The Economic Implications for Cuba of Relaxing Restrictions on the Freedom of Movement

By Arch Ritter, October 16, 2012

Cuba’s relaxation of its much-loathed travel regulations, to come into effect on January 14 2013,  is welcome news as it will improve the freedom of movement for Cuban citizens considerrably– one hopes .  It is certainly to be welcomed warmly.

The new policy abolishes the requirement to have a foreigner make an invitation and pay $224.00 (CDN in 2009) for an exit visa (non-refundable even if the permit is refused.) It also permits Cubans to remain outside the country for 24 months, extendable, rather than the current 11 months, without having their property in Cuba confiscated.

There are a number of unknowns in the new policy however.

  • Restrictions or controls apparently will remain on professionals . How broad these are is not clear.
  • Will the restrictions still apply to independent professionals such as pro-democracy critics such as Oscar Chepe or Yoani Sanchez?  Will they still require exit permits?  Will they then be free to return to Cuba?

Dimas Castellanos, Miriam Celaya, Reinaldo Escobar and Yoani Sanchez; Will Cuba’s Pro-Democracy Bloggers now be able to exit Cuba freely and – one hopes – to return freely as well?

 TheEconomic Consequences of the New Travel Regulatoions

 Increased Emigration?

Easier exit and 24 months – extendable – absence may lead to more emigration and the  loss of “human capital.”  Already annual net emigration is high, reaching 38,165 in 2010 (ONE 2011 Table 3.21). Those who emígrate are disproportionately better education and entrepreneurial and ready to face the challenges of starting over in a new country. Such population loss is especially onerous in view of Cuba’s declining population and the prospect of accelerated decline as an aging population becomes a dying population .

Or Decreased Emigration?

Greater freedom to exit and re-enter Cuba may in fact reduce emigration as Cubans in Cuba are able to leave more freely.

Perhaps increased numbers of Cubans will remain in Cuba if they are free to visit abroad for lengthy periods ot time and also to return.

For some Cubns such as musicians oir major league Cuban baseball players in the United States and Canada,  spending part of the year in the US but returning for some months to Cuba each year would be an ideal situation. Would some such professionals ultimately  return to live in Cuba part-time?

Declining or Increasing Revenues for the Government?

The Cuban Government will lose the revenues from the very high exit permit fees. (These were an extortionarte $ US 224.00 for each person in 2009 when I tried to invite two  Cubans, Miriam Celaya and Yoani Sanchex to visit Canada in a prívate capacity. The payments were non-refundable.)

But will increased foreign travel lead to higher government tariff revenues from the increased volumes of products imported by air passengers?

 Increased Remittance Payments from Migrants?

Will more Cubans leave Cuba to work abroad but support their families at home in Cuba and revisiting often? The result would then be increased inflows of hard currency to Cuba.

In summary, the economic implications of the relaxation of the travel restrictions are ambiguous and not yet clear – as is the detail of the legislation itself at this time.

However, the government perhaps is to be congratulated for renouncing some easy forms of hard currency income from the elimination of the exit permit fee and facing the risk of increased emigration.  Over time, the crass monetary aspects of the improvement in peoples’ freedom of movement should be more positive in terms of government revenues and National economic gains.

 Currency Inconvertibility and Monetary Dualism as Limits on Freedom of Movement

The most serious violation of the freedom of movement of Cuban citizens results from Cuba’s monetary and exchange rate system.  Cuba’s currency has been inconvertible for 50 years and the dual monetary and exchange rate system has prevailed for the last 20 years. Currency inconvertibility means that citizens can not routinely change their earnings for foreign currencies in order to travel freely. Instead, from 1961 to 1992 they have had to get permission from the Government to exchange their earnings in Moneda Nacional pesos into a foreign currency. This meant that for the average citizen travel was highly restricted unless one could find a foreign sponsor to pay the bills.

The economic powerlessness of most Cuban citizens was further intensified when the dual monetary system came into play in the early 1990s,. With the collapse of the value of the “old peso” (Moneda Nacional) vis-a-vis the US dollar (and then the convertible peso or “CUC”) the purchasing power of earnings in the official economy also collapsed.

At the exchange rate for Moneda Nacional to the US dollar at around 26 to 1, the average monthly income is somewhere around US$ 20.00. It is not easy to travel outside – or inside – Cuba independently with this level of income!

In sum, Cuba’s exchange rate and monetary systems impoverish Cuban citizens in terms of the international transferability of their earnings from work.

Only when Cuba establishes a normal exchange rate and monetary system will greater freedom of movement become a realistic possibility for the average Cuban citizen.


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