Tag Archives: Remittances

Remittances Drive the Cuban Economy

By Emilio Morales and Joseph L. Scarpaci, Miami (The Havana Consulting Group).— Fidel Castro’s government reluctantly accepted remittances from abroad in 1993 when it realized it needed access to hard currency to survive.

It was a devastating ideological blow at the beginning of the so-called ‘Special Period in a Time of Peace’ because it revealed that the Cuban exile community had become a lifeline for the island. Suddenly, U.S. dollars started inundating the island and would never leave. Both the Cuban society and the exile community were startled by this bold move.

The former Cuban leader probably never imagined that the forced opening up to dollars was going to become the most efficient driver in the economy over the last 20 years. Not a single Cuban economist foresaw that outcome. Today, remittances reach 62% of Cuban households, sustain about 90% of the retail market, and provide tens of thousands of jobs.

Money sent from overseas far exceeds the value of the once powerful sugar industry which, in 1993, began a huge decline from which it has not recovered. Remittances in 2013 surpass net profits from tourism, nickel, and medical products manufactured by the Cuban biotech industry.

Table 1. Remittances versus Other Sources of Hard Currency in Cuba, 2012 (in millions of US dollars)

No.

Source

2012

1

Remittances received in cash

$2,605.12

2

In-kind remittances

$2,500.00

3

Total remittances

$5,105.12

4

Tourism revenues

$2,613.30

5

Nickel exports

$1,413.00

6

Pharmaceutical exports

$500.00

7

Sugar exports

$391.30

Data sources: Calculated by The Havana Consulting Group, based on their data and open-source statistics published by the Oficina Nacional de Estadísticas e Información (ONEI), Havana.

The table above shows that remittances ($5.1 billion) outstrip the leading four sectors of the Cuban economy combined ($4.9 billion). Moreover, the figures for items 4 through 7 do not take into account expenses incurred in generating those gross revenues (i.e., costs of processing sugar, manufacturing drugs, food imports, etc.). Sending remittances does not cost the Cuban government money, but it circulates throughout he economy and supports most Cubans in some way.

White House Policies Trigger Growth in Remittances

Barack Obama’s arrival in the White House has directly influenced the increase in money being sent to Cuba. In the past four years, $1 billion USD of remittances have infused the Cuban economy.

Cash remittances in 2012 reached a record $2.61 billion USD; a 13.5% increase over 2011.

In other words, cash remittances outweigh government salaries by 3 to 1. The current monthly mean salary according to ONEI (the official government statistics agency) is 445 Cuban pesos, or the equivalent of just under $19 USD. Today, the economically active work force is 5.01 million workers, of which about 80% (4.08 million) draw state paychecks, whereas the balance is self-employed, agricultural, or cooperative workers.

If we use the official exchange rates that one Cuban convertible peso (CUC) equals 24 pesos (CUP) or one US dollar, the annual payout for state workers is three times less than the volume of money that Cuban émigrés send to family back home. Include in-kind remittance contributions (gifts, appliances, clothing, etc., brought to Cuba during visits), and the ratio leaps to 5.5 to 1.

Behind this growth in sending money to Cuba is the opening up of travel to Cuba as well as eliminating restrictions on sending money there. In 2012, just over a half a million Cubans residing abroad visited Cuba, making them the second largest tourist group in the island’s market; only Canadians (1.1 million visits) surpass them.

Out-migration from Cuba –about 47,000 annually on average over the past decade or nearly a half million émigrés—is also a contributing factor because those who have most recently left the island are the ones most inclined to send money back home. That was not the pattern with the original exile community in the 1960s; sending dollars to the island was forbidden back then.

We also need to acknowledge that several reforms introduced by the Cuban government in the past three years have encouraged remittances. This cash infusion helps to start home restaurants (paladares), B&Bs, car rentals, and more recently the buying and selling of private cars and real-estate. These businesses are aided by the 1.6 million cell phones in use today –available to the general public only since 2007—of which 70% are paid for by Cubans living off the island.

Never at a loss to encourage remittances, the Cuban government announced just last month the opening of 118 Internet stations that charge very high hourly rates. The new cyber cafés will initially cluster in the tourist poles across the island and the provincial-capital cities.

At the present, then, the role the Cuban diaspora plays in developing the island’s economy has never been greater, despite the restrictions on how and where money can be invested. However, the short term is unlikely to witness a greater influx of capital beyond the diaspora’s giving. Witness the failures in recent offshore gas and oil oil drillings that have come up ‘dry’ and the political and economic crisis in post-Chávez Venezuela is mired. This may create a broader space for the exiles to have a more direct hand in rebuilding the country.

Like it or not, Cuban exiles carry economic clout on the island. They have a lot of skin in the game; some of it is economic, and a lot of it is love of family. Their role in shaping the lives of many will be transformative in years to come, and on both shorelines that straddle the Florida Straits.

Last Updated (Tuesday, 11 June 2013 04:20)

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New Publication: The Cuban Diaspora in the 21st Century

A new analysis of the potential role for the Cuban diaspora was made public today – October 7, 2011 – in Washington and will be presented in Miami on October 10. It was produced under the auspices of the Cuban Research Institute of Florida International University and more specifically, the Project entitled “The Cuban Diaspora and the Development of the Entrepreneurial Sector” of the Cuban Research Institute in cooperation with the Cuba Study Group.

As can be seen from the Table of Contents below, the Report, while concise, is wide ranging in scope and constructive in orientation. It may prove to be an important catalyst in generating changes in attitudes and eventually policy on both sides of the Florida Straits. At least, I hope that this is the case.

A distinguished group of scholars produced this Report, including Uva de Aragón (Florida International University), Jorge Domínguez (Harvard University), Jorge Duany (the University of Puerto Rico), and Carmelo Mesa-Lago (University of Pittsburgh).  Orlando Márquez, director of Palabra Nueva, a journal of the Havana Catholic Archdiocese, joined the committee in March. The coordinator for the project is Juan Antonio Blanco (Florida International University), who also coauthored the report.

The complete study is available here:

The Cuban Diaspora in the 21st Century, FIU, October 2011

From the Preface by Juan Antonio Blanco:

The authors have analyzed relations between several states and their diasporas and studied the problems and potentials associated with the Cuban diaspora’s potential role in Cuba’s national development. While this document does not attempt to evaluate the measures adopted by the Cuban government in August 2006, it suggests that Cuba’s so-called economic update would have a better chance of success were it accompanied by a parallel update of the island’s migratory policy.
The authors have reviewed the tensions, conflicts, and traumas in the history of Cuban state’s relationship with its diaspora, but their emphasis is always on the future. Without glossing over problems, they prefer to scan the horizon for possibilities that could bring about a genuine normalization of relations between the diaspora and its country of origin; in particular, changes in existing migratory policy to bring it in line with universally recognized standards. Their analysis also includes the obstacles posed by United States policy toward Cuba, especially for the Cuban diaspora, and the need for their removal.
The members of the committee—who volunteered their services to produce this report—have formulated a series of recommendations for respectful submission to the governments of Cuba and the United States, as well as to the Cuban diaspora and Cuban civil society.
As the authors note in the conclusion to this document, “Many of the observations, conclusions, and suggestions expressed in this report are aimed at tomorrow, with the hope that they will eventually be implemented in whole or in part. Tomorrow can begin today, however, if the actors with decision-making power in this area so choose, as Cuba so urgently needs.”

Table of Contents

Preface 5
Summary 7
Introduction 11

A Better, Shared Future 11
Points of Departure  12
Advantages of a Shared Future 13

State-Diaspora Relations 16

Haiti: A strategically selective state 18
The Dominican Republic: A Transnational Nation-State 20
Cuba: Between Disinterest and Denunciation 23
Policies for Improving State-Diaspora Relations 28
The Role of Government Institutions 33
Relations with Non-Governmental actors 34
Dual Citizenship Laws 34
External Voting 35
Investment Incentives  35
“Brain Circulation” 35
Ethnic Tourism 36
Nostalgic trade 36
Relations with Charitable and Voluntary Organizations 37

The Cuban Diaspora: Possibilities and Challenges 38

The Cuban Diaspora in the United States 38
New Policies and the Diaspora  45

The Diaspora: Resources and Possibilities 47

Economic Capital  48
Social Capita 50
Human Capital 50
Symbolic Capital 51
Possible Diaspora Support for the Non-State Sector  52
Venture Capital or Joint Investment in Small Enterprises  53
Using Symbolic and Social Capital to Attract Financial Capital  55
Access to Foreign Markets, Marketing, and Outsourcing 56
Tools, Inputs, and Technology 57
Training and Consulting 58
Obstacles and Challenges 59
Policy Framework: Updating Cuba’s Migration Laws 61
The Subjective Context  63

Conclusions and Recommendations .65

Conclusions 65
Recommendations 68
To the Government of Cuba  69
To the Government of the United States70
To the Cuban Diaspora 72
To Cuban Society. 72
Epilogue 73

 

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Cheney Wells: “The Role of Remittances in Cuba’s Non-State Sector Expansion”

How recent changes in remittance policy by the US and Cuba may facilitate small-scale investment to support Cuba’s growing non-state sector

Attached is an interesting MA Thesis by Chaney Wells on remittances and their posible use for microenterprise in Cuba:
Abstract:
This study adds to the existing literature on the potential use of remittances for credit in a financially underdeveloped economy, focusing on Cuba, a country for which little is known about the relationship between remittances and investment. In the past, economic and legal conditions in Cuba, in addition to US and Cuban policies on financial transfers have resulted in a large majority of remittances to Cuba being used for basic consumption. The Cuban government’s changing stance on the non-state sector, as well as recent shifts in both US and Cuban policies on remittances have important  implications for remittance use in Cuba. This paper assesses the factors affecting remittance use, and makes the case that as a result of the concurrent shifts in US and Cuban remittance policy along with Cuba’s non-state sector expansion initiative, a more significant portion of remittances will be used for productive investment purposes, filling the void left by the underdeveloped financial sector.
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