Remittances: Aiding the Individual or Private Business?

The eventual legalization of small and medium-sized private companies, together with the strengthening and greater autonomy of municipalities in the new territorial division endorsed by the new Cuban Constitution could become opportunities for investment of remittances at the local level.

The government of Cuba is studying the experiences of other countries to channel the collective benefits of remittances that arrive in the Caribbean nation from the United States, Canada, Europe and other regions where more than 1.5 million migrants settle.

Official sources admit that these shipments represent a “strong and important” income for the economy and there is a space to channel it towards productive investments. They also recognize that the process includes the need to encourage the collection of remittances with a benefit for the receiver.

There are no official data of the Caribbean nation for the totals of these remittances, but according to various reports, from 2012 to 2016 the cash figure amounts to $1,5 million and $3,6 M dollars annually. It is assumed that these estimates include formal and informal routes.

The highest amounts in recent years coincided with the restoration of diplomatic relations between Cuba and the United States, the largest issuer of remittances to Cuba. In 2015, they added $3,354 M $3,6 M in 2016, according to Cuban economist Armando Nova.

This researcher and other specialists agree that the Caribbean nation needs to take innovative steps so that a considerable amount of the remittances that arrive and are destined for consumption, fundamentally, can be used in economic investment and growth.

One of the options that are considered is the creation of a bank fund for certain economic activities, state or private, with an attractive interest rate, which can be collected from time to time either by the shareholder himself or by a family member.

Another variant would be to call foreign commercial chains to actively participate in the Cuban market, bring their merchandise on consignment and sell them by mutual agreement and jointly with the national side. The consumer would pay in cash or by means of an electronic bank card enabled for this purpose in dollars, euros or other currencies.

In this way, the national economy would not have to allocate foreign currency for the importation of products and merchandise, and it would be possible to channel the income from remittances and other means of direct entry of cash into the country, once the commitments were deducted.

The cost would be reduced and retail prices would not have the surcharge or percentage increase currently applied to the products for sale in the Foreign Currency Collection Stores (TRD).

“It would be possible to funnel the real cash income received by remittances in the economic development of the country,” Nova told IPS.

This article was first published on the Inter Press Service in Cuba. It has been translated by Cuba Business Report staff.