The US announces changes that will provide greater financial support to the private sector and small businesses in Cuba

WASHINGTON/HAVANA — The U.S. Treasury announced regulatory changes Tuesday to enable greater U.S. financial support for Cuba’s nascent private sector and expand access to U.S. internet services. These are limited but timely measures that officials say will help the island’s fledgling small businesses get a leg up.

The United States said it would allow small businesses on the communist-controlled island to open and access U.S. bank accounts from Cuba for the first time in decades, following bans imposed shortly after Fidel Castro’s 1959 revolution.

The measures would also enable Cuban entrepreneurs to use U.S.-based social media platforms, online payment sites, video conferencing and authentication services that have previously been unavailable to the sector and represent a major obstacle currently facing small businesses on the island.

The moves aim to fulfill the Biden administration’s long-delayed pledge to help Cuba’s emerging entrepreneurs, paying respect to the small but rapidly growing private sector despite a Cold War-era U.S. embargo that has complicated financial transactions by the Cuban government for decades.

“Today we are taking an important step to support the development of free enterprise and the growth of Cuba’s entrepreneurial sector,” a senior U.S. official told reporters on Tuesday.

The Cuban government did not immediately respond to a request for comment on the policy changes.

In developing these measures, U.S. officials, who spoke to reporters on the condition of anonymity, signaled that they tried to balance the goal of strengthening the private sector with the desire to avoid benefits to Cuban authorities.

President Joe Biden took office in January 2021 with high hopes for Cuba reversing the tough Trump-era approach, but Cuba’s crackdown on protests this summer prompted the administration to continue to pressure Havana.

The new measures would exclude Cuban officials, military officers and other “insiders” in an effort to minimize resources available in benefits to the Cuban government, officials say.

Republican U.S. Rep. Maria Elvira Salazar, a Cuban-American legislator from South Florida, was quick to criticize the Democratic administration’s announcement.

“The Biden administration is now giving the ‘Cuban private sector’ access to the US financial system,” she said in a post on X. “This would make a mockery of US law, given the lack of progress toward freedom on the island and the escalation of repression.”

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Cuba has long blamed the embargo – an intricate web of U.S. laws and regulations that complicate financial transactions conducted by the Cuban government – for decades of economic crisis that has recently left Cuba with no choice but to open its economy to small private business.

These types of businesses – taboo for decades in communist Cuba – are now booming on the island.

The government says more than 11,000 small businesses have started since May under Cuba’s new 2021 regulations, ranging from corner grocery stores to water and sewage, transportation and construction companies.

According to statistics from the Ministry of Economy as of the end of 2023, these companies employ over 15% of Cuban workers and produce about 14% of the gross domestic product.

The regulations announced on Tuesday also authorize American banks to reprocess the so-called “U-Turn” funds transfers, allowing them to send money to Cuban citizens – including payments and remittances – provided the senders and recipients are not subject to U.S. law.

Such measures are a step in the right direction, said John Kavulich, chairman of the U.S.-Cuba Trade and Economic Council, but noted a “gross omission” in the policy: Cuban companies continue to struggle with the requirement to use third-country banks to sending your money.

“As long as financing, investments and payments must be routed through third countries, the Biden-Harris administration will carefully restrict the activities it purports to support,” Kavulich wrote in an email.

There was no indication that Tuesday’s announcement would herald a more significant easing of U.S. sanctions and other restrictions on Cuba, beyond the modest steps Biden has already taken since becoming president.

Some analysts have attributed Biden’s cautious approach to Cuba to his concerns that a softened approach to Havana could hurt him politically among staunchly anti-communist Cuban American voters in Florida, a key swing state that he lost to Trump in the 2020 election.

U.S. officials would not say whether the administration is conducting a formal review of Cuba’s continued presence on the State Department’s list of state sponsors of terrorism.