If MSMEs Are Important To Cuba, Why Nearing Seven Months And No Regulations Authorizing Foreign Investment And Foreign Financing? Biden Administration And 6,000 MSMEs In Cuba Are Waiting.
/Why The Delay? Nearing Nineteen Months And Cuba Has Yet To Issue Investment And Financing Regulations, Procedures For MSMEs. Biden Administration Authorized Investment And Financing In May 2022. There Are Nearing 6,000 MSMEs That Could Receive Support From U.S. Investors And U.S. Financiers.
Delays Are An Incentive For The Republic Of Cuba’s “Best And Brightest” Who Will Create And Manage And Grow MSME’s To Leave The Country And Pursue Opportunities Elsewhere- Particularly In The United States. That’s Not Good For The Republic Of Cuba.
Nearing seven months after the Biden-Harris Administration (2021- ) approved on 10 May 2022 the first license authorizing direct investment and direct financing to a privately-owned company owned by a Republic of Cuba national and located in the Republic of Cuba, the Diaz-Canel-Valdes Mesa Administration (2019- ) has yet to publish regulations as to the process for delivering the direct investment and direct financing.
With each day in delay, the government of the Republic of Cuba increases the level of suspicion by individuals and corporate entities that the self-stated commitment to the re-emerging private sector in the Republic of Cuba is sustainable.
Direct investment to and direct financing for a Micro, Small, and Medium-sized Enterprises (MSMEs) should not be equated to direct investment to and direct financing to a Republic of Cuba government-operated company or to a joint venture, economic cooperation agreement, or other form of engagement with a Republic of Cuba government-operated entity.
The process for MSMEs to receive direct investment and direct financing should be simple, should be easy, and should not require a committee to approve. Provided the MSMEs self-certify that they are in compliance with regulations issued by the government of the Republic of Cuba, MSMEs must be deemed to be compliant absent evidence of non-compliance.
According to the most recent data published by the government of the Republic of Cuba, there are 5,643 private MSMEs in the Republic of Cuba which includes sixty-eight (68) Republic of Cuba government-operated entities and fifty-nine non-agricultural cooperatives. Fifty-two percent (52%) of the entities are conversions of pre-existing enterprises and forty-eight percent (48%) are new enterprises.
On 10 May 2022, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury issued a license authorizing direct investment in and direct financing to a privately-owned company located in the Republic of Cuba owned by a Republic of Cuba national. Investment funds and dividends, and financing funds and interest/interest/principal payments must currently be transferred through financial institutions located in third countries because the OFAC authorizes United States-based financial institutions to have correspondent accounts at Republic of Cuba government-operated financial institutions, but does not authorize Republic of Cuba government-operated financial institutions to have correspondent accounts with United States-based financial institutions.
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Granma
Havana, Republic of Cuba
2 June 2021
Aprueba Consejo de Ministros perfeccionamiento de actores de la economía cubana. El Consejo de Ministros aprobó en su más reciente sesión el perfeccionamiento de los actores de la economía cubana, que incluye a la empresa estatal socialista; a las cooperativas no agropecuarias; a las micro, pequeñas y medianas empresas y al trabajo por cuenta propia, convocados todos a impulsar, cada uno desde su ámbito, el desarrollo de la nación.
“The Council of Ministers approves the improvement of actors in the Cuban economy. The Council of Ministers approved in its most recent session the improvement of the actors of the Cuban economy, which includes the socialist state enterprise; non-agricultural cooperatives; to micro, small and medium-sized enterprises and self-employment, all summoned to promote, each one from their own sphere, the development of the nation.”
Miami Herald
Miami, Florida
6 April 2021
“Cuba’s Ministry of Foreign Trade and Foreign Investment is opening the door to Cuban Americans who want to participate in foreign investment projects as the island tries to jump-start its beleaguered economy and encourage Washington to loosen sanctions. Katia Alonso, the ministry’s director of foreign capital investments, told the Miami Herald by email in response to a list of questions that Cuba won’t reject potential business bids from Cuban Americans based on the sole fact that they live in the U.S. — something she said the law has never prohibited, though in the past exile entrepreneurs haven’t always been welcomed either. “Cuba is open to foreign capital regardless of its place of origin,” Alonso explained, “so if a Cuban American were interested — whether they were born in the U.S. or migrated to that country — in investing on the island, their interest would be evaluated just like any other potential investor from any other place of origin.””
Recent Administration Policy Changes Background And Issue With Payments
The Biden-Harris Administration (2021- ) policies and regulations have, thus far, focused upon providing connective and re-connective opportunities to the re-emerging private sector in the Republic of Cuba.
The remaining challenge to transition Biden-Harris Administration policies from aspirational to operational is recreating a cost-efficient, timely, transparent, and secure mechanism to move funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States through the re-authorization of direct correspondent banking.
The issuance of OFAC licenses and Bureau of Industry and Security (BIS) of the United States Department of Commerce licenses in May 2022, September 2022, and November 2022 will by implementation result in two-way transfers that are small in value but consistent.
Privately-owned companies located in the Republic of Cuba will need to send funds for product purchases (including recently BIS-licensed electric vehicles), send dividend (profit sharing) payments to the source(s) of direct investment, and sending interest and principal payments to source(s) of direct financing.
For the United States Department of State to continue to require transactions include a third-country financial institution (and the number of third-country financial institutions willing to engage with Republic of Cuba-related transactions continues to decline) is cost inefficient, less transparent, and an impediment to fulfilling the goals of the licenses issued thus far by the OFAC and BIS.
