{"id":233739,"date":"2021-01-27T12:27:31","date_gmt":"2021-01-27T17:27:31","guid":{"rendered":"https:\/\/oncubanews.com\/en\/?p=233739"},"modified":"2021-01-27T12:27:31","modified_gmt":"2021-01-27T17:27:31","slug":"u-s-restrictive-policies-on-cuban-remittances-effects-on-families-and-emerging-private-sector","status":"publish","type":"post","link":"https:\/\/oncubanews.com\/en\/cuba-usa\/u-s-restrictive-policies-on-cuban-remittances-effects-on-families-and-emerging-private-sector\/","title":{"rendered":"U.S. restrictive policies on Cuban remittances: effects on families and emerging private sector"},"content":{"rendered":"

The main United States remittance agency in Cuba, Western Union, <\/span>closed its operations<\/span><\/a> on November 26, 2020 after the U.S. government\u2019s new restrictions the took effect. These new restrictions have at least three important effects.<\/span><\/p>\n

First, they damage the survival strategies of Cuban families, which are already experiencing the effects of the current economic crisis. Second, they hurt the emerging private sector. Third, they promote a change in the sending of <\/span>remittances<\/span><\/a> from formal to informal channels, which increases the prices of services and products for Cuban families and the emerging private sector, while reducing the transparency of regulators in both countries.<\/span><\/p>\n

Numbers in context: relevance of remittances in Cuba<\/b><\/p>\n

Over the years, the Cuban diaspora has played a vital role in the Cuban economy and in family income, to the point of constituting the second most important source of hard currency on the island.<\/span>1<\/b> Of the more than 2.3 million Cubans who emigrated to the United States,<\/span>2<\/b> some 700,000 send remittances to Cuba each year.<\/span>3<\/b> Western Union transferred between 900 million and 1.5 billion U.S. dollars annually.<\/span>4<\/b> Before the closure, Cubans residing in the United States sent funds in approximately 240,000 monthly payment transactions through Western Union, especially to the Cuban capital.<\/span>5 <\/b>Around the same amount of funds was being transported through informal channels: friends, family, or so-called mules, that is, people who carry cash and merchandise to the island by charging their customers for this.<\/span>6<\/b><\/p>\n

Percentage of reception of formal remittances by province:<\/span><\/i><\/p>\n

\"\"<\/a><\/p>\n

Source: Prepared by the author from information provided by CubaTrade (2020).<\/span><\/i><\/p>\n

However, remittance flows started <\/span>declining last year<\/span><\/a> as the impact of the pandemic on the Cuban immigrant economy has been limiting their ability to support their loved ones. Similarly, restrictions on international travel, in force since April 2020, have affected foreign exchange earnings from tourism and the flow of remittances through informal channels.<\/span>7<\/b><\/p>\n

United States implements restrictions on FINCIMEX and Western Union<\/b><\/p>\n

On June 3, 2020, the United States Department of the Treasury <\/span>included<\/span><\/a> FINCIMEX (Financiera CIMEX, SA) in the Cuba Restricted List. FINCIMEX is the Cuban agency, directed by the military, that manages and administers the reception and distribution of remittances. The Treasury Department\u2019s Office of Foreign Assets Control (OFAC) took this action to prevent the military from benefiting from the fees for the remittance process. Secretary of State Mike Pompeo said: \u201c<\/span>Cuba is the only country in the hemisphere where the military takes a cut of remittances<\/span><\/a>.\u201d<\/span>8<\/b> Although the main argument to prevent FINCIMEX from acting as a local Western Union partner is to limit the access by the military to remittance-related funds, this policy causes considerably greater harm to families and private entrepreneurs on the island.<\/span><\/p>\n

The closure of Western Union adds another layer to the restrictive policies that the Trump administration imposed on Cuba in recent years. For example, in September 2019 he limited remittances per person to $1,000 per quarter to a close relative living in Cuba. In reality, many Cuban migrants support more than one family member, since economic needs affect not only individual members, but also the family as a whole. In addition, in Cuba families are usually extended, so grandparents, aunts, uncles, cousins \u200b\u200band other relatives live together. The closure of Western Union came as a second blow, further limiting the scope of support that Cuban Americans can offer their loved ones in difficult times.<\/span><\/p>\n

The Central Bank of Cuba has assessed Western Union\u2019s interest in continuing with remittance services in Cuba through <\/span>REDSA<\/span><\/a>, a non-military entity in charge of managing the network of Cuban ATMs and debit cards. The Central Bank has modified REDSA\u2019s license to include the handling and processing of family remittances sent to Cuba from abroad. This official action was published in the <\/span>Gaceta Oficial de la Rep\u00fablica de Cuba<\/span><\/i>, Resolution 152 of November 16, 2020.<\/span>9<\/b><\/p>\n

This license, which enables REDSA to manage the flow of remittances, would allow Western Union to return to Cuba. One potential scenario could be that senders make electronic transfers directly from their bank accounts using Western Union to finance Cuban debit cards for their family members. REDSA\u2019s operations could expand the digital platforms designed for receiving remittances.<\/span>10<\/b><\/p>\n

An\u00e1lisis econ\u00f3mico: \u201cValdr\u00eda la pena expandir las remesas digitales en la crisis econ\u00f3mica actual\u201d<\/a><\/p><\/blockquote>\n