Remittances from Cubans abroad drive the island’s economy

Cash remittances to Cuba in 2012 surpassed all revenue coming from the main components of the Cuban economy while becoming the largest element of support to the retail market, according to a study by a Miami-based analysis group.

The study, titled “Remittances to Cuba: the Most Powerful Engine of the Cuban Economy,” was done by The Havana Consulting Group. It concludes that in 2012, remittances reached $2.605 billion. The number represents an increase of more than 13 percent compared to the previous year of nearly $2.3 billion.

“Today remittances to the island reach 62 percent of Cuban homes, support close to 90 percent of the retail market and allow employment of tens of thousands of people,” the study says.

The remarkable upward trend has also been a common denominator in goods (electrical appliances, clothes and consumer items, among others) that Cubans abroad ship to relatives or friends in Cuba. This category amounted to $2.5 billion in 2012, according to the study. Both categories (money and goods) together surpassed $5.105 billion.

“The remittances have left behind the powerful sugar industry ($391 million) — which by 1993 had entered its biggest crisis and it is still in decline — they surpass tourism ($2.613 billion) in volume and performance, provide more revenue than nickel exports ($1.413 billion) and the pharmaceuticals produced by the Cuban biotechnological industry ($500 million),” the study says. “And this without subtracting costs in each category, which would make the difference significantly larger.”

The injection of remittances has been a powerful pillar for the country’s economy, which has been practically stagnant and with high levels of unemployment. But it’s role has now been strengthened because of the deteriorating economy, according to experts familiar with the issue.

In October 2010, the Cuban crisis forced Raúl Castro’s government to launch market reforms and other emergency initiatives. The reforms, which a large part of the opposition calls “insufficient” and “cosmetic,” include a larger participation of foreign investment, self-employment and services in dozens of labor categories.

The study emphasized that the Obama administration’s policies contributed to the increase of remittances. During his first term, Obama lifted most of the restrictions of travel and remittances while easing up religious, cultural and educational exchanges.

“Without any doubts, the arrival of President Barack Obama at the White House has directly influenced the increment of remittances in the last four years, an increment that has almost reached $1 billion in such a short time,” says The Havana Consulting Group’s study.

The study highlights that cash remittances in 2012 surpassed, at a ratio of 3 to 1, the salaries the government pays to the approximately 4 million workers who work for the public sector. Officially, the average salary in Cuba is 455 pesos a month, equivalent to $19.

“If to this value we add remittances arriving in the form of goods, the ratio would then be 5.5 to 1, a monumental difference,” the study says.

Another point that has favored the increase of remittances is closely linked to the migration flow of Cubans abroad, the study adds. The flow has been kept at 47,000 people annually, almost a half-million in the last decade.

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