AP writes that Cuba has just announced a new credit system that will offer loans to small-business owners, independent farmers, and other citizens beginning in December, advancing promised reforms to the country’s state-planned economy. Credit will also be available to people looking to purchase building materials, pay for labor associated with home construction, “acquire goods for their personal property or satisfy other needs.” Here are excerpts with a link to the full article below:
The lack of a lending system has been one of the chief complaints of the expanding class of entrepreneurs running independent businesses as part of President Raul Castro’s economic overhaul, which aims to right Cuba’s foundering economy and has picked up steam since a landmark Communist Party summit in April.
Economists have also said credit is necessary if private businesses are to grow beyond subsistence levels. “The new credit policy is another step toward the configuration of a mixed economy integrating state and non-state sectors in a common national market,” said Arturo Lopez-Levy, a Cuban-born economist at the University of Denver. “This is a significant departure from the partially reversed changes of the 1990s, when the archconservative 5th Communist Party Congress conceived the non-state sector as walled off from business activity.”
The island government also established rules for paying private contractors who do business with the state. Offering loans for home construction could help address the island’s acute housing shortage and bolster Cuba’s brand-new real estate market, created earlier this month when property sales were legalized for the first time since shortly after the 1959 revolution.
[. . .] Applications will be evaluated using people’s “legal personal income” as the most common source of repayment, according to the law. It also allows people to take out mortgages on second homes or vacant lots, a novelty after five decades of prohibition against using homes as collateral. Under the housing law that took effect November 10, Cubans are limited to ownership of a primary residence and a second vacation house to avoid accumulation of wealth.
[. . .] Financial institutions authorized by Cuba’s Central Bank will offer the loans in Cuban pesos, valued at 24 to the U.S. dollar, rather than the stronger convertible currency, which is one to the dollar. The Central Bank will also set minimum and maximum interest rates.
The lending system is the latest piece of Castro’s economic reform package, which the government touts as an update of its socialist model despite an increasing embrace of free-market mechanisms such as self-employment, a new tax code, and liberalized rules on home and auto sales.
[. . .] Last week, the government put in place a law authorizing farmers to sell their products directly to state-run tourist hotel and restaurant concerns, eliminating the need to go through a state middleman. The government also allowed farmers to negotiate their own prices.
For more information about banks in Cuba, see http://www.bc.gov.cu/english/foreign_banks.asp
Photo of Banco Nacional de Cuba in Camaguey from http://www.pprincipe.cult.cu/ciudad-pasado/Camaguey-Patrimonio%20Urbano.php