: The First Consequences of Egyptization in the Private Sector

Private businessmen say they feel “paralyzed” by the expected consequences of banking who established the Cuban regime, and they are afraid to “stop Hamas” investing in their business, according to the agency Reuters.

When the Cuban government announced at the beginning of August that it was taking a big step towards electronic banking and a “cashless” society, red alerts went off for start-ups and small businesses on the island. The thing of most concern to many entrepreneurs was the new cap of 5,000 pesos, about $20, Daily limit for corporate cash withdrawal. This measure, according to the government, was intentional Pushing Cubans to conduct their transactions electronicallyBy transfer, online payment or bank cards.

Officials from the Central Bank of Cuba said the changes were necessary to reduce liquidity shortages. While the rapid depreciation of the peso and the rise in prices depleted the reserves of banks and ATMs. “The demand for cash is growing against the cash income that does not support the work of every branch of the bank,” said Alberto Quinones, vice president of BCC, on television.

It has been difficult to digest these changes, Yulita Hernandez, founder and director of Pilares Construcion, a Havana-based private company that employs 60 people, told Reuters. “We understand that there is a real crisis in the country and that banking is needed, but it is the company’s money.”Hernandez said, noting that his company has already switched to online banking, though he often needs access to cash to pay for business emergencies.

Even before the new restrictions, Cuban businessmen have faced what may seem insurmountable obstacles such as electricity and internet outages, Fuel shortages and no legal way to convert large amounts of local currency into dollars needed to import goods from abroad.

Three days after the rules were in place, Hernandez said, bad news arrived. “Many service providers have started reporting that they do not accept transfers, and now they just want cash for fear of losing access to the fiat money they need to operate, contrary to what the law intends,” the entrepreneur explained.

“The impact at the moment is like paralysis,” Hernandez said, noting that many business owners are already freezing their investments amid growing uncertainty. “People are waiting to see how (the banks) will perform,” he added.

Cuban businessmen consulted by Reuters said the measures could dampen enthusiasm for investing in private companies. They sell food, repair cars or build homes, providing a range of goods and services that state-owned enterprises have historically faltered in.

Leonardo Rodriguez runs Kaibocu, a Havana-based company that specializes in processed foods and agricultural products. Rodriguez said he and other businessmen began using electronic banking services long before the announcement of new measures to comply with tax laws that evolved as the private sector grew.

“(Cubans) have been doing business on the street for many years, without ever knowing what a tax system is. We are not adapted to a tax system, to declaring sales, to declaring income. We Cubans are not prepared, these concepts are very newRodriguez said.

On the other hand, Ronald Venero, a 34-year-old fruit and vegetable trader from Havana, said that most farmers who sell goods do not accept payments via electronic devices. “Peasants negotiate their goods in cash. And if you tell them you’ll pay by card or by wire transfer, they say no.”Venero said.

These consequences are consistent with those predicted by Rafaela Cruz, an analyst at Cuba daily. Banking resulted in a Less reliable than the Cuban state” And now, “Investing in Cuba is very risky.” All this “removes from the country those productive investments that require long maturation periods, precisely those that the Cuban economy needs most, while it attracts investments that are limited to resale and quick profit, and are those that lead to higher prices. Supply shock, loss of credibility, falling investment and rising dollar cost mean more fuel for the inflationary fire Cruz warned of the increased inflation that these measures would bring.