Lack of foreign investment may be easier to overcome than exclusion from financial systems. Even the state most committed to swaraj, swadeshi, and satyagraha needs international trade. The impacts of new instruments of financial exclusion that Washington has been using in part explain what looks to be Raúl Castro's foreign and domestic policy.
<http://www.iht.com/articles/2007/07/25/business/peso.php> Cuba finds itself isolated from financial systems By Anthony Boadle Reuters Wednesday, July 25, 2007
HAVANA: Heightened scrutiny of banking transactions by the United States since the Sept. 11, 2001, terror attacks has led European and Canadian banks to curtail dealings with Cuba, according to bankers and businesses.
Cuba ceased exporting armed revolution to Latin America two decades ago, but Washington still lists the Communist country, along with Iran, Syria, Sudan and North Korea, as a "rogue" state that sponsors terrorism.
The U.S. Treasury denied that it was actively pressuring foreign banks to cut off business with Cuba but said that it had stepped up pressure on banks to cut ties with Iran in recent months.
Such efforts may be causing international banks to rethink their overall policies toward customer-relationship risk.
"Financial institutions and companies have to make their own decisions regarding what business they want to take on, and evaluating the risks posed by certain customers is certainly a key factor," a Treasury official said.
The USA Patriot Act allows the U.S. authorities to confiscate assets and penalize institutions that fail to report money laundering and terrorist financing. The result - perhaps intended - is that Western businesspeople in Havana are having difficulty moving dollars to and from Cuba because banks are increasingly refusing their business.
HSBC, Barclays, Credit Suisse, Royal Bank of Canada and the Bank of Nova Scotia, also known as Scotiabank, have closed accounts of Cuban companies or reduced business tied to Cuba since last year to comply with U.S. regulations.
"Canadian banks have told clients to close their accounts and their credit cards because they have a business address in Cuba," said Mario Simonato, a Canadian importer of vehicles and heavy equipment into Cuba from Canada.
ING Groep, the first big Western bank to set up business in Cuba, in 1994, said two weeks ago that it would close its Havana office. ING said it was purely a business decision, but it followed the blacklisting last year by the United States of ING's banking joint venture with Cuba.
Scotiabank last year ended dollar transactions by the Cuban Embassy in Jamaica and was criticized for bowing to U.S. rules.
"It is a risk-mitigation measure, a straight issue of our ability to settle transactions on U.S. dollar accounts," said a Scotiabank spokesman, Frank Switzer. "It applies to anyone on a U.S. sanctions list."
The move to comply with U.S. regulations came after the heaviest penalty in banking history. In 2004, the largest Swiss bank, UBS, was fined $100 million by the U.S. Federal Reserve for helping Cuba, Iran, Libya and the former Yugoslavia swap old dollar bank notes for newer currency.
UBS said it had "substantially completed" its exit from dealings with Cuba, Iran, North Korea, Myanmar, Sudan and Syria by the end of last year.
"UBS took this decision in 2005 after its own, careful evaluation of the costs and benefits of doing business with counterparties in these countries," said Doug Morris, a UBS spokesman in New York.
Shunned by Swiss banks, Cuba has had trouble funding its United Nations mission in Geneva, a European diplomat in Havana said.
In June, Cuba complained that UBS and Banistmo, based in Panama and owned by HSBC, had refused to process the payment of its annual membership fee in the Latin American Parliament.
The bank squeeze is obstructing Cuba's financial operations more than the U.S. trade embargo enforced since 1962, which has been since tightened but then amended in 2000 to allow U.S. companies to sell food to Cuba.
"The Patriot Act gave U.S. authorities a tool to do what they could not do before: chase foreign banks to comply with U.S. sanctions," said a European businessman in Havana who asked not to be identified. Notes:
<http://www.nytimes.com/2007/07/27/world/americas/27cuba.html> Cuba's Revolution Lurches Forward Under Two Masters By JAMES C. McKINLEY Jr. Published: July 27, 2007
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Since the Communist Party has yet to officially replace Fidel Castro as the head of state, his presence in the wings and his towering history here continue to exert a strong influence in Cuban politics. That has made it difficult for Raúl Castro to shake up the island's centralized Soviet-style economy, experts on Cuban politics said, though Raúl's public remarks on Thursday made it clear he would like to.
He scolded the nation for having to import food when it possessed an abundance of rich land and vowed to increase agricultural production. He also said Cuba was seeking ways to secure more foreign investment, without abandoning Socialism.
"No one, no individual or country, can afford to spend more than what they have," he said. "It seems elementary, but we do not always think and act in accordance with this inescapable reality. To have more we have to begin producing more."
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Raúl Castro has taken several small but meaningful steps over the last year that suggest that he wants to open up Cuban society and perhaps move to a market-driven system, without ceding one-party control, not unlike what has happened in China. During the 1990s, he supported limited private enterprise and foreign investment, reforms his brother reversed four years ago.
Since becoming acting president, the younger Mr. Castro has twice offered to enter negotiations with the United States to end a half-century of enmity and sanctions. He repeated that stand on Thursday, noting that President Bush would soon be leaving office "along with his erratic and dangerous administration."
"The new administration will have to decide whether it will maintain the absurd, illegal and failed policy against Cuba or if it will accept the olive branch that we offered," he said. Mr. Castro has taken other small steps away from the rigid Communist line his brother follows. Fewer dissidents have been arrested this year than in the past and cadres of party militants have stopped harassing critics, Mr. Cuesta Morúa, the opposition leader, said.
On the economic front, Raúl Castro has allowed the importation of televisions and video disc players. He has told the police to let pirate taxis operate without interference. He pledged to spend millions to refurbish hotels, marinas and golf courses. He even ordered one of the state newspapers to investigate the poor quality of service at state-controlled bakeries and other stores.
Perhaps his most important step, however, was to pay the debts the state owed to private farmers and to raise the prices the state pays for milk and meat. Cubans still live on rations and cope with chronic shortages of staples like beef. Salaries average about $12 a month, and most people spend three-quarters of their income on food, according to a study by Armando Nova González, an economist at the Center for the Study of the Cuban Economy in Havana.
"What a person makes is not enough to live on," said Jorge, a museum guard who asked that his last name not be used because he feared persecution. "You have to resort to the black market to get along. No, not just to get along, to survive." He said he and his wife together made about $30 a month, just enough to support their family of four.
But Raúl Castro has disappointed many Cubans who had expected significant changes once he took power. He has always deferred to his brother, and he seems to lack the political power to take major actions until Fidel either gives up total control or dies, experts on Cuba said.
"I would say what is remarkable over the last year is how little has changed," said Robert A. Pastor, a former aide to President Jimmy Carter and a political scientist at American University. "People have been calm, but of course, big brother has been watching."
Fidel Castro's influence extends beyond his new role as columnist in chief. Even as Raúl Castro appears headed toward consolidating his rule, leaders seem reluctant to roll back the elder Mr. Castro's decision in 2003 to centralize the economy again and restrict the small-scale private enterprises that emerged in the 1990s after the fail of the Soviet Union, several economists and political scientists say.
Fidel Castro's "main impact on Cuba is not his writings but that he's alive, and it means Raúl and the others are reluctant to take major initiatives," said Jorge I. Dominguez, a Harvard professor and Cuba expert.
In his speech, Raúl Castro acknowledged the stubborn problem of low wages and the lack of productivity, saying the economic problems were eating away at the social fabric. He urged Cubans to be patient. -- Yoshie