April 22, 2009 / 2:40 AM / 10 years ago

Cuba to limit foreign companies' cash transactions

HAVANA (Reuters) - Cuba’s central bank has said it will limit cash withdrawals and deposits in Cuban bank accounts held by foreign companies and joint ventures.

No immediate explanation was given for the central bank move, which was set out in a letter sent to customers this week by Banco Metropolitano, one of the state-controlled banks on the communist-ruled island that handles corporate accounts.

Accountholders were informed that starting on May 7, cash transactions by foreign companies and associations would be restricted to withdrawals to pay salary supplements to Cuban employees.

Special authorization from bank officials would be required for all other future cash deposits and withdrawals.

In Miami, the Nuevo Herald newspaper said the limits on cash withdrawals and deposits were an attempt to clamp down on illegal financial activities such as money laundering.

But a local economist, who asked not to be named because of the sensitivity of the subject, told Reuters the moves were a “response to liquidity problems in the economy.”

These problems stemmed from a disastrous 2008 when damage from three hurricanes caused Cuba’s trade deficit to widen and the global financial crisis dried up credit.

As of May 7, Banco Metropolitano said “cash deposits and withdrawals will not be accepted in the current accounts of foreign entities domiciled or not in Cuba, of joint ventures or other forms of international economic association.”

It also sent foreign companies a form through which to request authorization to carry out future cash withdrawals and deposits, asking them to detail the amount of the planned monthly transactions and the purpose.

Based on government figures, Cuba’s trade deficit was estimated to have totaled $11.8 billion last year, up from $6.9 billion in 2007. Foreign businessmen have reported some payments problems and delays on the Cuban side, reflecting the effects of the liquidity squeeze.

The central bank directive cited by the Banco Metropolitano circular did not refer to individual accounts held by foreigners.

Last week, U.S. President Barack Obama slightly eased the 47-year-old U.S. trade embargo against Cuba by removing limits on cash remittances which can be sent by Cuban Americans to relatives on the island.

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