21 January 2007


You send cash to Cuba?

Well, here’s some facts and conjecture on remittances.

I say conjecture because when it comes to Cuba, analysis most times becomes educated guesswork.

Here’s an article from the L.A.Times that wades into the murky waters of remittances:

Cuba's dependence on dollars leads to a divide, analysts say

Some Excerpts:

By some estimates, such remittances are now more important to the Cuban economy than tourism or sugar. Hard-line opponents of Cuba's Communist government contend that fees and markups on the money are more help to Fidel Castro's regime than it is to its actual recipients, providing the government with a source of easy money and allowing it to avoid market reforms in the 15 lean years since the defeat of its Soviet benefactors.But the truth may not be quite so simple. Experts say dollars sent from abroad also cleave this officially classless society of 11 million people into two parts, those who receive them and those who don't, undermining Castro's regime.

Dollarization "created a bifurcated economy that gives some people access to hard currency and others not. And until you get broad-based growth, that inequality won't be solved," said Phil Peters, Cuba analyst at the Lexington Institute, a think tank in Arlington, Va.
Two differing theories on the importance of remittances to the Cuban Economy:

But Paolo Spadoni, an expert on the Cuban economy and a political science professor at Rollins College in Winter Park, Fla., says U.S. visitors to the island routinely circumvent those restrictions. Many send cash via third-country agencies or through an underground network of "mules," or fee-charging couriers.Judging by the booming TRD sales, remittances must have topped $1 billion a year by 2000 and grown to at least $1.3 billion in 2004, Spadoni said. Although it is difficult to determine whether there has been a significant drop-off since then, Spadoni said that dollar-store income rose almost 7% last year."In net terms, remittances are the biggest source of foreign exchange for the country, more than tourism and sugar," he said.

The Cuban government has to invest about 80 cents for every dollar it earns from tourism, now a $2-billion-a-year industry, whereas remittances arrive with minimal state outlays.But John Kavulich, senior policy advisor to the U.S.-Cuba Trade and Economic Council in New York, estimates that the value and influence of remittances to Cuba is far lower. A veteran analyst of centralized economies, Kavulich says Havana's economic data are inflated.

He estimates the volume of remittances at no more than $450 million and says their influence on the overall economy is minimal compared with billions in aid from China and Venezuela. But for average Cubans, remittances are far more tangible.

Rest of the Article here

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