Cuba: $2.6 Billion in Remittances in 2012
Remittances have become the driving force of the Cuban economy.
Emilio Morales* (Café Fuerte)
HAVANA TIMES — According to an independent study, remittances sent to Cuba from abroad continue to grow at an uncontainable pace and reached the record figure of US $2.605 billion in cash during 2012.
In cash flow alone, this represents a 13.5 increase with respect to the previous year’s figures.
When the incomes represented by packages and luggage containing food, medicine, electrical appliances and other materials sent to Cuba from abroad (remittances in kind) are added to these figures, the total, according to data processed by The Havana Consulting Group (THCG) is estimated at US $5.105 billion.
The yearly study conducted by THCG is based on the analysis of Cuba’s hard-currency retail invoice database, the remittance amounts sent to the island through official channels, an estimate of informal monetary incomes and the expenses paid by visitors to Cuba.
It also relies on financial figures made available by Cuba’s National Statistics and Information Bureau (ONE). THCG, based in Miami, complements this information with surveys conducted in both Miami and Havana.
In the summer of 1993, Cuban President Fidel Castro allowed remittances to enter the country, but only in spite of himself and begrudgingly, as a means of securing hard currency and ensuring the financial survival of the country.
Being forced to accept that Cuban émigrés were one of the most significant forces keeping Cuba economically afloat during the “Special Period” was a crushing ideological blow. US dollars flooded Cuba overnight, arriving on the island to stay.
The dollar economy, 20 years later
The liberalization of the dollar, a measure taken nearly 20 years ago, had a powerful impact on Cubans living on the island and abroad.
Nearly 70 percent of Cuba’s mobile phone market, with over 1.6 million cellular phones currently in service, is also financed by Cuban émigrés.
What Fidel Castro never imagined was that the liberalization forced by circumstances upon the country would become the most efficient driving force of the Cuban economy for the following two decades. No Cuban economist, in fact, predicted such a scenario. Today, remittances reach an estimated 62 percent of Cuban homes, sustain nearly 90 percent of the country’s retail market and favor the employment of tens of thousands of people.
Revenues secured from remittances have risen well above those taken in through the sugar industry – which entered its most disastrous phase in 1993 and has being going downhill ever since. The remittances report greater volumes and efficiency than the tourism sector and represent more money than exports of nickel and medications produced by Cuba’s biotechnology industry.
Below is a comparative list of the most important items of the Cuban economy in 2012, as per their revenues in hard currency (US dollars).
Remittances in cash
$2.60512 billion
Remittances in kind
$2.5 billion
Total remittances
$5.10512 billion
Tourism revenues
$2.6133 billion
Nickel exports
$1.413 billion
Medications
$500.00 million
Sugar exports
$391.30 million
The above list shows how the total revenues secured through remittances sent to Cuba are above those of the Cuban economy’s four main items as a whole. In total, remittances account for US $5.10512 billion, while the export of sugar, nickel and medications and the tourism sector together bring in US $ 4.91760 billion, an estimate calculated without subtracting the sums invested in each item, an operation that would produce a notably greater difference.
That the entry of Barack Obama into office has directly led to an increase in the sending of remittances to the island over the last four years is beyond question. Over the period 2009-2012, this increase reached a value of nearly US $ 1 billion.
An all-time record in remittances
The record figure of US $2.60512 billion in remittances taken in last year is three times the total amount the government paid State employees in salaries during this period. Currently, the average monthly salary earned by a Cuban worker is 455 Cuban pesos (CUP), the equivalent of US $18.95. Today, Cuba’s work force is made up of 5.01 million employees, 4.08 million of which receive payment directly from State institutions. The rest is employed by the private sector, made up of farmers, members of cooperatives and freelancers.
The entry of Barack Obama into office has directly led to an increase in the sending of remittances to the island over the last four years is beyond question. Over the period 2009-2012, this increase reached a value of nearly US $ 1 billion.
The total sum that the government paid these 4.08 million State employees in wages is 928,586, 750.00 Convertible Cuban Pesos (CUC), a figure calculated using the official exchange rate of 1 CUC for 24 CUP. That is to say, the total amount paid by the State in wages is one third the amount of money that Cuban émigrés send their relatives on the island. If we add the amount sent in kind to this figure, then the rate becomes 5.5 to 1.
The total amounts Cuba has received in remittances since 2000 are listed below.
2000 – $986.96 million
2001 – $1.01087 billion
2002 – $1.07215 billion
2003 – $1.10046 billion
2004 – $1.03084 billion
2005 – $1.14412 billion
2006 – $1.25115 billion
2007 – $1.36271 billion
2008 – $1.44706 billion
2009 – $1.65315 billion
2010 – $1.92044 billion
2011 – $2.29454 billion
2012 – $2.60512 billion
The lifting of travel restrictions and those applied to the sending of remittances and goods to Cuba from the United States are the measures which have impelled this phenomenon most powerfully.
Last year, more than half a million Cubans living abroad travelled to the island, a figure that makes Cuban émigrés the second most important source of tourism in the country, below only Canada, with 1.1 million visitors every year.
We must also bear in mind that, in the course of the last decade, the migratory flow of Cubans leaving the island has remained at an average of 47,000 émigrés a year.
In addition, the structural changes implemented by the Cuban government over the last three years has stimulated the sending of remittances, particularly in connection with the financing of new privately-run restaurants, the rental or sale of real estate and the purchase of automobiles.
What émigrés pay
Nearly 70 percent of Cuba’s mobile phone market, with over 1.6 million cellular phones currently in service, is also financed by Cuban émigrés.
So as to maintain the tradition of encouraging the sending of remittances, the Cuban government has recently opened 118 cybercafés, public Internet access points charging the extremely high rate of 4.50 CUC the hour of Internet use. It is clear that part of the money Cubans use to access the Internet will also come from abroad.
Even with the investment restrictions it faces, the Cuban diaspora is one of the most important driving forces of the country’s economy. And its significance could become greater if new liberalizations allowed it to participate more directly in the country’s economic reconstruction.
Remittances are an indicator of the transformative role Cubans are going to play in Cuba’s future, no matter how irritating this may prove for people on both shores.
—–
(*) Cuban economist. Former chief of marketing strategies for Cuba’s CIMEX corporation and author of the books “Cuba: A Silent Transition Towards Capitalism?” and “Marketing without Advertising, Brand Preference and Consumer Choice in Cuba”. He is the current president of The Havana Consulting Group (THCG), based in Miami. The statistical tables used in this article were prepared by THCG.
Wages in Cuba are low because the State takes most of the money to fund the State. A side benefit is that a desperate citizenry is too busy trying to survive to bother rebelling.
Thank you, Griffin. Wow. $10,200 per capita. Impressive. But, I still wonder why wages and salaries are so low. Something doesn’t seem to compute. Cheers.
You have to keep in mind the difference between what Cuba exports and what she import, or the balance of trade. Cuba recorded a trade deficit of 7915 Million CUC in 2011. Cuba runs consistent trade deficits as a result of low productivity and dependence on food imports. Cuba mainly exports nickel, cane sugar, cigars, fuel, beverages, metallic ores, fish, cement, oil and thyroid extract. Cuba mainly imports food, cereals, fuel, diesel engines, vehicles, motor parts and vegetable oils. Cuba’s main trading partners are Venezuela, China, Canada, Spain, Brazil, the Netherlands,
the United States, México, Italy, France, Germany and Russia.
But the balance of trade is not the whole picture of Cuba’s economy. The Gross Domestic Product is the sum of all economic activity in Cuba. In 2012, the Cuban GDP was either $120 billion, or $72 billion, depending on who you ask. Obviously, it’s hard to calculate such a figure when dual artificial currencies are involved. The GDP per Capita is estimated at $10,200.
http://en.wikipedia.org/wiki/Economy_of_Cuba.
Thank you so much, Moses. I’m certain that their economy must be extremely inefficient, given the incentive-destroying monstrosity of the state owning most enterprise.
Without the institution of private property rights; and with state-hired functionaries managing and state-hired employees receiving time-based wages and salaries working, it seems that it would be almost a miracle for the economy to function, at all–especially after the enthusiasm of the first several decades of revolution wears off.
I was trying to be conservative in my estimate of per capital national income, using only the figures set forth in two recent articles. It would be of great interest to have a competent analyst and journalist to do an article on the subject of real per capita income, plus a “follow the money” breakdown. Perhaps I should write to Fernando Ravsberg and see if he, or anyone else, has already done it.
Again, I appreciate your “humble” response. If only the Marxist Left were able to think humbly . . . and creatively!
In my humble opinion, Cuba wastes a huge amount of money on internal propaganda. The ‘Free the Cuban 5’ billboards are everywhere and Cubans have no say as to when and how these spies will be freed. Imagine if you will if the US government had to foot the bill for what is paid for by Madison Avenue and their clients. I believe it is wasted because no Cubans that I know believe any of it. Another expenditure that helps to drain public coffers is the money lost due to the dual currency. Beyond that Grady is the garden variety theft, corruption and mismanagement that likely exists everywhere in the world. However, in Cuba, because the margins are slimmer, the impact of their inefficient economy is felt more severely
Here’s a question, Moses, for you and/or anyone out there in HT-land:
According to an HT article a few days ago regarding foreign healthcare revenues, Cuba receives $5 billion. The total received according to this article comes to well over $6 billion. It seems safe to say therefore that Cuba has a conservative national income of over $11 billion.
If we divide this $11 billion by 11 million inhabitants, then each man, woman and child should have something like $1,000 available in the economy. My question is, if most workers are being paid such a pittance, where is all the money going?
I sincerely would like an honest answer . . . from anyone.
The author of this article was a former senior manager for CIMEX, the large Cuban corporation owned by the FAR. Now he lives in Miami (of all places!) where he’s the CEO of a consulting firm which provides services to people wishing to invest in or do business with Cuba. One must conclude he maintains good relations with the relevant Cuban government ministries in order to carry out his business activities in Miami. He could not have left on bad terms to go live in Miami, that city of gusanos, if he ever hoped to do business with the Cuban government. In fact, it’s a reasonable conjecture to assume Morales is still working for his old employer.
The content of his essay shou,d be read in that light: the author is advocating for more business for his company. Which company we can only guess.
The 5 billion dollars of known remittances bring in nearly as much as the trade in medical services / subsidies. As correctly pointed out here there is also lots of help that is taken over the Cuba by people visiting that is not included in these figures. Every Cuban going over to visit family takes goods and medicines with him. Most make high end purchases for family members while in Cuba and all leave cash.
I also wonder whether this figure includes the purchases of food, household items and appliances made by Cubans resident abroad in the series of Cuban controlled online stores (lots based in Canada).
The US remains the source of the overwhelming majority of remittances that over 60% Cuban households receive. Far from starving people on the island as some falsely claim here the US and the much reviled “worms” (gusanos) that live there are helping people to survive. Life without remittances is hard in Cuba. I know people that have to live on an income of 220 Pesos per month. Rationing does not meet even their basic food needs.
All of these remittances basically end up in the hands of the government. The sales of food at exorbitant prices. In addition to the high store margins, all products have a tax of 240%. as the BBC reported. Low end quality goods end up costing more than high end goods in US or European stores. These aren’t just luxuries, but also the basic foodstuffs like cooking oil. As the dictatorship controls all parts of the supply chain (from purchase over import to final sale).
The lifeline these remittances represent it very well illustrated by reports in the press.
El Pais reported that 75% of Cuban families can’t make ends meet.
70% of total income is absorbed by basis food purchases. IPS reported that Cuban economists had calculated that “a family of four would require seven times the average salary to meet all of their basic needs”. Remittances are vital for the survival of people in Cuba. One of the most damaging and embarrassing effects of the rather inaptly names special period is that the dictatorship had to allow remittances thereby admitting failure as it could not provide for the Cuban people without Soviet subsidies.
Diaro de Cuba has just posted two interesting small articles on what a salary in Cuba buys. You will find the links below
References:
“Cuba: se rumora cierre anticorrupción”
http://news.bbc.co.uk/hi/spanish/latin_america/newsid_3709000/3709203.stm
The “libreta” rationing system:
http://racionamientoencuba.impela.net/
“Cuba toca fondo”, Mauricio Vicent, 14 JUL 2007,
http://elpais.com/diario/2007/07/14/internacional/1184364001_850215.html
“New Squeeze on Family Remittances”, Dalia Acosta, HAVANA, Jun 9 2006 (IPS)
http://www.ipsnews.net/2006/06/cuba-us-new-squeeze-on-family-remittances/
“Un kilogramo de hígado de res”
http://www.diariodecuba.com/cuba/1370844674_3674.html
“55 potes de yogurt”
http://cubafood.blogspot.se/2013/06/55-potes-de-yogurt.html
Source:
http://cubafood.blogspot.se/
So the single largest sector of the Cuban economy is the flow of remittances from capitalist countries.
I guess this is yet another “great achievement of the revolution” !
It is to cry.
It has been less than a week since my wife wired her monthly support to her parents in Guantanamo. In her family’s case, the money she sends pays for meat on the table a few more times a week, shampoo, detergent and shower gel from the hard-currency stores, ETECSA phone cards, and a little left over to go into the savings to pay for the inevitable emergencies that come up around their house. We have Cuban friends here in California who literally maintain entire households in Cuba with the money they send regularly. Every birthday, every holiday means we are putting together a “care” box with perfume, cooking spices, clothes, shoes, and other items either not available in Cuba or too expensive to buy even if they were. Frickin’ Fidel and all his idiot supporters can talk all the crap they like about savage capitalism and cruel imperialists but I know one family in Cuba whose lives would suck even more than it does if it were not for this dyed-in-the-wool capitalist. That $5.1 billion in remittances sent last year to Cuba is tangible proof that Castro’s socialism is a lie and always has been. But for the support provided by capitalist families, the Castros would have been run out of town a long time ago.
That does not count the $$$$$ Canadians – Americans and others leave in Cuba with family when visiting. I have family in Cuba and was there 5 times in the last year. Gordon Robinson Port Alberni B.C. Canada