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Remittances to Cuba: The Problem and the Solution

Taking capital out of the hands of the oligarchs and putting it directly into those of Cuban citizens is the empowerment that the Cuban people need, and the great challenge faced by the Biden Administration.

A man with a Cuban flag in front of the White House.
A man with a Cuban flag in front of the White House. Los Angeles Times

The issue of sending remittances to Cuba is currently being debated. As is known, they constitute the main source of revenue for Cubans, and are the result of the efforts of tens of thousands of exiles who send money to their relatives on the island to help them meet basic needs, as the latter live in a country where they are prohibited from generating wealth.

After the military companies that control 100% of remittance transactions arriving through official channels were sanctioned by the US State and Treasury departments, the Cuban Government refused to hand over their handling to any civil institution. Even though at the end of 2020 the Central Bank of Cuba granted the non-banking financial company RED SA the pertinent licenses to take charge of handling remittances from the US —a market accounting for 92% of the total received— this still has not happened.

The explanation for this is simple: the military does not want to lose its main source of financing.

Meanwhile, Covid-19 has further complicated the situation, as flights from the US to Cuba have been suspended for almost 18 months. This has meant that informal remittances (48% of the total) have almost disappeared. For now, the issue of remittances has come to a standstill, and hangs in the air. Although it refuses to take action, the Cuban Government has the solution in its hands.

The problem

Since 1993, when they were allowed, down until today (28 years), the Central Bank of Cuba has never published a report on remittances. The matter was controlled by the military from the very beginning; first, by the group of Fidel Castro (CIMEX SA) and, as of 2006, by his brother Raúl's (GAESA).

Cash remittances currently represent 25% of Cuba's GDP. If we add remittances in goods, the total rises to one third of GDP. The exportation of medical services accounts for another third, with the real economy constituting the rest.

As we know, the Cuban elite appropriates 80% of the salaries of the doctors it sends abroad, and 100% of the remittances that arrive through official channels. Both amounts are stolen from the Cuban people. In other words, 2/3 of the country's GDP, generated by Cubans' families in exile, and by citizens, are not used for the benefit of the people or for the development of society, as demonstrated by the current collapse of the health system and the lack of food and medicine. These 2/3 of the national GDP end up elsewhere.

The governance system that prevails in Cuba is not that of a socialist government, but rather one dominated by a group of oligarchs that controls an obedient president not elected by the people. This is why —as US President Joe Biden has stated— Cuba has a failed government, one not interested in the welfare of the people, but rather the fortunes that can be stolen and accumulated through legislative mechanisms and business schemes concealed in tax havens.

This oligarchical group has turned the remittance business into an almost untraceable money laundering business, allowing it not only to launder assets in tax havens, but on the island itself. GAESA keeps the money from remittances in a bank account in a third country through its respective affiliates and subsidiaries (CIMEX SA, FICIMEX SA, AIS SA), sanctioned by the US State and Treasury departments.

The problem of remittances is not, therefore, that the military seizes 10% or 15% of them. It should be made clear: the Cuban military appropriates 100% of the remittances. It is as simple as that.

Cubans are only given the equivalent of what is sent to them in a devalued currency, worthless anywhere else in the world. The electronic dollar that the Government deposits in MLC accounts is what Cubans use to buy basic necessities at stores that also belong to GAESA, with a markup of at least 240% with respect to the value at which the military buys abroad.

As part of this very shady business, GAESA is not supervised by the Office of the Comptroller General of the Republic, the National Assembly of Popular Power, or by any other civil institution. GAESA 's financial statements are inaccessible; not even President Miguel Díaz-Canel has access to them.

Given all the above, reconnecting American companies with FICIMEX SA or with AIS SA would mean giving the military money that does not belong to it; money that they use to build dozens of hotels and to pay for the logistics with which they repress the people, as we saw in response to the July 11 demonstrations.

In the same way, channeling remittances through the Correos de Cuba company —which has just been authorized to receive transactions throughout the country, under the same scheme that FINCIMEX SA and AIS SA had, by which dollars are not delivered to the recipients— is to maintain the same capital laundering scheme. This does not solve the problem.

The remittances must reach Cubans in the form of dollars, not electronic dollars only good to buy at stores that also belong to GAESA. The Biden Administration must be vigilant so as not to fall into the trap that is being set by Havana. If the Government wants to channel remittances through Correos de Cuba, it must guarantee that Cubans are actually given dollars, and that they are the ones who decide what to do with them. Otherwise, the dollars will remain in the hands of the oligarchy.

The scenario is simple: how is it possible that there is transportation sufficient to mobilize thousands of repressors, but not for ambulances to serve the population? How is it possible that there is money to arm repressors, but not to buy food, vaccines, medicines and oxygen? How is it possible that, given the humanitarian crisis, the military invested more than 4 billion dollars in the construction of hotels in 2020, betting on a moribund tourism industry with an occupancy level that did not exceed 14% last year?

All of this can only be summed up simply: money laundering and genocide.

The solution

The solution to sending remittances to Cuba must be based on the principle that money should end up in Cubans' hands, not the military's, and in such a way that it is the citizens who decide what to do with it.

The only way to help Cubans is by looking for technological solutions.

Therefore, FINTECH companies and their digital wallets are the optimal solution. The term "fintech," a contraction of the words "finance " and "technology," refers to the trend of implementing advanced digital technologies to optimize the financial industry's activities.

Most people in Cuba have cell phones (6.6 million), so it is possible to use these platforms to achieve this objective. With them, customers have total control over their money.

FINTECH companies can create secure financial corridors that are impossible to penetrate, managing to safeguard their customers' money, which they can use at their discretion not only in Cuba, but anywhere in the world. This technology could facilitate significant economic independence not only for entrepreneurs, but for all citizens.

The Biden Administration can encourage and pave the way so that FINTECH companies that have the right technology and are legally prepared to operate. This is a practical and possible solution.

The reality reveals to us a great problem, and a great opportunity to solve it. The problem is a group in power that profits with impunity from 2/3 of the country's GDP, thereby violating international law. Taking this capital out of the hands of those oligarchs and putting it directly into those of Cubans would be the solution; this is the empowerment that the people need and the great challenge the Biden Administration faces in Cuba.

This is not a matter of political decisionmaking, but rather of enforcing international law and punishing those who break it. When this happens, the Cuban people will find their way to freedom - that which, massively and spontaneously, thousands of citizens turned out, in more than 50 cities across the country on July 11, to demand.

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