In 2016 cash remittances to Cuba set a record of 3,444.68 million dollars, for a growth of 2.7% compared to 2015. Of this amount, 55.82% is estimated to have arrived by formal means, and 44.18% by informal means.
Figure 1. Remittances to Cuba, 2011-2016 (in millions USD)
Source: Havana Consulting Group.
The rise in remittances was mainly due to the increase in Cuban migration to the US, principally through informal routes, through which 50,082 Cubans left the island in 2016. That year, a total of 80,082 Cubans left the island. See Figure 2.
Figure 2. Cuban emigration through legal and illegal routes, 2002-2016
Source: Based on data published by the Oficina Nacional de Estadística e Información (ONEI) (legal departures) and statistics from the U.S. Border Patrol and U.S. Coast Guard (illegal departures) and estimates by HCG.
Another factor that influenced the growth of remittances to the island was the increase of flights to Cuba from the US, especially after regular flights to the island began in the second half of 2016, which significantly increased the number of passengers above all because the cost of tickets decreased more than 50% compared, to the average prices of charter flights, which was about 450 dollars per ticket. This led to a significant increase in the trips of Cuban-Americans to the island.
There was also a considerable increase in the number of Cubans traveling from Cuba to the United States. Many of them make several trips a year, spending time spans of between two and three months, working informally and returning to the island with the money saved. Studies conducted by THCG have revealed that about 30,000 Cubans with Spanish nationality travel to the US a couple of times a year. Most of them come to work in agriculture, in factories and even to take care of patients. It is also estimated that between 20,000 and 40,000 Cubans travel several times a year since they have 5-year visas.
Recently the Department of State made public the figures of the tourist visas granted to Cubans in the period 2006-2016. The numbers corroborate our statement. During the two mandates of President Obama (2009-2016), 188,115 tourist visas were granted to Cuban citizens,in addition to the 20,000 migrant visas granted each year, plus thousands of additional migrant visas. See Figure 3.
Figure 3. Tourist visas granted by the U.S. to Cubans, 2009-2016
Source: Department of State.
Cuban authorities recently made public information stating that from January 2013 to December 2016, some 671,000 Cubans traveled outside of the island. The number of trips made by Cuban residents abroad during that period was 1,745,000 trips.
2016, a year of changes
As a point of interest, it should be noted that 2016 was a year where the International Money Transfer Conference (IMTC) was held for the first time in Havana. Dozens of remittance companies traveled from different parts of the world, looking for opportunities to insert themselves in the business of transferring remittances to Cuba. For the first time in more than 20 years there was a public exchange between leading remittances companies and the Cuban entities that operate the remittance business to the island.
Leading remittances companies in the Latin American and world market, like Moneygram, Sigue Corporation, More Money Transfers, Intermex, IDT Telecom, Transfer To, among others, were there to explore business opportunities in the Cuban market. For more than 20 years the only internationally renowned company that has been present in the island with its own payment network has been the giant Western Union.
At a time when remittances have become very significant for the Cuban economy, the authorities took advantage of the international meeting, made possible by the thaw between the Cuban and US governments, to explore options for finding new partners to increase the share of remittances being transacted through formal channels. Nevertheless, shipments of remittances by informal channels continue to have a great impact on the Cuban market, currently representing 45% of shipments.
Conclusions
Remittances to Cuba again set a new record in 2016, reaching an estimated level of $ 3,444.68 million, for a growth of 2.7% compared to 2015. However, the rate of growth achieved in 2016 is the lowest in the last 8 years, which is a warning signal of a potential slowdown in the growth of remittances to the island, above all affected by the repeal of the dry feet, wet feet policy, which will cut drastically the migratory flow of Cubans to the United States. In addition, the decrease in the granting of tourist visas to Cubans will also influence the slowdown in the growth of remittances to Cuba.
Major US remittances companies are exploring their incursion into the Cuban market, which could mark the beginning of the end of Western Union's hegemony for nearly 20 years. At the same time, there is a strategic decentralization move within the island with respect to the remittances business, creating space for several Cuban institutions to enter the market.
The Central Bank of Cuba has begun to give the green light to its banking institutions to venture into the remittances business. This step could revitalize the Cuban banking sector, which today is one of the most backward in Latin America.
The business potential of offering services related to remittances to millions of customers is a great opportunity to develop the payment networks of Cuban banking institutions, which need to grow in capillarity in order to cover a business that today involves almost 70% of Cuban households.
The remittances business could be the gateway for Cuban and North American banking institutions to begin establishing direct relationships without the need for third parties, since the US is the main market for remittances to Cuba, accounting for more than 90% of the total transfers to the island. This step could do way with the secrecy of banking information that for over half a century has clouded the island's financial relations with international financial institutions and which currently hinders its entry into international financial circuits.
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