ECONOMY-CUBA: Insecurity in US Threatens Flow of Remittances

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Oct 10 2001 (IPS) - The climate of insecurity spawned by the terrorist attacks against New York and Washington is threatening the flow of remittances sent by Cuban emigrants in the United States back home to their families, the third source of revenue for the island, after tourism and sugar exports.

More than 1.2 million Cuban immigrants and their descendants live in the United States, and many of them are concentrated in the southern state of Florida, particularly in Miami. The majority maintain contact with their relatives in Cuba and send them money via wire transfers.

Remittance totals reach 800 million to 1.0 billion dollars a year in Cuba. Once the money is incorporated into the island’s circuit of consumption it represent net income of 600 million dollars for the government, according to specialised studies.

Pedro Monreal, of the governmental Centre for International Economic Research, said that the funds wired from the United States in recent years have become one of the main sources of cash in this country, alongside tourism and sugar exports.

Cuba continues in its attempts to recover from the economic crisis triggered in the early 1990s by the collapse of the Soviet Union and the European socialist bloc, previously the island’s main trade partners. Cuba’s gross domestic product (GDP) plummeted 34.8 percent in the 1990-1993 period, with dramatic impacts on the living standards of the country’s 11.1 million inhabitants.

’The average annual growth rate of the money transfers from 1992 to 1996 was 242 percent, more than 10 times the growth rate of tourism during the same period,” Monreal says in a study on the phenomenon.

That situation may change as a result of the Sep 11 attacks on the World Trade Centre in New York and the Pentagon (Defence Department) in Washington, and the military strikes that the United States and Britain began Oct 7 against Afghanistan.

The World Bank said Oct 1 that the consequences of the Sep 11 attacks would be felt in all regions of the world, and particularly in countries that depend on tourism, on remittances from citizens living abroad or on foreign investment.

According to a study by the Inter-American Development Bank (IDB), Latin American emigrants last year sent more than 20 billion dollars to their countries of origin, with Mexico and Brazil being the top recipients.

The total remittances to the region, which have grown at an annual rate of seven to 10 percent, are equivalent to nearly a third of the foreign direct investment flowing to Latin America.

IDB figures show that remittances sent from abroad in 2000 represented 17 percent of the GDP recorded that year for Haiti, 14.4 percent for Nicaragua, 12.6 percent for El Salvador, 11.7 percent for Jamaica, and 10 percent of GDPs of the Dominican Republic and Ecuador.

The important role of remittances is evident in the case of the Mexican economy, where money sent home by emigrants was 160 percent greater than the country’s farm export revenues, roughly equal to income from the tourism industry, and two-thirds the revenues from oil exports.

The IDB study, which does not include Cuba, states that most of the money transfers originate in the United States, which is home to 14.5 million people who were born in Latin America or the Caribbean, according to last year’s census data.

Economists consulted by IPS in Havana agreed that in moments of crisis or war the trend is that emigrants or descendants of emigrants take greater precautions and either stop wiring money to their relatives in their country of origin or send much less.

’There are widespread rumours that people are not sending any more money. A decline in remittances, on top of a decrease in tourism, could be disastrous for the Cuban economy,” an economist, who requested anonymity, told IPS.

Raymundo Gutiérrez, a doctor working in a community clinic here, said he had found ’there is great concern among the patients, particularly among the elderly who have relatives in Miami and are financial dependent on them.”

Nevertheless, outside the Cuban offices of Western Union, the US- based agency that handles the money transfers that country, the normal queues can still be seen as people go to collect their money. One employee consulted by IPS declined to comment on whether he had observed a decline in remittances.

In a survey conducted in Havana in the mid-1990s, 60 percent of the respondents said they had relatives living abroad.

’To help my family” is one of the top reasons mentioned by individuals who seek to emigrate from Cuba, while those who remain on the island hope that their emigrant relatives will comply with what they consider a family duty: send clothing, medicine and money.

’They haven’t said they are going to quit sending me money, only that for now we will have to wait and see what happens,” said Ornelia Cabrera, 57, who says she is able to get by financially, thanks to her two brothers living in Miami.

Cabrera, a retiree from the manufacturing sector, has a monthly pension of 140 Cuban pesos (one dollar equals 22 pesos). Her brothers in the United States send 300 dollars quarterly for her and her three daughters.

But now she fears that with the decline in tourism and the struggling economy in Miami her relatives ’may lose their jobs and things could go badly for them.”

Cabrera uses the financial boost she has been receiving to buy certain foods, clothing, cleaning items and other essentials that she can generally only purchase at the government authorised chain of dollar stores.

The goods available in Cuban pesos are limited mostly to foods purchased at the farmers’ markets. Even there, the prices are very high for a population whose average monthly income is just 250 pesos.

The socialist government ensures that the minimum family food basket is sold at subsidised prices, though it barely covers the basic necessities.

Catholic cardinal Jaime Ortega, archbishop of Havana, said Sep 8 û prior to the terrorist attacks in the United States – that a new type of emigration has developed in Cuba, made up of people who leave the country so that they can alleviate their families’ financial woes by sending home money.

’It is troubling to consider how those who do not have the remittances sent by family abroad deal with their daily household needs,” said Ortega.

In Cuba, official figures on remittances are unavailable, but government sources acknowledged in past years that as much as 62 percent of the population has regular access to dollars.

The officials stated that it would be difficult to calculate the sum of the remittances or any change in flow because most of these transactions take place through channels other than banks.

Economy expert Monreal, however, stated that the remittances are ’a decisive factor in mitigating poverty, (but contribute) to the stratification of consumption, the segmentation of markets, and social exclusion.”