Remittances in Cuba, What People Do with the Money

By Vicente Morin Aguado

Photo: diariolasamercias.com

HAVANA TIMES – By codifying the US’ complex relationship with Cuba, the Helms-Burton Act intervenes on an issue that is particularly sensitive for Cubans, remittances. More specifically, I’m talking about Title I, Section 112 of the Cuban Liberty and Democratic Solidarity (Libertad) Act:

“It is the sense of the Congress that the President should–   (1)(A) before considering the reinstitution of general licenses for family remittances to Cuba, insist that, prior to such reinstitution, the Cuban Government permit the unfettered operation of small businesses fully empowered with the right to hire others to whom they may pay wages and to buy materials necessary in the operation of the businesses; and before considering the reinstitution of general licenses for Cuban nationals who reside in the United States to travel to Cuba to visit their families by individuals residing in the United States who are family members of Cuban nationals who are resident in Cuba, insist on such actions by the Cuban Government as abrogation of the sanction for departure from Cuba by refugees, release of political prisoners, recognition of the right of association, and other fundamental freedoms.”

Still rejecting its interfering nature, the paragraph refers to key problems in Cuba, and we will take a look at the first one in this article: remittances as the driving force of Cuba’s economy. Some figures from the Havana Consulting Group, a research organization based in Miami, are quoted by different economists:

“In 2018 alone, some 6.5 billion USD entered the island, split almost evenly between money and goods. This statistic allows us to deduce that remittances have been a leading financial asset for the Cuban economy.” (Elias Amor Bravo, Havana, 1958, professor at the University of Valencia, Spain.)

This figure is equal to our country’s trade with Venezuela, China and the European Union.

Alarm bells recently went off when US presidential advisor, John Bolton, a key figure in Miami, announced that remittances would be limited to a maximum of 1000 USD every trimester per payee. Will that really have an impact? Elias Amor Bravo points out:

“If a Cuban in Miami is sending 1000 USD to their family every trimester, they will be sending back over 10 times the average monthly wage over the same period.”

A study carried out in 2011 and endorsed by Cuba’s Academy of Sciences, established that in order to ensure 3285 kcal per day and 83 grams of protein per person in a household with three people, they would need to be earning between 882-1006 Cuban pesos (CUP), approximately double the average public sector wage back then. (Challenges for social equity in the reform of Cuba’s economic model, Social Sciences Publishing House. Havana, Cuba. 2015.)

Costs of food have grown considerably in recent years, yet the limit that Mr. Bolton has announced won’t be the root of the main problem, which has to do with individual consumption across the large Caribbean island.

Discreet surveys give us an average of 100-200 USD per month per payee at Western Union offices. Other figures which are impossible to calculate come to our distressed countrymen via other hands. Free money circulation is unstoppable, especially in a recipient country where they want things to be this way.

The improvised tropical version of Stalinism that has been following us since 1959 bet a lot on the benefits it would receive from its geopolitical alliance with the Soviet Union. We lived almost entirely cut off from the capitalist world, for three decades. Remittances were excluded to the point that just having foreign currency in your posession meant jail time for any Cuban citizen.

Socialist totalitarianism grudgingly accepted the financial aid from Cubans beyond the archipelago’s borders. However, this financial aid has been growing for two decades now, paying no heed to government restrictions.

Cuba is unique in Latin America in this regard, as in almost every other regard:

Amount of remittances by country and its evolution (millions of dollars)

Country20172018% difference
Mexico32,27135,6599.3
Guatemala8,4499,57312.7
Dominican Republic6,1786,7899.9
Colombia5,5316,41115.9
El Salvador5,0545,4587,9
Honduras4,3234,7469.8
Peru3,0513,2506.5
Ecuador2,8493,0868.3
Haiti2,7222,9869.6
Cuba2,5002,7009.0

A country with 11.2 million inhabitants, plus another 2 million outside its borders, shouldn’t be in last place. The reason? It’s economy prohibits, in its Constitution even, asset accumulation, investments by its own citizens, as well as the exercise of property rights when it comes to property assets and agricultural land.

Money sent is limited to only being spent on survival, buying products on a retail network of stores that the State holds absolute monopoly control over, which imposes exorbitant prices for goods that are infamously in shortage.

The burden of the past, called “continuity” by the new Government, discourages remittances quite significantly.

It’s sad to hear so many voices shouting out and making fair demands against the undoubtable harm the US embargo causes, when the potential of remittances alone can evade the serious damage caused by US policy.

How much does the embargo cost? Juan M. Ferran Oliva, tenured professor at Havana University, explains:

“In 2018, damages caused by the embargo reached 4.320 billion USD. The number was released by two ministers, a month apart, and seems to be credible. It clearly comes from the same source. The calculation is said to abide to a methodology that is internationally recognized.” (Bolg Elestadocomotal, January 13, 2019.)

The influence of remittances in the Cuban economy seems to throw ideological preconceptions that really move Cubans out of the window. Dr. Pedro Monreal, editor of the Elestadocomotal blog, reveals the magnitude of this dilemma:

“The main and normal money supply that reaches the population’s hands, created inside the country and associated with national production and supply, was approximately 80 billion CUP.” (Cuban pesos, 25 of which are the equivalent of 1 USD).

Meanwhile, 3 billion USD in remittances are the equivalent of 75 billion CUP.

The country’s main source of net income in hard currency can become a driving force of national progress.

The problem isn’t how many dollars, but what you can do with them.

Vicente Morin Aguado: Mardeleva287@gmail.com

4 thoughts on “Remittances in Cuba, What People Do with the Money

  • May 16, 2019 at 11:19 pm
    Permalink

    Excellent article Vincente.

    Reply
  • May 18, 2019 at 5:32 am
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    Glad to have some insight as to how the other countries line up with receiving money from relatives outside their country. Here in the US every FRIDAY you can see lines of people at the Western Union counter sending money to their home countries.

    Reply
    • May 19, 2019 at 7:02 pm
      Permalink

      They could do it at a considerably lower cost if they persuaded their Cuban relatives to open bank account and transferred money from their own bank account to that of the relative in Cuba. For example, to send any amount of money from most banks to an account in Cuba, costs $45. Compare that with Western Union!

      Reply

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