Working Paper # 15 Remittances To Cuba: An Evaluation of Cuban and us government Policy Measures Lorena Barberia September 2002 Abstract

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The first stage, from 1959 to 1979, can be characterized as the most prohibitive. During this stage, Cuban government policies deterred remittances, and foreign currency remittance flows to the island were virtually non-existent. Following the triumph of the revolution in 1959 and the successive reforms and nationalizations that took place in the 1960s, there was a mass exodus of Cuba’s political, economic, and social elites to the US during the 1960s and early 1970s. The Cuban government permitted migration, but began to tightly control departure through a series of measures stipulating that (1) exit from the island was permanent without the possibility of return, even for temporary visits; (2) émigrés would relinquish their rights as citizens, although they would retain Cuban citizenship; and, (3) the property and assets of émigrés would be confiscated (Martín and Pérez 1997:86).

Migration produced not only a physical separation of families, but also in many cases a severance in the relations between those who stayed and those who left. The revolutionary government and its supporters saw those who left as traitors to the Cuban Revolution and its goals. Implicitly and explicitly vis-à-vis the Cuban State's migration policy, Cubans who left understood that they were also choosing to sever their economic and social ties with Cuba. Under the circumstances, those leaving were given little incentive to remit funds to their relatives.
In addition, economic policy measures were instituted that limited private family transfers. In the midst of the failed uprisings in the Escambray mountains in early 1960 by counterrevolutionary forces and the Bay of Pigs invasion in April 1961 by invading brigades of Cuban exiles, and as the massive exodus of Cuba's upper classes accelerated, the Cuban government undertook a series of nationalizations and monetary policy reforms as a political move to wrest control and power from revolutionary foes.11 As part of this strategy, the Cuban government moved to increase its control over the economy's assets and financial flows by nationalizing farms, foreign-owned and Cuban-owned large and medium scale enterprises, as well as petroleum refineries. In terms of financial assets, US-owned banks were nationalized on September 17th, 1960 and Cuban-owned banks were nationalized on October 13th, 1960.
In August 1961, the government announced the creation of a new Cuban peso. Heads of households were allowed to exchange a maximum of 10,000 old pesos in circulation; bank deposits were automatically converted, but the remaining old pesos outside the banking system were lost. Cuba’s National Bank declared that the new official exchange rate would be one new peso per one US dollar, although the value of the peso was worth fractionally less in world capital markets (Domínguez 1978:228). Households that had been hoarding pesos outside the official banking system and those holding their savings in US dollars lost significant portions of their wealth.12 As a result of these measures and the regulations imposed by the US embargo in 1962, direct correspondent banking services between the United States and Cuba were interrupted and effectively shutdown.
The government introduced reforms aimed at transforming Cuba's economy into a centrally planned economy. With the socialization of the means of production, the Cuban State replaced market-based distribution with the allocation of goods and services through centrally fixed prices (Mesa Lago 1981: 16). With the introduction of rationing to guarantee distribution of consumer goods and price controls, the value and significance of money in the domestic economy lost much of its importance, and those holding surplus pesos had difficulty spending them in the centrally planned, progressively more rationed economy.13
For the next two decades, the Cuban government strongly discouraged contact between island families and their “gusano” émigrés.14 Visits by Cuban émigrés, a common channel for unofficial remittance transfers, were prohibited. Thus, State sanctioned remittances were restricted to in-kind transfers of small-scale packages that contained clothing, medicines, food, and other consumer goods. In-kind transfers surged primarily during the period between 1968 and 1975, when the Cuban economy underwent a period of contraction and bilateral tensions ebbed. Agencies were established in the US and packages were sent on flights between the US and Cuba. Yet, these practices continued to be stigmatized and discouraged as this quote from one of the interviewees for this study testifies:
Prior to our return, family ties and contact were forbidden by members of the Communist Party. There was basically no communication between my cousin, a university professor, and us [my family in the US] for over 20 years. When I went back to Cuba [in 1979], he opened up a closet filled with the packages my mother had sent with clothing and medicines for the family [during the late 60s and early 70s]. He said, ‘please tell her [your mother] not to send any more of these clothes, because we don't want them and we can't wear them.’ As university professor, he couldn't wear any of the clothing because it would arouse suspicion and could get him in trouble as evidence of having contact with his family abroad.
In sum, émigrés wanting to help their relatives on the island had limited options for the first two decades after 1960. Direct banking and financial transactions between the US and Cuba were non-existent. The primary channel for sending remittances to the island was through packages containing in-kind and cash transfers. The migration of Cubans with no possibility of return to their homeland, combined with the transformation of Cuba’s monetary system and the subsequent collapse in financial transactions between the United States and Cuba, were contributing factors limiting remittances. Even in cases where private family transfers were able to get through the barriers, island recipients were reluctant to accept these items. Although no official statistics or studies reporting transfers for this period were found, it is estimated that remittance flows were minimal.

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