Cuba: $2.6 Billion in Remittances in 2012

Remittances have become the driving force of the Cuban economy.

Emilio Morales* (Café Fuerte)

Foto: cafefuerte.com
Foto: cafefuerte.com

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.


12 thoughts on “Cuba: $2.6 Billion in Remittances in 2012

  • June 16, 2013 at 9:48 pm
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    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.

  • June 14, 2013 at 10:44 pm
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    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.

  • June 14, 2013 at 10:34 am
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    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.

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