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For close to half a century, the Cuban remittances market was buffeted by U.S. embargo legislation and restrictions from Cuban socialism. No other remittances market in Latin America suffered so many limitations. Today, the situation is quite different: sending remittances to the island is one of the sectors that has been most favorably affected by the rapprochement policies pursued by President Obama's Administration since his arrival at the White House in 2008. In 2015, remittances sent to the island reached a record level of 3,354.1 million dollars[1]. From 2008 to 2015, Cuban remittances grew by an astronomical 1,907.1 million dollars, for an average annual increase of 238.3 million dollars, an unprecedented growth performance since the receipt of remittances became legal in 1993. |
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The Cuban remittances market recorded the highest growth in Latin America from 2008 to 2014, growing by 1,681.9 million dollars, surpassing the growth recorded by the Dominican Republic (1,423.0 million) and Guatemala (1,085.0)[2], the two other fast growing remittances markets in Latin America.
Cuban remittances market had become the seventh largest in Latin America Thus, in 2014, the Cuban remittances market had become the seventh largest in Latin America, amounting to 3,128.9 million dollars, only surpassed by Mexico (23,645 million dollars), Guatemala (5,544 million dollars), Dominican Republic (4,571 million dollars), El Salvador (4,217 million dollars), Colombia (4,093 million dollars) and Honduras (3,353 million dollars). Should Cuba's remittances growth trends continue, within 5 years its remittances market could surpass that of Colombia, Honduras, El Salvador and Dominican Republic. If we take into consideration the size of the population of the countries and of their respective diasporas, we can see that Cuba's levels of remittances are lower than those of other Latin American countries. This suggests that should Cuba liberalize its markets through the ongoing reform process, remove restrictions on real estate transactions, stimulate the private sector, and free-up the sale of automobiles, among other measures, remittances to the island could grow. According to the 2010 U.S. Census of Population, Cuba's emigration to the United States amounted to 1,785,465 persons, the highest number from any of the Central American and Caribbean countries listed in the next table. The Central American and Caribbean countries that most closely followed Cuba in terms of immigrants to the United States in 2010 were El Salvador (1,648,871) and Dominican Republic (1,414,691).
Cuba was also the origin of immigrants to the three countries that are the largest sources of remittances to Central America and the Caribbean -the United States, Canada and Spain- with a combined 1,852,041 immigrants. Examining the average value of remittances sent to the home country from immigrants living abroad in 2014 shows that Cuban immigrants remitted annually an average of 1,689 dollars, the lowest per capita remittances level of any of the Central American and Caribbean countries in the table. Per capita remittances by Guatemalan and Honduran immigrants were 3.1 and 3.0 times higher, respectively, than for Cuban immigrants. Similarly, the average annual level of remittances per capita received by Cubans in the island (280 dollars) was the lowest among all countries mention in the table. The very low level of remittances from Cuban immigrants is influenced by several factors. First, unlike other markets, the Cuban remittances market continues to be subject to many restrictions. Some of these restrictions include not being able to use the remittances for financing small and medium size enterprises, purchase of land, purchase of real estate or automobiles, and so on. Another factor is that the other countries have large undocumented populations residing in the U.S. who, although not officially registered, nevertheless send remittances to their relatives in the home country. The case of Cubans in the U.S. is unique, as the benefits they received in the U.S. upon registration are such that there is a strong incentive for them to be officially registered. Thus, official statistics on the number of immigrants residing in the U.S. do not reflect the actual number of immigrants, as there are undocumented immigrants that are not captured in the official statistics. The number of undocumented immigrants is extremely difficult to calculate but it has been estimated that the number of undocumented immigrants from the countries in Figure 3 conservatively could be 2 to 2.5 million persons. Undocumented immigrants tend to work in low-pay jobs and therefore remittances sent to the country of origin often represent the amount sent by several individuals. According to analysts, a single remittance transaction might include the contribution of between 5 and 10 individuals. Each person may be remitting $20 to $50, for an average of $35 per person, for a combined remittance of $100 to $500 and an average of $350. To get a sense of the flow of undocumented persons crossing borders, a press report from 2015 stated that from October to April, Mexico had detained 92,889 undocumented migrants from Central America. Over the same time period, the U.S. had detained 70,226 “non-Mexican” undocumented migrants, originating primarily from Honduras, Guatemala and El Salvador[3]. Factors that have affected the growth in the sending of remittances to Cuba in the last 8 years. The principal such factors are:
Cuban emigration has grown significantly in the last few years. Figure 4 shows that emigration flows have been higher since Raúl Castro ascended to the Cuban presidency compared to the last four years of Fidel Castro’s presidency. It is interesting that during Raul Castro’s presidency, Cuba has seen the highest migration peaks since the Mariel exodus in 1980 even though the country is undergoing economic reforms that have authorized self-employment in 201 occupations and have incentivized the development of cooperatives. However, available data suggests that to date, the economic reforms have not benefitted the bulk of the Cuban population, with many citizens seeking better alternatives by migrating to other countries, principally to the United States.
The first factor that has influenced Cuban emigration flows has been the thaw in diplomatic relations between Cuba and the U.S. This development has increased migration of Cubans to the United States to a large extent because of the concern that the Cuban Adjustment Act might be abolished. If this were the case, Cuban migrants would no longer benefit from the special legal and economic benefits that the U.S. currently offers them[4]. The second element that is responsible for the increase in remittances to Cuba has been the lifting of U.S. restrictions on the amount of such remittances. Prior to the Obama Administration, Cuban emigrés residing in the U.S. were able to send only $300 every three months to first degree relatives (parents, brothers/sisters, grandparents). The Obama Administration initially set the limit at $5,000 per day, and later raised it to $10,000 per day. These changes were very influential in the avalanche of remittances to the island. |
The third factor has been the tremendous growth in travel to the island by Cuban-Americans. Under the policies of the Presidency of George W. Bush, Cuban-Americans were permitted to travel to the island only once every three years, which limited contacts and the flow of remittances to the island. Since Barack Obama took over the White House, this restriction has been eliminated and therefore Cuban-Americans are free to travel to the island as many times per year as they wish. Lifting this restriction increased substantially travel by CubanAmericans to the island. It is important to keep in mind that Cuban-Americans traveling to Cuba carry with them, on average, $3,200 – $3,500 in cash, according to several studies conducted by THCG. In 2015, the number of Cuban-Americans who traveled to the island and of Cubans residing in the island who traveled to the U.S. and returned to Cuba added up to 538,433 passengers. The number of such passengers in 2015 was 3.27 times larger than in 2007.
The third factor has been the tremendous growth in travel to the island by Cuban-Americans. Under the policies of the Presidency of George W. Bush, Cuban-Americans were permitted to travel to the island only once every three years, which limited contacts and the flow of remittances to the island. Since Barack Obama took over the White House, this restriction has been eliminated and therefore Cuban-Americans are free to travel to the island as many times per year as they wish. Lifting this restriction increased substantially travel by CubanAmericans to the island. It is important to keep in mind that Cuban-Americans traveling to Cuba carry with them, on average, $3,200 – $3,500 in cash, according to several studies conducted by THCG. In 2015, the number of Cuban-Americans who traveled to the island and of Cubans residing in the island who traveled to the U.S. and returned to Cuba added up to 538,433 passengers. The number of such passengers in 2015 was 3.27 times larger than in 2007. Remittances to Cuba offset the shortage of hard currency in the economy When in 1993, the Cuban government authorized the sending of remittances to the island as one of several measures aimed at countering the economic crisis of the so-called Special Period (following the collapse of its main benefactor the Soviet Union), no one imagined that remittances would have such weight in the Cuban economy and in the lives of its citizens 23 years later. In 2015, remittances sent to the island reached a record sum of $3,354 million, a figure that exceeded the earnings of the most strategic sectors of the Cuban economy, such as the export of nickel, sugar, tobacco, medicines and even tourism income.
If you combine merchandise remittances and cash remittances, the total amount of this family assistance ($6,634 million) is higher than the sum of the earnings of the five most important productive sectors of the Cuban economy, which together showed earnings of $5,168.9 million[5]. However, this latter figure is gross earnings, from which must be subtracted production costs, operation costs, commercialization costs, and so on, which means that the estimated net income from these sectors amounts to a round $1,137.2 million, which is nearly 6 times lower than the value of the financial assistance sent by the Cuban diaspora to family members and others on the island. It is worth pointing out that this same exile community shoulders all of the costs of sending the money and merchandise, so the $6,634 million in assistance is a net value. Remittances are the main source of income for Cuban families For some years now, remittances have been the main source of income for Cuban families. In 2015, their value in cash was 1.95 times higher than the aggregate of the average annual salaries of all of the country’s workers. Next Figure shows even more clearly the difference each year between the total volume of remittances received by the Cuban population and the aggregate value of average salaries paid to active Cuban workers.
It should be pointed out that in 2015, Cuba's active labor force was 4.86 million, while the estimated number of persons sending remittances to the island in that year was approximately 1 million. If we compare the per capita amount of remittances sent by Cuban émigrés with the per capita annual salary of Cuban workers (calculated in dollars on the basis of an exchange rate of 24 CUP to the U.S. dollar), the remittance amount is 9.55 times higher. In other words, the annual salary received by 9.55 Cuban workers is equivalent to the annual remittances sent by a single émigré. From this one can see that remittances to Cuba provide not only the main economic support of families in Cuba but also, by extension, a major source of income for the hard currency retail network on the island that is mostly controlled by the state. The new scenario expected to be created by the granting of legal recognition to small- and medium-sized companies in Cuba will connect, in an entirely legitimate way, the sending of remittances with the development of these private enterprises. This is turn will allow micro-credits to play a significant role in the business development of the Cuban economy. This would imply a recognition that Cubans who live both inside and outside the island are natural and essential contributors to the economic development of the nation, independent of the importance and role of foreign investment. Not to recognize this would be a suicidal act in the current circumstances. An accelerated combination of both these forces – remittances and the development of small- and medium private enterprise – is the most effective formula for the country to pull out of underdevelopment. |
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Bibliography [1] Morales Emilio. “Cuba: The Fastest Growing Remittances Market”. THCG BUSINESS REPORT April 2016 No.2. The Havana Consulting Group and TECH. [2] Maldonado, R., Hayem M. “Las remesas a América Latina y el Caribe superan su máximo valor histórico en 2014”. El mapeo anual del FOMIN de las remesas a América Latina y el Caribe. FOMIN, 2016. http://www.fomin.org/es-es/PORTADA/Conocimiento/Publicaciones/idPublication/138816.aspx [3] AP. “México deporta más centroamericanos que EU”. Excélsior. Junio 2015. http://www.excelsior.com.mx/nacional/2015/06/18/1030178 [4] Chardy, Alfonso. “Marco Rubio advierte que la Ley de Ajuste Cubano está en peligro”. El Nuevo Herald. Enero 2015. http://www.elnuevoherald.com/noticias/mundo/america-latina/cuba-es/article5582637.html [5] Morales, Emilio. “ One of the most attractive in Latina America.”. THCG BUSINESS REPORT June 2016 No.3. The Havana Consulting Group and TECH.
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