Cuban banks to offer loans for first time

[El Presidente]

Things must really been changing. It was only last January that the central bank froze cash withdrawals for foreign businesses in Cuba...because they ran out of cash. It lasted six months. You could issue official Bank Cheques...but nobody would take them

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Reuters

CUBA has authorised banks to loan money to small businesses, private farmers and people who want to repair or build homes - a revolutionary step for the island's communist government.

The measure, which comes into effect December 20, is part of a cautious overhaul of Cuba's Soviet-style economy that began when Raul Castro took over from his older brother Fidel as president in 2006.

Farmers "can ask for loans for the purchase and repair of equipment ... and other actions that contribute to rising agricultural production", read the decree published in the Official Gazette today.

The loans will be available "always in Cuban pesos" and the amount and conditions will be agreed between the bank and the borrower, according to the decree.

A convertible peso, known as CUC, pegged to the US dollar is also available on the island. Each convertible peso is currently valued at 24 Cuban pesos.

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Ever since the 1959 revolution, people have traditionally turned to family and friends when they need a loan.

Those few Cubans with bank accounts include musicians who go on foreign tours and professionals, especially doctors, who work abroad.

While pay in Cuba is meagre - about $US20 ($20.55) a month - basic food items are subsidised, and health services and education are free.

The loan program will help home builders, as Cuba currently needs an estimated one million units.

The loans will also help small businesses like "paladares", or private restaurants, that have sprouted in Cuba to service the island's growing tourist industry.

Cuba's single-party regime authorised the purchase and sale of cars earlier this year.

[winelover]

A wake up call about the evils of communism where freedom is whatever the government permits you to do. A bank lending - well I never!

[BrotherBear]

Funny, I was talking about this last week when I was in Habana. Now that vehicle ownership and purchasing rules have changed I wondered aloud about financing. According to the cab driver I asked he said most have to save up the cash and hope they can find a vehicle. Makes me wonder how the supply vs demand plays into the pricing.

In my line of work (mortgages) I deal with Federal regulations from Canadian Mortgage rules and can see the Cuban Government possible taking baby steps towards that next step in partnering with banks for insured mortgage loans... Of course, a ready inventory of houses would be critical to this working out. How much longer before the military is not only in charge of buildng hotels but also starts building whole communities?

[mazolaman]

I don't think there's any other way to become democratic, slowly.

An instant change would just be messy, dangerous, and some one would just end up scamming the whole country, as in the Russian change.

Seems a good baby step to me, as with others they have made.

Good luck to them.

[Plato]

Thought provoking read Rob.