Sudden banking cash-withdrawal limit threatens private sector and food imports to Cuba

Cuba’s Central Bank is dramatically restricting the amount of cash in local currency that private businesses can withdraw from their bank accounts, a move that threatens food imports amid ongoing shortages in Cuba.

Starting Saturday, Cuba’s private enterprises will only be able to withdraw a minimal amount of cash, 5000 Cuban pesos — equivalent to about $22 on the island’s informal market — for payments related to contracted goods and services between all “economic actors,” including state and small private enterprises, cooperatives and self-employed workers. That also includes the payments of salaries and other employee benefits.

Transactions above that threshold must occur through digital payments or other banking solutions.

The Cuban Central Bank announced the new regulations, published in the Cuban Official Gazette on Wednesday, as a way to encourage digital transactions, but critics say it amounts to a freeze of bank assets, known in Spanish as a “corralito,” a reference to corraling currency.

The rules also require small private businesses to deposit all cash revenue from sales in their bank accounts the following day or hire a government money transport company to do so. Private enterprises can continue selling their products and services in cash but will be required to offer their clients ways to pay with a bank card or with authorized digital platforms.

In a press conference Wednesday, top-ranking Central Bank officials said the measures are aimed at promoting the use of banks for transactions that, especially in the private sector, have evaded the system. They also said the rules are aimed at “protecting” the public, which has been complaining about the lack of available cash on the island.

Due to a galloping inflation rate, the government has been printing more pesos, the local currency. Still, the cash is not returning to the government’s coffers because the government stores have little to offer. Instead, the private sector is capturing more of that money.

In practice, the new measures mean that private businesses will be forced to deposit revenues in local Cuban pesos, but will not be able to withdraw the cash later to pay providers or for other operational expenses.

Even worse, critics say, small business owners will not be able to take their Cuban pesos to buy dollars in the informal market, which they need to pay for goods purchased abroad. That could hinder imports by the private sector at a time the government is unable to provide for the population, and food and essential goods are already scarce.

“It’s a corralito,” said a Cuban entrepreneur who asked not to be named for fear of government retaliation. “They’re trying to reduce the availability of cash, the number of businesses and that fewer people try to buy dollars so they can capture a little more of those dollars.”

“We are really talking about a battle for the dollars,” he added.

The Cuban entrepreneur said he believes there will be people who will have to close their businesses, fearing running afoul of the new regulations. If there are fewer products for sale, prices go up, and if people have less access to cash, the measure, he said, will hit the most vulnerable the hardest.

“This is a totally crazy idea,” a second entrepreneur who also asked for anonymity said. “It is a populist measure because people complain that there is no money in the ATMs. But what are you going to do, stop the economy?

The Cuban private sector has expanded after the government allowed Cubans in 2021 to create companies with up to 100 employees. Private businesses have become the primary importers of food and other basic goods because the government is broke, and providers do not want to sell to state enterprises. But these small and medium private enterprises, known as pymes, operate under excessive controls and regulations, and the government does not sell them dollars.

The private companies also can’t make regular bank transfers to pay providers abroad because Cuban banks have limited access to the international banking system due to the U.S. economic embargo. Sanctions aside, Cuban government banks lack hard currency to support those financial operations.

While many of the private businesses rely on complex financial schemes to overcome these limitations and import goods, access to dollars in the informal market is key for those to work.

Against this backdrop, the new measures have left many small business owners scratching their heads.

“They denote a total disconnection with the reality in Cuba,” said Yosué Montes de Oca Arias, the founder of AlaSoluciones, a tech business focusing on machine automation. The measure, he wrote on X, formerly Twitter, would likely cause private companies to under-report their revenues and try to get payments directly in foreign currencies.

“This new siege (not the first) will directly and quickly impact the price of products and services, as well as the value of the most widely used foreign currencies,” he added.

But few believe the government will be able to enforce the announced restrictions.

To start, the banking and digital infrastructure in the country does not appear to be prepared for the change.

Banks are frequently crowded with customers and will have to deal with a higher volume of daily deposits. The two only money transfer apps allowed in the country, EnZona and Transfermovil, developed by the government, frequently crash, their users say, and most places need the devices to read bank cards. When they have them, the connection to the system often fails.

“The Cuban state has shown that it is incapable of fulfilling its own plans,” one of the Cuban entrepreneurs interviewed by the Miami Herald said. “I don’t see how you can enforce these measures without resorting to repression.”

The repercussions can be so dire for businesses and the public that some experts believe private companies will find ways to circumvent the new regulations, just as they have done with many other measures that the government cannot enforce. Otherwise, authorities risk exacerbating more civic unrest.

“I don’t get stressed out,” another entrepreneur told the Herald. “This is unsustainable. I tell people that the measures will not work, or, if the government fully enforces them, they will leave the country without food, and people will take it to the streets again.”

“But I think, either way, capitalism will prevail; it’s an unstoppable force.”