This week Joe Biden’s administration announced that it contemplates softening its stance on Cuba by expanding the U.S. diplomatic presence on the island and facilitating the sending of remittances. But could such a move really help Cubans?
Last year, when the Donald Trump administration decided to toughen its Cuba policy and impose new sanctions, it specifically targeted a number of companies linked to the communist dictatorship’s Revolutionary Armed Forces (FAR) that, in its own words, would be sanctioned to “prevent U.S. dollars from continuing to fund the Cuban regime and going directly to citizens.”
Trump then made special mention of the Grupo de Administración Empresarial (GAESA), the corporation through which the Cuban FAR controls customs, ports, the hotel sector and foreign exchange stores in Cuba, as well as its financial arm, FINCIMEX.
Who benefits from remittances?
Back then, after those companies were included in the State Department’s Bureau of Economic and Business Affairs’ List of Restricted Entities and Subentities Associated with Cuba, the consulting firm The Havana Consulting Group (THCG) organized a conference to elucidate the effect that Trump’s new sanctions would have on the Castro dictatorship, as well as to clarify the motivations.
It was then that Cuban-American economist Emilio Morales, president of the THCG, explained that the regime of the Castros and Miguel Díaz-Canel keeps 74% of the remittances that the Cuban community in the United States sends to their relatives in Cuba.
In other words, out of every $100 that is sent, after passing through the hands of GAESA and FINCIMEX, the Cuban recipients end up receiving only $26, at the exchange rate in local currency. The rest is destined for the coffers, wherever they may be, of the communist dictatorship.
“The money sent in foreign currency by the Cuban diaspora to their relatives on the island never reaches its recipients in the currency it was sent,” explained Morales, who was also head of strategic marketing planning at FINCIMEX. “That multi-million dollar capital remains deposited in banks outside Cuba, generating the big question mark as to what and how it is used by the Cuban military.”
This translates, according to Morales, into approximately $46.8 billion dollars contributed to the Cuban economy since 1993, some $18.9 billion through formal channels (such as Western Union, which closed its offices in Cuba after the sanctions) and another $27.9 billion coming in informally.
“This is a multimillion-dollar, well-spun business in the hands of the Cuban military, and it has served the government to receive income that its own economy has not been able to produce for the past 27 years,” Morales said at that conference.
Thus, Trump’s sanctions against GAESA and FINCIMEX sought to affect the indirect financing of the Cuban regime through remittances sent to the island through regular channels such as Western Union.
President Biden announced the formation of a “remittance working group” that will aim to “identify the most effective way” for the money to “get directly into the hands of the Cuban people,” without going so far as to contradict Trump’s motivations.
GAESA and FINCIMEX remain sanctioned and Western Union remains closed in Cuba. Even so, the White House announced that it will “intensify” diplomatic efforts with its regional and international allies to support the “aspirations of the Cuban people” and that it will enhance the delivery of “humanitarian aid” to the island. Both the form its decision will take and the effect it will have on the finances of Cuba’s communist tyranny remain to be seen.