ECONOMY-CUBA: Commercial Bank Credits Return

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Apr 23 1999 (IPS) - Bank credits are back on the financial scene in Cuba. The chance for Cubans to obtain loans returns in May as part of Cuba’s new banking policy after disappearing earlier this decade.

Cubans will be able to apply at the People’s Savings Bank (BPA) for loans in Cuban pesos for purchases, investments, or a totally new loan category for Cuba: cash.

The BPA, Cuba’s principal savings institution, will accept applications from people older than 18, who are legally qualified, have a regular income and a stable job and home address.

Cash loans will only be offered to public-sector employees and retired or pensioned government workers, thus excluding 160,000 self- employed workers

Vice-president of the BPA, Iliana Aguiar, revealed that in cases of credit for consumption or investment, individuals will have to justify their purchase or service request from a state-run business, entity, or organisation – never a private one.

Cubans will be able to obtain credit to buy furniture or household appliances, goods for personal use, automobiles, motorcycles, construction materials, and for payment of some taxes.

“A loan in dollars is one thing, but what am I going to buy with pesos?” said a 23-year-old woman in reaction to the news that the BPA will begin granting loans to individuals.

On the other hand, a professor, age 39, reacted differently. “Now things are really getting good,” he said. He sees the possibility of individual bank loans as an indication of “better times ahead.”

This professional and father of two, who earns less than 300 pesos per month (300 US dollars at the official exchange rate), was able to furnish his home in the mid-1980s thanks in large part to loans he received from the BPA.

Bank loans were commonplace in Cuba during 1980s with the growing supply of refrigerators, televisions, washing machines and other appliances imported from the Soviet Union and other former socialist bloc countries.

Now people going to the BPA offices will be able to ask for a minimum of 300 pesos . The ceiling for cash loans will be 3,000 pesos according to a resolution of the Central Bank of Cuba.

For consumer credits, maximum interest rates are fixed at eight percent, while the rate for cash and investment loans will be nine percent, the union weekly newspaper, Trabajadores (Workers), confirmed Monday.

The official exchange rate in Cuba establishes parity between national currency and the US dollar. However, in exchange houses opened by the government, one dollar buys 21 Cuban pesos.

Beyond the exchange rate, what most worries the majority of Cuban people is the weak purchasing power of the Cuban peso and the absence of significant offerings in that currency.

Independent experts conducted a poll last December among 200 Havana residents, all of whom expressed dissatisfaction with the current monetary duality.

This Caribbean island has been dealing with economic crisis since 1990, but the devaluation of the national currency reached its worst moments in 1994, when the exchange rate with the dollar was 150 Cuban pesos.

The legalisation of the dollar and the 1993 opening of a network of stores for sales exclusively in this currency was one of the first measures taken by Fidel Castro’s government to ease the effects of the crisis.

The launching of a policy for credits in pesos could be accompanied by an increase in the availability of the currency, something local experts claim is necessary for the recuperation of the national currency.

The BPA – the only entity of its kind on the island – had an active fund of 5,770.6 million pesos at the end of 1997. Of that total, five percent had been given as loans to corporate and individual clients.

Though in the last few years loans to the public have practically disappeared, they continued in certain cases and for sectors such as individual and co-operative farmers.

Corporate loans may also be applied for at the Credit and Commerce Bank, an entity arising out of the banking reform initiated by the government in 1995 which is still underway.