The Remittance Conundrum

at 12:00 AM Monday, August 1, 2011

The summary below on remittances is from the State Department's very own Background Note on Cuba.

Upon reading this, please ask yourself:

Why would the Obama Administration (or anyone else, for that matter) support unlimited remittances to Cuba?

No one is arguing to eliminate remittances altogether, but there should be a humanitarian cap, in order to help families with basic necessities (while recognizing the Castro regime's disproportional benefit).

Meanwhile, for those that believe remittances will help spark "entrepreneurship" amongst Cubans (despite the island's totalitarian economy) -- think again.

An academic study released over the weekend shows that nearly half of all Cubans that receive remittances from abroad have absolutely no interest in leasing a self-employment license (ownership remains prohibited) from the Castro regime, while another 34% would only "think" about it. That leaves few that actually have or would.

At the end of the day, as is well-documented below, the Castro regime only seeks to absorb hard-currency into its totalitarian economy -- so why is the Obama Administration making it easier?

Just think about it -- this is the State Department's (weak) spin on its own policy.

It's dumbfounding.

From the State Department:

Remittances also play a large role in Cuba's economy. Cuba does not publish accurate economic statistics, but academic sources estimate that remittances total from $800 million to $1.5 billion per year, with most coming from families in the United States. U.S. regulatory changes announced in April 2009 allow unlimited remittances to family members, excluding certain Cuban Government officials and members of the Cuban Communist Party. The total amount of family remittances that an authorized traveler may carry to Cuba is now $3,000. In January 2011, the United States announced further changes that permit anyone under U.S. jurisdiction to send up to $500 per quarter to anyone else in Cuba (with the same exclusions as above). The changes also authorize unlimited remittances to religious organizations in Cuba.

Beginning in November 2004, the government mandated that U.S. dollars be exchanged for "convertible pesos" -- a local currency that can be used in special shops on the island but has no value internationally -- at an 8% exchange rate conversion plus up to 2% in fees. In addition, the Cuban Government levies a 10% tax on every conversion of U.S. dollars (and only U.S. dollars). This results in nearly 20% in fees that disproportionately affect Cubans who receive remittances from relatives in the United States. However, Western Union announced in December 2010 that it received permission from the U.S. and Cuban governments to remit payments in Cuban convertible pesos, thus avoiding the 10% tax on U.S. dollars. The Cuban Government captures dollar remittances by allowing Cuban citizens to shop in state-run "dollar stores," which sell food, household, and clothing items at a high mark-up averaging over 240% of face value.

The picture below is from one of the Castro regime's money exchange (theft) houses (CADECA).