Remittances to Cuba: The Problem and the Solution

Taking capital out of the hands of the oligarchs and putting it directly into those of Cuban citizens is the empowerment that the Cuban people need, and the great challenge faced by the Biden Administration.

A man with a Cuban flag in front of the White House. Los Angeles Times

By Emilio Morales (Diario de Cuba)

HAVANA TIMES – The issue of sending remittances to Cuba is currently being debated. As is known, they constitute the main source of revenue for Cubans, and are the result of the efforts of tens of thousands of exiles who send money to their relatives on the island to help them meet basic needs, as the latter live in a country where they are prohibited from generating wealth.

After the military companies that control 100% of remittance transactions arriving through official channels were sanctioned by the US State and Treasury departments, the Cuban Government refused to hand over their handling to any civil institution. Even though at the end of 2020 the Central Bank of Cuba granted the non-banking financial company RED SA the pertinent licenses to take charge of handling remittances from the US —a market accounting for 92% of the total received— this still has not happened.

The explanation for this is simple: the military does not want to lose its main source of financing.

Meanwhile, Covid-19 has further complicated the situation, as flights from the US to Cuba have been suspended for almost 18 months. This has meant that informal remittances (48% of the total) have almost disappeared. For now, the issue of remittances has come to a standstill, and hangs in the air. Although it refuses to take action, the Cuban Government has the solution in its hands.

The problem

Since 1993, when they were allowed, down until today (28 years), the Central Bank of Cuba has never published a report on remittances. The matter was controlled by the military from the very beginning; first, by the group of Fidel Castro (CIMEX SA) and, as of 2006, by his brother Raúl’s (GAESA).

Cash remittances currently represent 25% of Cuba’s GDP. If we add remittances in goods, the total rises to one third of GDP. The exportation of medical services accounts for another third, with the real economy constituting the rest.

As we know, the Cuban elite appropriates 80% of the salaries of the doctors it sends abroad, and 100% of the remittances that arrive through official channels. Both amounts are stolen from the Cuban people. In other words, 2/3 of the country’s GDP, generated by Cubans’ families in exile, and by citizens, are not used for the benefit of the people or for the development of society, as demonstrated by the current collapse of the health system and the lack of food and medicine. These 2/3 of the national GDP end up elsewhere.

The governance system that prevails in Cuba is not that of a socialist government, but rather one dominated by a group of oligarchs that controls an obedient president not elected by the people. This is why —as US President Joe Biden has stated— Cuba has a failed government, one not interested in the welfare of the people, but rather the fortunes that can be stolen and accumulated through legislative mechanisms and business schemes concealed in tax havens.

This oligarchical group has turned the remittance business into an almost untraceable money laundering business, allowing it not only to launder assets in tax havens, but on the island itself. GAESA keeps the money from remittances in a bank account in a third country through its respective affiliates and subsidiaries (CIMEX SA, FICIMEX SA, AIS SA), sanctioned by the US State and Treasury departments.

The problem of remittances is not, therefore, that the military seizes 10% or 15% of them. It should be made clear: the Cuban military appropriates 100% of the remittances. It is as simple as that.

Cubans are only given the equivalent of what is sent to them in a devalued currency, worthless anywhere else in the world. The electronic dollar that the Government deposits in MLC accounts is what Cubans use to buy basic necessities at stores that also belong to GAESA, with a markup of at least 240% with respect to the value at which the military buys abroad.

As part of this very shady business, GAESA is not supervised by the Office of the Comptroller General of the Republic, the National Assembly of Popular Power, or by any other civil institution. GAESA ‘s financial statements are inaccessible; not even President Miguel Díaz-Canel has access to them.

Given all the above, reconnecting American companies with FICIMEX SA or with AIS SA would mean giving the military money that does not belong to it; money that they use to build dozens of hotels and to pay for the logistics with which they repress the people, as we saw in response to the July 11 demonstrations.

In the same way, channeling remittances through the Correos de Cuba company —which has just been authorized to receive transactions throughout the country, under the same scheme that FINCIMEX SA and AIS SA had, by which dollars are not delivered to the recipients— is to maintain the same capital laundering scheme. This does not solve the problem.

The remittances must reach Cubans in the form of dollars, not electronic dollars only good to buy at stores that also belong to GAESA. The Biden Administration must be vigilant so as not to fall into the trap that is being set by Havana. If the Government wants to channel remittances through Correos de Cuba, it must guarantee that Cubans are actually given dollars, and that they are the ones who decide what to do with them. Otherwise, the dollars will remain in the hands of the oligarchy.

The scenario is simple: how is it possible that there is transportation sufficient to mobilize thousands of repressors, but not for ambulances to serve the population? How is it possible that there is money to arm repressors, but not to buy food, vaccines, medicines and oxygen? How is it possible that, given the humanitarian crisis, the military invested more than 4 billion dollars in the construction of hotels in 2020, betting on a moribund tourism industry with an occupancy level that did not exceed 14% last year?

All of this can only be summed up simply: money laundering and genocide.

The solution

The solution to sending remittances to Cuba must be based on the principle that money should end up in Cubans’ hands, not the military’s, and in such a way that it is the citizens who decide what to do with it.

The only way to help Cubans is by looking for technological solutions.

Therefore, FINTECH companies and their digital wallets are the optimal solution. The term “fintech,” a contraction of the words “finance ” and “technology,” refers to the trend of implementing advanced digital technologies to optimize the financial industry’s activities.

Most people in Cuba have cell phones (6.6 million), so it is possible to use these platforms to achieve this objective. With them, customers have total control over their money.

FINTECH companies can create secure financial corridors that are impossible to penetrate, managing to safeguard their customers’ money, which they can use at their discretion not only in Cuba, but anywhere in the world. This technology could facilitate significant economic independence not only for entrepreneurs, but for all citizens.

The Biden Administration can encourage and pave the way so that FINTECH companies that have the right technology and are legally prepared to operate. This is a practical and possible solution.

The reality reveals to us a great problem, and a great opportunity to solve it. The problem is a group in power that profits with impunity from 2/3 of the country’s GDP, thereby violating international law. Taking this capital out of the hands of those oligarchs and putting it directly into those of Cubans would be the solution; this is the empowerment that the people need and the great challenge the Biden Administration faces in Cuba.

This is not a matter of political decision making, but rather of enforcing international law and punishing those who break it. When this happens, the Cuban people will find their way to freedom – that which, massively and spontaneously, thousands of citizens turned out, in more than 50 cities across the country on July 11, to demand.

Read more from Cuba here on Havana Times.

18 thoughts on “Remittances to Cuba: The Problem and the Solution

  • Other than mules who travel to Cuba regularly ,the only decent way it seems to send money to Cuba today is by loading their AIS cards in electronic dollars.
    And then they can go to the over priced electronic MLC stores where the regime marks the price up on all the products because they have a monopoly.

    And the incompetent tyranny gets it’s skim in the transfer.
    Power was out again roaming blackouts.

    It just keeps getting worse it looks rather bleak.
    Hope that Cuban vaccine of theirs works. Buena suerte.

  • There are a couple of commentors who default to the tired and feckless defense of the Castro dictatorship by blaming the US embargo. Obviously they are bootlickers, lacking a cogent counter-argument, simply vomit words without understanding how to apply them. I challenge any Castro sycophant to explain what the embargo has to do with remittances.

  • adam
    one of the difficulties of revealing sources of information in Cuba, is that it exposes those who provide such information to persecution and jail. For example, when writing my book about Cuba, I took very great care not to reveal sources as it endangers them.
    Is that an excuse for falsification? I can only respond by recalling a contributor to these pages, who having read the book, challenged others to find a single error within it. That was five years ago – and to date, no challengers.
    I would be the first to agree that it would be nice to attach a glossary, but the risks are too high, not only individually but for ones Cuban family.

  • Could the author provide a source please for the statement about 2020 government spending on hotels and tourism infrastructure.

  • Thomas Jossair, the article author Emilio Morales is considered one of the most notable experts on the Cuban economy. He is President of a large US economic consulting firm dealing with the Cuban economy. Prior to leaving Cuba, he was head of strategic marketing for CIMEX, the largest commercial group owned by the Cuban government.

    US dollars have been exchanged on the street and spent for purchases for well over ten years. I last spent US dollars directly and exchanged them for CUP in July, two months ago. Some of my dollars may have eventually found their way to a Cuban bank but I have never dealt with one in over ten years.

    Yes, you can have mules deliver US dollars to Cuban citizens by carrying them on flights. They can either pay out dollars (most expensive) or Cuban pesos. Real problem now is that there are only 4 flights per week from the US to Cuba.

  • This person who wrote this article has to read it one more time. Let’s suppose the Cubans tomorrow begin to receive dollars and then they are going to change them, where? , and they are going to spend it, where? . In all the scenarios that money ends up in the banks of Cuba. And while it is being discussed, there are needy families going through miseries. There is also a very healthy sending of remittances from Miami to Cuba by Cubans, which is what they do as a business and sometimes you even receive it in 24 hours in Cuban pesos, the dollars stay here.

  • Here is a simple example for those who cannot comprehend how much the Cuban government takes from a remittance.

    A family member is Cuba has the opportunity to buy a freezer in a private transaction for US$300. Items like this are frequently sold in US dollars. Cuban family member asks if you can send them the money for the freezer.

    You know the Cuban government will not pay out in US dollars but in Cuban pesos and at the “official” 24:1 rate. You know the only way to buy US dollars is in the street at the market 60:1 rate. You compute your family member will need 18,000 pesos to buy the US$300 they need. Then you compute how many US dollars you must send so they get 18,000 pesos at the “official” 24:1 rate. Your math shows you must send US$750 for your family to get $300. Actually a bit more because of fees. You find this incredible and recompute using Euros or CDN instead of US$ but the ripoff is still there.

    So you figure out if you have to send $750 for your family to get $300, somebody is coming out $450 ahead. It’s the Cuban government, primarily the military since they were the only other one involved.

  • This article is filled with crass misunderstandings. So when Cubans receive remittances it is not in US dollars but in a currency they can use in Cuba. It is the same with Mexicans who receive remittances. They don’t receive dollars, they get pesos.

  • If the problem were the embargo then what about the rest of the countries that do business with and do not have an embargo with Cuba? China? Russia? Canada? France, England? You meant to believe that the USA is the sole godmother of Cubas problems? The article rightfully illustrates that the only entity that benefits financially from remittances and other financial support is the military backed government which is 100% true. If you understand the article it clearly illustrates that Cubans get their remittances in national pesos NOT dollars to be used at the MLC (dollar) stores to get basic necessities. They do not get US dollars that they can use anywhere else. A Cuban that receives MLC remittances cannot use those funds outside of the country. MLC is where the money goes into -a bank card account. If and when a cuban wants to travel out of the country, that remittance money cannot be used because the currency in which it is valued isn’t the dollar! The national peso isn’t worth a penny outside of Cuba. So for those of you criticizing the article, get your facts straight. The article is factually stating that remittance money goes to the military backed government and in turn they give out monetary credits in moneda nacional to Cubans to buy basic necessities at MLC store where the government buys the goods at a fraction of what it’s selling it to the people (@ 240% mark up)! Some system of socialism that is eh? So back to the point of the US Embargo being to blame, if the Embargo was lifted, the people would still be enslaved to the military back governments whims. No one in Cuba except the government would benefit or be able to accumulate wealth. Without wealth they’ll continue to be stuck in the same old Cuban government subservient hole. In other words same as it ever was! Nothing would change and this is the point of the article!

  • The Cuban economy can not count on tourism or foreign remittance to support the people and the gov. Cuba needs foreign investment in agriculture food processing , manufacturing and high tech. Canada Holland and Germany and Mexico could make it happen. Dutch and investment from Leamington in agriculture could solve the food and hydro shortage. Germany and Canada and Mexico could easily make 400,000 jobs and provide income to gov and nonprofit groups to build another 300,000 affordable apartments for people who work and 100,000 nursing home and new hospital beds and updated ambulances and medical equipment and supplies. The current Cuban government is more worried about keeping power than providing for the Cuban people in my opinion. Other countries have problems too but Cuba is in a position to make a deal with certain groups outside of China.

  • Editors Note: Since we already have a Nick from the UK as a regular commenter, in the future it would be a good idea for you to put a last name to not confuse.

  • the real problem is lack of a real government that actually would care for its people

  • It is a Blockade.

  • Neil the problem is obviously an obsolete dictatorship the Cuban regime 62 years of horrible economic disasters. There are after 7/11 more the 3000 people have been incarcerated in Cuba right now 14 minors among them just for the mist basic human rights like Protesting, and you want to give a blank check to the dictatorship. You can be sure that any credit the regime get it’s going to buy more handcuffs and police gear for more repression. If you think this article is stupid I think you are a dated leftist that believes the lies of the Cuban regime.
    The Cuban dictatorship can buy medicine and food even in the USA. The problem for the regime is that they have to pay in cash. The regime wants credit to not pay later like it usually does

  • The Cubans only get pesos or electronic money on their debit card. Both equally useless. The government keeps the real money. I just sent some and found out that they can not get real dollars.

  • Thanks for the article of interest to many here in the USA. In regards to the Biden administration, don’t be too eager that something is going to happen to help CUBA. Biden is really not running the show, plus there are too many other things on the plate to deal with at this time and the near future.
    And with the inhumane treatment for human rights by the Cuban government toward it’s own people there will be no aid from the United Nations either.
    In regards to the Cuban medical personnel being deployed to other countries for hard currency they basically are slaves for the Cuban government to support the Cuban military.
    Thus, in the end the Cuban people have no control of their lives nor their own money!

  • What a load of guff. Cubans receive 100 percent of remittances less a modest bank fee or at least they do from Canada

  • What a stupid article. The problem is the USA embargo.

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