BUSINESS NEWS|MARCH 6, 2018

Cash-strapped Cuba imposes new restrictions on imports

Marc Frank

HAVANA (Reuters) - Cuba has imposed new restrictions on imports by state-run companies,
ordering them to obtain a letter of credit from the central bank for purchases above the
equivalent of $100,000, as the Communist-run island struggles with a shortage of cash and
mounting commercial debt.

Central bank resolution 19/2018, which took effect this month, states that the measure is
aimed at ensuring companies have the resources to meet their foreign obligations and to
prevent that “the foreign debt continues growing.”

Cuba’s government frequently regulates demand for imports using access to credit and foreign
currency, and other mechanisms.

A western banker with extensive experience of working with Cuba said the measure would lead
to a short-term plunge in imports and to slower contracting of supplies.

The banker, who requested anonymity, said it might also shut down non-essential and insolvent
companies.

“Other Latin American countries have adopted similar measures in the past, for example
Argentina, but those were market economies not state dominated ones,” the banker said by
telephone.

U.S. embargoed-Cuba has suffered from the implosion of ally Venezuela’s economy and oil
industry, as well as lower commodity prices and dwindling domestic production following cuts
in electricity, fuel allocation and other inputs to state companies beginning in 2016.

Cuban exports of goods and services fell from $17.8 billion in 2014 to $13.6 billion in 2016 while
imports slipped from $13.9 billion to $10.3 billion, according to the government.

Cuba last reported its debt at $18.9 billion in 2014.

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Since then President Raul Castro’s government has restructured much of its official debt, but
according to diplomats and foreign businessmen state companies are overdue in paying more
than $1 billion to suppliers.

The central bank resolution says authorities need to “exercise adequate control” over debt. To
obtain a letter of credit, companies must prove they “have adopted measures to insure they
can meet their obligations at the time of payment,” it said.

Pavel Vidal, a former Cuban central bank monetary specialist, said state-run banks would now
function as an additional filter to ensure companies were solvent and could pay for imports.

He said Cuba had experienced similar payments problems every decade since the 1980s.

“They have figured out that the government can renegotiate the foreign debt, but if the state
companies do a poor job managing their finances they face the same problem over and over
again,” said Vidal, who teaches at Universidad Javeriana Cali in Colombia.

Source: https://www.reuters.com/article/us-cuba-trade/cash-strapped-cuba-imposes-new-
restrictions-on-imports-idUSKCN1GI290