Western Union and remittances: the Cuban government's desire for absolute control of dollars

CyberCuba published this Thursday, exclusively, that the Western Union company is evaluating the possibility of delivering in US dollars (USD) remittances sent to people in Cuba, which would at the same time allow direct deposits to be made on the new magnetic cards enabled for payment in appliance stores in foreign currency. Until now, these deliveries are compulsorily made in the currency of exchange, the CUC, and Cubans carry out the operations in cash.

The cards require support in the form of bank deposits in a series of entities chosen by the regime, and also in foreign currency, so that all transactions made with the card referring to the account do not have to be changed to Cuban pesos. or convertible pesos, but prices are established in the corresponding currency.

If this finally happens, Western Union would implement an important change in the processes of delivering cash remittances to residents of the island, which are currently carried out in convertible pesos (CUC) and at the fixed exchange rate stipulated by the government that is maintained since the distant times of the special period, at 1 per 24.

Apparently, this option has been offered by the regime, specifically by the Central Bank of Cuba, to Western Union, in what undoubtedly represents one more step by the government, in the line of exercising absolute control over the entry of foreign currency. In the economy.

The operation also means removing from circulation an abundant amount of CUC, which was the currency obtained through exchanges with the dollar by the people who received remittances in cash. The Central Bank's proposal is essentially that remittances in dollars be entered into magnetic cards and that the money can later be used through payments for goods and services in establishments with point-of-sale terminals.

For Cubans, there is no doubt, if this were possible, they would be facing a step forward of an important magnitude, in the modernization of the economic system, since the use of cards and electronic means of payment presents a bleak panorama on the island and clearly behind other countries. The reality is very different. Most of the retail circulation of the economy, what in the market economy is called sales, is carried out in Cuba in establishments and commercial forms that, in general, lack these electronic means of payment and therefore do not accept cards and They operate in cash.

Let's think about the warehouses where a good part of the transactions are formalized or the state stores where regulated or non-regulated agricultural products are sold. Most sales are made in cash, which explains why in Cuba the indicators of money in circulation reach the highest percentages of GDP in all of Latin America and the Caribbean. Card payments can only be made in exclusive stores where products are sold at international prices and in convertible currency, and even in hotels and restaurants, but when you leave those circles open to tourism, the card payment option drops from very significant way.

Therefore, for the Cuban who receives remittances, the option of operating with cards at the current time may be more of a setback than an advantage, especially if a good part of the transactions that are going to be carried out with the money that comes from abroad are produced in the informal economy, where cash circulates widely, and where you can find almost everything you need since the harshest times of rationing in the 60s of the last century.

On the other hand, self-employed workers in the majority of authorized activities and trades are not overly concerned about this card payment option either given that, for example, transporters charge prices that can hardly be paid by card, and even A meal at a good palate is more easily paid for in cash and thus avoids banking control of the activity, which is like putting the business figures in the hands of state security.

We can ask ourselves who is interested in this measure then. And the answer is obvious: to the regime, which thus has another instrument at its service to control the circulation of currencies that enter the economy. To the extent that Western Union's decision is still up in the air, I consider that this company has no interest in moving towards these operations, since it offers a better service by paying cash to the client, who can then freely dispose of the amount of the remittance, after the discounts demanded by the communist regime.

The government has been closing all the loopholes through which the hard currency that enters the economy escapes for some time, and thus the sale of household appliances, motorcycles and car parts arose in stores authorized to operate with foreign currency throughout the national territory.

It was said that this measure tries to address the obstacles and sanctions of the US government, but the reality is that they are linked to transactions coming from that country, which also apply to Cubans who send euros from Spain or those who send Canadian dollars. The goal is to raise money no matter what.

Western Union should take into account, as a company that provides services to its customers, these considerations and take a break from the communist government's proposals. Even more so, if you have to make operational adjustments to be able to change the way the service is provided.

I have no doubt that in the coming months, and given the stagnation of the economy, the authorities will impose harsh mechanisms on all foreign currency operators operating on the island to control the entry of hard currency. While Cubans will continue to opt for cash operations, which provide greater freedom of choice, the regime will try to fence off any space for economic freedom, as it has done with the “mules” dedicated to the appliance business, which have been market sweeps.

It is not advisable to lose sight of the fact that with the tail engines practically turned off, the remittances that diaspora families send to their loved ones in Cuba have become the main source of income for the economy, allowing Cubans additional spending on goods and services. services that would be impossible with the low salaries and pensions paid by the government on the island. Although the Trump administration has reduced the average amount of remittances to $1,000 dollars per quarter, the sending of family remittances continues at a good pace and this has allowed the communist government to open the doors of tourism to Cubans, in a year in which not even The planned 4.5 million foreign tourists will be far from reached.

The need to control currencies is of such magnitude that the authorities are silently accepting a phenomenon of dollarization in the economy that clashes with the eternal argument of confrontation and harassment of the northern neighbor and that also coincides with a process in which taken the first steps towards the unification of the two currencies, so it seems that the historic Cuban peso will finally survive. It is no secret to anyone that all of this can create very strong distortions in monetary control that further aggravate the current situation of the economy.

Finally, there is the issue of estates granted in the United States to residents in Cuba, which are sent through Western Union from frozen accounts in banks in that country. It is true that currently up to $10,000 dollars can be sent daily to Cuban beneficiaries on the island, because the restrictions on the quarterly amount of remittances, imposed by the Office of Foreign Assets Control (OFAC) last year, are not established in the case of hereditary estates, which are property rights in favor of a testator.

In any case and with the data available, I do not believe that this could become a very important volume of remittance shipments, even more so when the options to invest in Cuba continue to be limited for amounts such as those that can be derived from the will of an American Cuban. Furthermore, the breaking of family ties makes it evident that many heirs are living in the United States, which limits the sending of money to the island. Estimates would have to be made, but I don't think this can be a determining factor to change anything.

The supposed stoppage of money transfers from blocked accounts in inheritance cases has some limits. I know of cases of Cubans who, upon receiving an inheritance in the United States, have taken the initiative of leaving the country and settling in South Florida to start a new life in freedom. I consider that the most important part of the remittances, the ones that are of most interest to the communist regime, are made up of the periodic remittances of money that are sent to families for their survival on the island, which constitute the main axis of Western Union's business and other companies.

In addition, FINCIMEX, which is the state agency that grants authorizations to foreign companies that are dedicated to sending remittances to the island, including Western Union, can change partners at any time. Sometimes the saying is best not to change things that work well, it is absolutely right. This may be a good example.