How important are remittances to the Cuban economy

(CNN Español) – After a series of historic protests about the economic situation and shortage in Cuba, which took place last week in different cities of the country, the President of the United States, Joe Biden, on Monday ordered an examination of his government’s policy on remittances sent from the country. His country to the island, trying to alleviate the situation.

Biden said last week that under current circumstances, the remittances — transfers of money from abroad to his Cuban relatives on the island — would end up in the hands of the Cuban government. Since the end of 2020, official transfers have been blocked due to US sanctions.

The White House has long been under pressure to ease the tough anti-Cuba policy of former President Donald Trump, who took some of the toughest economic measures against the island in decades, reinstated travel restrictions, and before leaving office. State sponsor of terrorism.

The President of Cuba, Miguel Diaz-Canel, blamed these measures and in general the US embargo on recent protests against the economic situation. In remarks broadcast on Cuban television, Diaz-Canel said it had been made clear to residents that they would “enter a difficult period, of difficulties and economic shortcomings” since 2019 when the Trump administration’s “restrictive measures” and “sanctions policy” were introduced.

Under the Obama administration, in which Biden served as vice president, there has been an improvement in relations, with embassies reopening and some current restrictions loosening, and many have expected the same from the current government, especially with regard to transfers. .

The weight of remittances

But, precisely, how much are these remittances, what countries do they come from and how important are they for the Cuban economy?

Estimated dialogue between Americans, A think tank for international affairs based in Washington, sent by analyst Manuel Orozco to CNN en Español, in 2019 Cuba received remittances worth more than 2055 million US dollars, which represents 2% of Cuba’s GDP, according to official data.

the National Statistics Office of Cuba Do not publish reports on official and unofficial transfers in the country.

Of the nearly 4 million households in Cuba, 1,042,451 received remittances in that period (about 26%), averaging $2,210 per household, according to the Inter-American Dialogue.

The United States is the main source of these remittances, with just over $1,721 million, or 83.72% of the total, concentrated. It is followed by Spain, where remittances worth $178.2 million (8.67%) were issued, while remittances of $156.4 million (7.61%) came from the rest of the world.

The island’s economy, which is ruled by the communist regime, has been affected by the epidemic and mounting sanctions imposed by the United States.

The report also notes that out of a total of 1,654,684 Cubans (in 2019 estimates) living in the United States, 65% of adults send remittances to their relatives in Cuba, according to the Inter-American Dialogue.

Unofficial shipments

Analyst Manuel Orozco, a member of Inter-American Dialogue, told CNN Cafe on Wednesday that more than 60% of remittances sent to Cuba are done informally, through what are known on the island as “mules” or “travelers.” They don’t contribute money to the government.

“There are about 800,000 transfer transactions per month, of which about 300,000 are done officially, through media outlets such as Western Union or MoneyGram, among others,” he said. “The government has left, with these transactions, about $2 each, i.e. it may earn a maximum of $1 million per month.”

Orozco asserts that official remittances are also under the control of Fincimex, a financial company affiliated with the State of Cuba. The United States imposed sanctions on it in 2020, which is why the transfers have been affected by recent Washington policy.

In this regard, the analyst notes that Fincimex is “a financial authority that implements and controls all international remittance payments, including operations carried out by the Cuban military, police and other state entities.”

The impact of the epidemic

According to data from the Economic Commission for Latin America and the Caribbean (Sibal)Cuba’s economy could have contracted by 8.5% in 2020 due to restrictions and a downturn in economic activity as a result of the COVID-19 pandemic.

Omar Everleni Pérez Villanueva, Doctor of Economics and University Professor at the University of Havana, highlighted the hit to tourism in Argentina’s CNN radio in particular.

“One of the main variables was the development of international tourism and all of a sudden it disappeared. In 2020, we received only 6% of the tourists that were received earlier. For this year, much less is expected. Sources have been cut.”

In addition to the penalties imposed on Fincimex, the travel restrictions have particularly affected the sending of remittances, by preventing the movement of money via “mules” or “travelers”.

Orozco told CNN that the drop in remittances in 2020 is estimated at 16%, although it could be more due to airport and border closures and their impact on the movement of people.