March2017-Flipbook

FINANCE
A PIPELINE
TO CUBA'S
PRIVATE SECTOR
Money remitters
are starting to play
a vital role in business
transactions
By Nick Swyter
When Cuba legalized the U.S. dollar in
1993, it was difficult to use remittances
for anything other than food, household
goods, and utilities. Now, after 24 years of
changes in U.S.-Cuba remittance policies,
cash transfers are so valuable that they are
propelling private businesses on both sides
of the Straits of Florida.
Elsa Vazquez Velar is just one of
several small U.S. business owners who
use money remitters to pay Cubans for
services in the private sector. Her business,
CasasCuba B&B, consists of several casas
particulares (bed & breakfasts) in Santiago
de Cuba. Vazquez Velar manages reservations
from her home in Miami, and uses
Western Union to pay her uncle in Santiago
de Cuba for welcoming those guests.
“I have no complaints,” Vazquez Velar
said. “Obviously, we are over here and my
uncle is running the B&Bs over there, but
it is still very efficient.”
CasasCuba B&B is not alone in
using money remitters to pay for services
in Cuba’s burgeoning private sector. Its
best-known competitor, hospitality giant
Airbnb, pays many of its hosts through the
Miami-based remitter VaCuba.
The casas particulares industry's use
of money remitters to pay hosts illustrates
how remittances are pivoting towards
conducting business transactions. U.S. and
Cuban policy changes helped make that
42 CUBATRADE MARCH 2017
pivot happen at an astonishing speed.
According to the Havana Consulting
Group, annual remittances to Cuba rose
by 116 percent from 2008 to 2014, making
Cuba the fastest-growing remittance
market in Latin America. Cash transfers
to Cuba––worth more than $3 billion
dollars in 2015—now rank among one of
the most valuable sectors of the Cuban
economy.
The Cuban government has authorized
several money remitters to operate
on the island, though none are as recognizable
as Western Union. Today, WU
facilitates cash transfers worth thousands
of dollars each at more than 400 locations
throughout the country.
WU set up shop in Cuba in 1999,
six years after the Cuban government
legalized the possession of the U.S.
A Western Union office in Havana
dollar as a way to offset its dependence
on the collapsed Soviet Union. In order
to operate in Cuba, the company signed
a contract with FINCIMEX, the Cuban
government entity that manages—and
takes a cut from—all remittance wire
transfers to the country. WU charges a fee
of 8 to 10 percent. Since then, the amount
and frequency of WU’s cash transfers has
been largely dependent on U.S. policy.
Remittance flows to Cuba fall into
three eras: Clinton, Bush, and Obama.
Wire transfers first took shape
under the Clinton presidency. Cubans
mostly used those transfers to pay for
food, household goods, and repairs. Even
though remittance flows to Cuba were
relatively small during those years, some
Cubans used the foreign capital to finance
small private businesses.
Photo by Matias J. Ocner