Remittances to Cuba hold steady, sources diverge

By Paul Wander
March 5, 2009

Listen to an mp3 audio recording of the event.

Remittances to Cuba remained constant in 2008, but came from increasingly diverse sources and by increasingly informal means, said Manuel Orozco (Inter-American Dialogue) and Katrin Hansing (Cuban Research Institute at Florida International University) at the release of the survey on remittances and migration in Cuba on March 5^th at the Inter-American Dialogue.

While arriving at a conclusive measure of remittances to the island is made difficult by the dearth and highly-politicized nature of data on the subject, Orozco concluded that remittances to Cuba in 2008 totaled almost $1 billion.  The Cuban government reports a figure closer to $1.4 billion. 

Recently Europe (especially Spain and to a lesser extent Italy) has become a key source of remittances to Cuba as the share of total remittances from the US decreased to 53 percent in 2008 (down from 81 percent in 2005).

While a majority of those sending remittances to Cuba use official channels (such as MTOs), 46 percent of senders from the US use mulas or other unofficial means to get money into the island.  Increased restrictions on remittances imposed by the Treasury Department under the Bush administration and high transaction costs associated with formal channels have steered an increasing percent of remittances into the illicit market.

These and other limiting factors make the market less than competitive with the result that transactions costs for sending money to Cuba are almost three times as high as the average 5% cut taken in the rest of Latin America and the Caribbean, said Orozco. 

Remittances are a key component to the Cuban economy.  State wages, averaging about $17 per month, are not sufficient to cover basic living expenses and Cubans typically augment state wages with hard currency obtained remittances.   The Cuban government also takes a cut, with a 10 percent tax on conversion from dollars to convertible pesos.  Critics of recent calls to remove restrictions point to the fact that remittances are a critical source of hard currency for the Cuban government.  Proponents of remittance liberalization note that money from family members abroad can be an important development tool, and may make Cubans less dependent on the government for their daily needs.  

Increased remittances broaden the scope of the informal sector and encourage “personal agency.”  These steps are “building blocks to strengthening civil society,” Hansing said.

But “not everybody receives remittances,” noted Hansing.  Social inequality in Cuba is growing and class divisions are emerging along lines marked in part by access to remittances and jobs in tourism.  Both ways of accessing hard currency are not equally distributed.   

Hansing touted the role of remittances in granting Cubans “more independence of actions and attitudes,” and said that removing restrictions on remittances to the island would “allow more people to engage in entrepreneurial endeavors.”  In fact, the study showed that people are saving and often utilize those savings for entrepreneurial activities that help improve their quality of life.