Development & Aid, Economy & Trade, Headlines, Latin America & the Caribbean, Population

CUBA: Remittances, a Major Source of Foreign Exchange – and Inequality

Patricia Grogg

HAVANA, Dec 29 2003 (IPS) - The remittances sent to their families in Cuba by the hundreds of thousands of Cubans living abroad help cover basic necessities and household expenses, while widening gaps in income and wealth that become especially noticeable during the year-end holiday season.

”Uncle Paco never fails, he always remembers us when December rolls around,” says María Teresa Domínguez, a 50-year-old divorcee who works in a bookstore and has two daughters who are finishing up their university degrees.

Domínguez has three relatives living in the United States, who send her a total of between 300 and 400 dollars a year, generally in letters brought by other travellers coming to this Caribbean island nation for a visit. ”It’s not a lot, everything’s so expensive, but the dollars really help,” she comments to IPS.

Domínguez says she spent 15 dollars on a leg of pork for the New Year’s dinner she will enjoy with her two daughters and their boyfriends. Another 15 dollars will go towards rum and roast piglet.

Her daughters were given 15 dollars each to buy Christmas presents, and Domínguez stashed away 25 dollars for any unexpected expenses that might pop up. ”It’s always good to have reserves in case there’s a health problem or the TV breaks,” she says.

In terms of the inflow of expatriate remittances, Cuba is no exception in Latin America and the Caribbean, which received a combined total of 33 billion dollars in money transfers this year, according to the Inter-American Development Bank (IDB).

No other region receives such a large influx. Latin America and the Caribbean will have taken in more than 400 billion dollars in remittances by the end of the decade, says the IDB.

The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that Cuba received some 915 million dollars in remittances this year, but researchers in Cuba say the total could be as high as 1.2 billion dollars.

They point out that most of the foreign exchange is spent in the government-run chain of stores that only accept foreign currency, and that the stores’ sales climbed to 1.3 billion dollars this year.

The well-stocked TRDs (”stores for recuperating foreign currency”) were created when the ban on the free circulation of dollars was lifted in 1993.

”If you don’t have family members abroad or some moonlighting job that brings in dollars, life is really difficult,” says Mercedes, a 30-year-old with no relatives overseas who hires herself out as domestic help for short stints.

Researchers in Cuba say the growing inflow of remittances has mitigated the poverty suffered by a portion of the population of 11.2 million, while representing an important source of foreign exchange for the state budget.

Remittances have become one of Cuba’s main sources of foreign exchange, along with tourism and sugar.

Cuba’s government-controlled press acknowledged the role played by the transfers when the White House announced earlier this year that it was considering the possibility of prohibiting the wiring of money orders to Cuba.

”The people who would suffer would be many families who have adapted their lives to the economic standards and considerable benefits that small transfers of money make possible in the conditions prevalent today in Cuba,” wrote Granma, the daily newspaper of the governing Communist Party, referring to the possible U.S. ban on remittances, which has not been adopted.

But moving abroad does not always bring the hoped-for results. Isabel, 30, told IPS that the father of her three-year-old son travelled to Spain with the intention of getting a job, working hard, and helping support his family back home.

But after spending more than a year in Spain, he has not obtained legal residency status, nor has he found a job that allows him to support himself, much less save money to send home regularly.

”Forty dollars is all he has been able to send in all this time, besides shoes and a few toys for our boy,” says Isabel, who earns just 200 pesos (less than 10 dollars) a month as an office worker.

Isabel says she is thankful that the Cuban state provides healthcare and education free of charge, but that she is at her wit’s end trying to make it to the end of the month without falling into debt.

”I owe each saint a candle, and I can’t even start thinking about New Year’s day dinner,” she complains.

For Angela Ferriols, assistant director of the governmental National Institute of Economic Research, the main element leading to inequality in Cuban society is whether or not a family has a source of income in hard currency.

”That is due to the low current exchange rate (of the Cuban peso), along with the fact that dollars are essential to satisfying some of a family’s essential needs,” wrote Ferriols in her study ”Income and Inequality in Cuban Society Today”.

More than 60 percent of the population is estimated to have some source of income in dollars, although most come by only small quantities, whether in remittances, special salary bonuses, or tips from tourists.

The Cuban exile community consists of around 1.5 million people who mainly live in the United States, Spain, Italy, Canada, Mexico, the Dominican Republic, Colombia and Ecuador.

Studies indicate that since Cuba plunged into economic crisis at the start of the 1990s with the disappearance of the Soviet Union and East European socialist bloc, one of the main reasons driving people to emigrate has been a desire to help out the family.

In past decades, opposition to Cuba’s socialist regime played a much greater role in the diaspora.