ECONOMY-CUBA: No Readjustment without Banking Reform

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Jan 2 1996 (IPS) - The tidal wave of radical change in Cuba will go full steam ahead in the new year with government plans for deep banking reform to consolidate the economic readjustment.

The renewal cooked up by the National Bank of Cuba (BNC) will do away with the State monopoly on banking, resurrecting structures which were seen as “un-socialist” for more than 30 years.

BNC president Francisco Soberon said a banking system is needed to offer rapid, secure and effective payment, channeling savings to where they can be most efficiently used and guarantee the functioning of the economy.

Specialist sources said that the market economy, adopted gradually, will force the nation to play a competitive financial game which will be impossible to win if all the power is in one pair of hands.

The decentralisation process began to gain ground two years ago when the currency reserves reached rock bottom, forcing the government to search around for loans and financing for the investments.

The first sign of the process really getting underway was the creation of the International Bank of Commerce Ltd. (BICSA), in Jan. 1994, which took over the commercial arm of the BNC and is today at the core of a budding corporation called New Bank Ltd.

BNC vicepresident Jose Rodriquez declared in November that the new banking group was affiliated to the chain of currency exchanges, CADECA S.A., the financial novelty with the most impact for the average Cuban.

The National Financier Ltd. (FINSA) was also created to provide more flexible financing for businesses in Cuba, above all in short- term loans.

However, the fact that all the new bodies will ultimately be under the control of the New Bank has raised suspicions amongst observers.

Soberon and other authorities defend the need to separate the functions of the Central Bank and the Commercial Bank. They want to see the creation of a Central Bank to control national financial activity, alongside organisms like the Ministry of Finance and Prices.

Specialist sources state that the national banking system has been forced to diversify its structures in order to respond to similar changes taking place in the economy.

The few the large State owned companies which dominated agricultural production have given way to a mass of more than 3,000 cooperative basic production units, 1,161 agricultural cooperatives and 86,000 private agricultural producers.

Any way you look at it, the banking reform will have plan its action in order to support the tendency towards self-employed workers, small, medium-sized and private businesses.

For the time being, most of the pressure in Cuba is coming from the changes in foreign trade: the desperate need for credit opened the nation up to foreign investment and commercial autonomy was granted to more than 240 national businesses.

The presence of representatives from 11 foreign banks on the island has introduced the important ingredient of competition and revealed the increasing interest awakened by the Cuban economic changes.

However, the government is trying to keep control of a chunk of the internal market of banking business, just as they did with foreign investment.

Rodriguez said that “the foreign banks are not authorised to carry out any banking activity in the country.”

Their role is limited to “promoting the business of the island’s banks,” he said, and for the present, “there is no possibility of giving licenses to any foreign bank to offer other types of services in Cuba.”

The Spanish Bilbao Vizcaya Bank (BBV) recently opened a branch in Cuba, offering financing for the Las Tunas area sugar production, in association with the PEMBA.

The Netherland Caribbean Bank is also there, along with the Spanish Exterior Bank, the Sabadel Bank and the Royal Bank of Canada.

A party to celebrate the 45th anniversary of the Central Bank recently, was attended by 120 banks from 45 countries, going to show that despite the operative limitations, the foreign banks are very interested in the Cuban economy.

BNC workers considered this meeting opened new perspectives for a solution to the problem of the national foreign debt.

In the opinion of local economists, foreign debt is one of the main obstacles to the country entering fully into the capital market and achieving economic growth – not counting the money owed to the former Soviet Union, the foreign debt runs to 8.6 billion dollars.

ECONOMY-CUBA: No Readjustment without Banking Reform

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Jan 2 1996 (IPS) - The tidal wave of radical change in Cuba will go full steam ahead in the new year with government plans for deep banking reform to consolidate the economic readjustment.
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