New Squeeze on Family Remittances

CUBA-US:
New Squeeze on Family Remittances
Dalia Acosta

HAVANA, Jun 9 (IPS) - An increased tax on remittances sent to Cuba in
dollars will bolster the flow of foreign exchange into state coffers,
but will create further difficulties for the hundreds of thousands of
families who are divided between Cuba and the United States.

"Supposedly, the increase is for the agency carrying out the money
transfer. But it's the customer who ends up paying," a 45-year-old Cuban
woman who lives abroad, and who spoke on condition of anonymity, told
IPS. The Cuban authorities "know that they can continue to squeeze
because we will continue sending money back."

"Of course not everyone is able to," she said in an e-mail message.
"There are people who make a huge effort to send a bit of money every
once in a while to their families in Cuba. And no matter how well off
you are, no one wants to be losing money like this. You find yourself
forced more and more to turn to illegal channels for helping your
family, even though you don't like to have to do that."

The measure means in practice that a money transfer for 123 dollars will
be converted in Cuba into 100 "convertible pesos" or CUCs, which were
created in 1994 as a substitute for the U.S. dollar in internal
transactions. Up to May 31, the ratio was 120 dollars:100 CUCs.

Two currencies are presently used as legal tender in Cuba: the regular
peso and the CUC. The CUC was pegged to the dollar until October 2004,
when the U.S. currency was removed from circulation on the island.

The new hike, or "margen comercial", is a result of the fact that Cuba's
Central Bank now charges 23 dollars in fees instead of 20 for receiving
a money transfer.

The announcement of the new increase, which the Central Bank circulated
among agencies abroad, according to sources in Miami, has not been
published in Cuba. Employees at the government exchange bureaux and at a
branch of the Banco Metropolitano told IPS that they were unaware of the
measure.

But the exchange rate could continue to rise as part of a Cuban policy
to strengthen the CUC and in response to measures by Washington aimed at
curbing to the utmost the Cuban government's sources of foreign exchange.

The new increase coincided with an order by the U.S. administration of
George W. Bush to close several travel and remittance agencies in the
United States, including "La Perla del Caribe", one of the most popular
of the 250 agencies authorised to provide such services related to Cuba.

Inter-American Development Bank (IDB) expert Gregory Watson said at a
Jun. 6 panel in Miami on the impact of remittances that it is more
costly to send remittances from the United States to Cuba than to any
other country in the region.

Total remittances to developing countries climbed from 58 billion
dollars a year in 1995 to 167 billion dollars last year, according to a
report presented this week by United Nations Secretary-General Kofi Annan.

The study also states that 191 million people were living outside of
their countries of origin in 2005.

Around 1.5 million Cubans live overseas, including 1.3 million in the
United States, according to Cuba's Ministry of Foreign Relations. After
the Cuban exile community in Miami, the largest groups of Cuban émigrés
are found in Spain, where they total around 70,000, and Venezuela (50,000).

While at a global level, remittances are steadily increasing year by
year, in Cuba the opposite has begun to occur, with the total shrinking
from an estimated 1.26 billion dollars in 2004 to 1.17 billion dollars
last year.

The Economic Commission for Latin America and the Caribbean (ECLAC)
projects a further eight percent drop this year.

Local experts, in the meantime, say the purchasing power of U.S. dollars
in Cuba has been reduced by around 30 percent since late 2004.

"My son used to send me 100 dollars every three or four months, and now,
although he still sends the same amount, it is converted into 80 CUCs,
which is spent even before I know it," said architect Aurelia García,
47. "I would like to ask him for more, but he's not doing that well
either; he works nearly 16 hours a day to support his family."

"My salary goes towards buying food in the farmers' markets," said
García, who nevertheless considers herself among the privileged. "There
are people who don't have any family members or friends abroad, and they
have to come up with some way to earn a few dollars. Now that would be a
tough situation to be in."

The options used to gain a few dollars by Cubans who have no source of
remittances from abroad include self-employment, private family
businesses, providing a variety of services to tourists, or more
underground economic activities like selling a wide range of black
market products, or prostitution (practiced by both women and men).

To cover their needs, Cuba's 11.2 million people must turn to two
totally different markets: one in pesos and the other in CUCs.

In the government exchange bureaux, a dollar trades for 0.92 CUC, on top
of which a 10 percent fee is charged for the transaction. A CUC, in
turn, trades for 24 pesos.

In Cuba, the average monthly income of a worker is 398 pesos.

According to ECLAC, the consumer price index rose 2.9 percent in 2004
and 4.2 percent in 2005.

Cubans receive their state salaries and pensions in regular pesos, which
they use to buy a very limited range of subsidised rationed food items,
or to purchase fresh produce in the farmers markets, where prices are
governed by the law of supply and demand..

An average family of four dedicates 75 percent of their salary to basic
food products sold at subsidised prices, which barely cover their
minimum nutritional requirements.

The CUC, meanwhile, provides access to a much broader range of often
essential goods, including food, clothing, footwear, and personal
hygiene and household products - like powdered milk, cooking oil,
shampoo or hair conditioner - in a chain of hard currency stores.

However, "most Cubans merely buy cooking oil, tomato paste and bar soap"
in these stores, said an economist who preferred not to be identified.

"This limited range of products on their shopping lists is a reflection
of the overall low level of income in hard currency, which barely covers
basic needs," he told IPS.

Although health care and education are free, and utility rates are
extremely low, a survey conducted in Havana at the start of the decade
found that a family of four would require seven times the average salary
to meet all of their basic needs.

Government sources estimate that 60 percent of the Cuban population has
access to dollars. (END/2006)

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