Cuba: $2.6 Billion in Remittances in 2012

Cuba: $2.6 Billion in Remittances in 2012
June 11, 2013
Remittances have become the driving force of the Cuban economy.
Emilio Morales* (Café Fuerte)


HAVANA TIMES — According to an independent study, remittances sent to
Cuba from abroad continue to grow at an uncontainable pace and reached
the record figure of US $2.605 billion in cash during 2012.

In cash flow alone, this represents a 13.5 increase with respect to the
previous year's figures.

When the incomes represented by packages and luggage containing food,
medicine, electrical appliances and other materials sent to Cuba from
abroad (remittances in kind) are added to these figures, the total,
according to data processed by The Havana Consulting Group (THCG) is
estimated at US $5.105 billion.

The yearly study conducted by THCG is based on the analysis of Cuba's
hard-currency retail invoice database, the remittance amounts sent to
the island through official channels, an estimate of informal monetary
incomes and the expenses paid by visitors to Cuba.

It also relies on financial figures made available by Cuba's National
Statistics and Information Bureau (ONE). THCG, based in Miami,
complements this information with surveys conducted in both Miami and
Havana.

In the summer of 1993, Cuban President Fidel Castro allowed remittances
to enter the country, but only in spite of himself and begrudgingly, as
a means of securing hard currency and ensuring the financial survival of
the country.

Being forced to accept that Cuban émigrés were one of the most
significant forces keeping Cuba economically afloat during the "Special
Period" was a crushing ideological blow. US dollars flooded Cuba
overnight, arriving on the island to stay.

The dollar economy, 20 years later

The liberalization of the dollar, a measure taken nearly 20 years ago,
had a powerful impact on Cubans living on the island and abroad.

Nearly 70 percent of Cuba's mobile phone market, with over 1.6 million
cellular phones currently in service, is also financed by Cuban émigrés.

What Fidel Castro never imagined was that the liberalization forced by
circumstances upon the country would become the most efficient driving
force of the Cuban economy for the following two decades. No Cuban
economist, in fact, predicted such a scenario. Today, remittances reach
an estimated 62 percent of Cuban homes, sustain nearly 90 percent of the
country's retail market and favor the employment of tens of thousands of
people.

Revenues secured from remittances have risen well above those taken in
through the sugar industry – which entered its most disastrous phase in
1993 and has being going downhill ever since. The remittances report
greater volumes and efficiency than the tourism sector and represent
more money than exports of nickel and medications produced by Cuba's
biotechnology industry.

Below is a comparative list of the most important items of the Cuban
economy in 2012, as per their revenues in hard currency (US dollars).

Remittances in cash $2.60512 billion
Remittances in kind $2.5 billion
Total remittances $5.10512 billion

Tourism revenues $2.6133 billion
Nickel exports $1.413 billion
Medications $500.00 million
Sugar exports $391.30 million

The above list shows how the total revenues secured through remittances
sent to Cuba are above those of the Cuban economy's four main items as a
whole. In total, remittances account for US $5.10512 billion, while the
export of sugar, nickel and medications and the tourism sector together
bring in US $ 4.91760 billion, an estimate calculated without
subtracting the sums invested in each item, an operation that would
produce a notably greater difference.

That the entry of Barack Obama into office has directly led to an
increase in the sending of remittances to the island over the last four
years is beyond question. Over the period 2009-2012, this increase
reached a value of nearly US $ 1 billion.

An all-time record in remittances

The record figure of US $2.60512 billion in remittances taken in last
year is three times the total amount the government paid State employees
in salaries during this period. Currently, the average monthly salary
earned by a Cuban worker is 455 Cuban pesos (CUP), the equivalent of US
$18.95. Today, Cuba's work force is made up of 5.01 million employees,
4.08 million of which receive payment directly from State institutions.
The rest is employed by the private sector, made up of farmers, members
of cooperatives and freelancers.

The entry of Barack Obama into office has directly led to an increase in
the sending of remittances to the island over the last four years is
beyond question. Over the period 2009-2012, this increase reached a
value of nearly US $ 1 billion.

The total sum that the government paid these 4.08 million State
employees in wages is 928,586, 750.00 Convertible Cuban Pesos (CUC), a
figure calculated using the official exchange rate of 1 CUC for 24 CUP.
That is to say, the total amount paid by the State in wages is one third
the amount of money that Cuban émigrés send their relatives on the
island. If we add the amount sent in kind to this figure, then the rate
becomes 5.5 to 1.

The total amounts Cuba has received in remittances since 2000 are listed
below.

2000 – $986.96 million
2001 – $1.01087 billion
2002 – $1.07215 billion
2003 – $1.10046 billion
2004 – $1.03084 billion
2005 – $1.14412 billion
2006 – $1.25115 billion
2007 – $1.36271 billion
2008 – $1.44706 billion
2009 – $1.65315 billion
2010 – $1.92044 billion
2011 – $2.29454 billion
2012 – $2.60512 billion

The lifting of travel restrictions and those applied to the sending of
remittances and goods to Cuba from the United States are the measures
which have impelled this phenomenon most powerfully.

Last year, more than half a million Cubans living abroad travelled to
the island, a figure that makes Cuban émigrés the second most important
source of tourism in the country, below only Canada, with 1.1 million
visitors every year.

We must also bear in mind that, in the course of the last decade, the
migratory flow of Cubans leaving the island has remained at an average
of 47,000 émigrés a year.

In addition, the structural changes implemented by the Cuban government
over the last three years has stimulated the sending of remittances,
particularly in connection with the financing of new privately-run
restaurants, the rental or sale of real estate and the purchase of
automobiles.

What émigrés pay

Nearly 70 percent of Cuba's mobile phone market, with over 1.6 million
cellular phones currently in service, is also financed by Cuban émigrés.

So as to maintain the tradition of encouraging the sending of
remittances, the Cuban government has recently opened 118 cybercafés,
public Internet access points charging the extremely high rate of 4.50
CUC the hour of Internet use. It is clear that part of the money Cubans
use to access the Internet will also come from abroad.

Even with the investment restrictions it faces, the Cuban diaspora is
one of the most important driving forces of the country's economy. And
its significance could become greater if new liberalizations allowed it
to participate more directly in the country's economic reconstruction.

Remittances are an indicator of the transformative role Cubans are going
to play in Cuba's future, no matter how irritating this may prove for
people on both shores.
—–
(*) Cuban economist. Former chief of marketing strategies for Cuba's
CIMEX corporation and author of the books "Cuba: A Silent Transition
Towards Capitalism?" and "Marketing without Advertising, Brand
Preference and Consumer Choice in Cuba". He is the current president of
The Havana Consulting Group (THCG), based in Miami. The statistical
tables used in this article were prepared by THCG.

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