CUBA STANDARD — Two days after the Obama administration’s March 15 announcement to de-penalize the use of U.S. dollars, the Cuban government said it may end a 10% surtax on the exchange of dollars in the island.
The Cuban measure will be effective as soon as Cuban institutions are allowed to use US dollars without being penalized, Foreign Minister Bruno Rodríguez said during a press conference at the Tryp Habana Libre hotel, adding that his government is “studying the reach and practical effects of the U.S. measures.”
In the coming days, Cuba will try to make dollar transactions with third-country and U.S. banks, “to verify whether, in effect, these transactions can be done, and whether foreign and U.S. banks have indications that they can make these operations with Cuba, without fear of unjust and intimidating penalizations,” he said.
This week, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published two amendments to a body of rules called Cuban Assets Control Regulations (CACR), effective immediately. One allows U.S. banks to process “U-turn payments” in dollars between third-country banks and Cuban entities. The other measure allows U.S. financial institutions to process dollar-denominated monetary instruments such as cash or travelers checks, presented by Cuban entities via third-country banks. This regulation enables Cuban companies and institutions not only to change dollars into other currencies, but it allows Cuban banks to deposit funds in dollar-denominated correspondent accounts in third-country banks.
In a press briefing announcing the measures, Ben Rhodes, Obama’s deputy national security adviser, encouraged Cuba to eliminate the 10% exchange rate penalty for U.S. dollars, imposed by the Cuban government in 2004 in response to tightening U.S. enforcement.
At the press conference in Havana, Rodríguez emphasized the importance of the dollar-depenalization measure, but said that for foreign and U.S. banks to feel legally and politically safe enough to engage with Cuba, OFAC will have to issue “numerous legal clarifications.”
“Without doubt, it concerns a significative aspect of the blockade,” he said. “However, for this measure to be viable, there will have to be political declarations at the highest level of the U.S. government.”
“The banks will have to understand whether this measure, in effect, means that in the near future the financial persecution against Cuba ceases. The intimidating effects accumulated during decades will have to be reverted, particularly in the recent period during which sanctions were applied against international banks — in other words, foreign banks from third countries — for more than $14 billion just for relating in a totally legitimate way with Cuba.”
As recently as October, U.S. federal and state agencies fined France’s Crédit Agricole SA and its investment bank subsidiary CACIB $787 million, in part over Cuba-related dollar transactions. In summer 2014, BNP Paribas paid $8.7 billion in fines to settle U.S. investigations, among others over Cuban dollar transactions; as part of the settlement, the French bank agreed to stop doing business with Cuba altogether, in any currency. In February 2015, Germany’s Commerzbank followed, with a $1.7 billion settlement.
Other banks reportedly targeted by U.S. investigations include France’s Société Générale, Germany’s Deutsche Bank AG, and Banamex, a Mexican subsidiary of Citigroup.
Rodríguez also criticized the Obama administration for not including in the latest set of measures the permission for Cuban banks to open correspondence accounts at U.S. banks. Late last year, the first U.S. financial institution, Fort Lauderdale-based Stonegate Bank, opened a correspondence account with a bank in Cuba.
“This is indispensable to sustain normal financial relations,” Rodríguez said, adding that Cuban financial transactions with the United States still have to be done through third-country banks, increasing the cost of transactions and fears of disruption.
Particularly U.S. food and agricultural products exporters to Cuba have been clamoring for direct banking relations.
“I would like to ask the U.S. government why this step has not been taken now, why it can’t be done, why it has been excluded from these measures.”
Rodríguez also lauded the measure that allows U.S. travelers to visit the island as individuals, without the need of a sponsoring organization, but he criticized the continued prohibition of tourism.
Telecommunications at an impasse
Meanwhile, the idea of U.S. investments in telecommunications in Cuba — emphasized by the Obama administration — seems to be stuck, for now.
Rodríguez accused the U.S. telecom plans of pursuing “openly political goals” and said that Cuba “accepts the challenge, but we will act … based on the national information technology priorities of our society, and we will continue to protect the technological sovereignty of our networks.”
He also challenged the U.S. government to allow Cuban imports, particularly of biotechnology products, specifically referring to Heberprot-P, a diabetic-foot drug.