The case of US policy toward the sending of money to Cuba is important to understanding how host countries affect the flow of remittances. Since 1963, US law has imposed tight restrictions on the transfer of remittances, as well as on direct to travel to Cuba and visitor expenditures on the island. Prohibitions and controls on private transfers to island relatives were a result of an overall US strategy to restrict Cuba's access to dollars as a means of fomenting economic hardship and domestic discontent with the Castro regime. These policies were briefly loosened between 1978 and 1982, when the US first permitted remittances to be sent to Cuba. Since then, US policy has attempted to tighten controls by issuing regulations, restrictions, and caps on the amount of remittances that can be sent to Cubans on the island and for a brief four-year period, between 1994 in 1998, discontinued official transfers altogether. In "regulating” remittances, the US has utilized restrictions as a punitive measure and as an instrument of its foreign policy toward the island.
Following the successful overthrow of the US-backed Batista dictatorship in 1959, relations between the US and Cuba’s revolutionary government gradually eroded. As Washington’s fears of the populist, and possibly Communist, ideological orientation of the Cuban government increased, US policymakers began to employ overt and covert tactics to destabilize the emerging anti-capitalist regime in the economic, as well as political, sphere. In the following decade, Washington established a global economic blockade strategy toward export-dependent Cuba aimed at cutting off the island’s access to foreign currency by severing its own economic ties with the island, as well as those of Cuba’s major trading and borrowing partners in the West.50 On the international front, the US pressured its allies into following similar policies by cutting off ties between Cuban and international banking institutions.51
Although reliable estimates are not available, remittances were sent by Cuban arrivals to the US in the early 1960s, but these were primarily sent to facilitate migration (Garcia 1996:17). Dollars were transferred via postal money orders, the primary channel for sending funds to Cuba at that time. When direct mail between Cuba and the US was suspended in 1962, this channel ceased to be an option (Sullivan and Morales 2002:10).
As part of its strategy to issue comprehensive sanctions, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued the Cuban Assets Control Regulations (CACR) on July 8, 1963 under the authority of the Trading with the Enemy Act codifying and further tightening the trade embargo that had been issued by President Kennedy in 1962. 52,53 Under the original regulations, any transfer of property, including cash and other specie, were prohibited. Section 515.201 of the 1963 CACR regulations prohibited US citizens, residents, and corporations from engaging in "(1) all transfers of credit and all payments…; (2) all transactions in foreign exchange by any person within the United States; and, (3) the exportation or withdrawal from the United States of gold or silver coin or bullion, currency or securities by any person within the United States " with Cuba and its nationals.
From 1963 to 1978, US policy outlawing transfers reinforced Cuba’s de facto policies inhibiting family ties and remittance flows. Since direct commercial bank transfers were prohibited by US law and strictly regulated by OFAC, any currency or in-kind transfers that took place during this period required a triangular payment system through a third country.
Under President Carter, the US sought to achieve the normalization of diplomatic and economic relations with Cuba. Easing travel and remittances were top items on the Administration's agenda. In March 1977, the Carter Administration announced several modifications to the CACR designed to liberalize travel and remittances from the US to Cuba. Section 515.563 of the CACR amended the original regulations to provide for “a general authorization for family remittances for the support of close relatives in Cuba.” Under the new regulations, family remittances were not to exceed a maximum $500 per quarter to close relatives in Cuba (Kaplowitz 1998: 97).
In 1978 the Office of Foreign Assets Control implemented revised CACR instructions permitting remittances to be transferred to Cuba through licensed family remittance forwarders or US banks. Since US policy continued to prohibit direct financial transfers, there were two alternate routes for getting funds to families in Cuba. Transfers either had to be hand carried by remittance forwarding institutions from the US to Cuba in specie, or the authorized entity in the US was required to transfer funds to a third-country financial institution from which the Cuban-based entities would then obtain the funds. Thus, although transfers were permitted, regulations imposed significant transaction costs on companies engaged in sending remittances to Cuba.
Carter Administration policy resulted in the first allowance of legally authorized remittances since officially sanctioned flows had ceased with the prohibition of financial transactions and travel in 1962. The explanation for the policy shift on Cuban remittances can best be understood as part of US immigration policy toward Cuba in the context of the Cold War. Since 1959, US policy was based on the premise that migration was caused by a political exodus of Cubans fleeing from communism. Upon arrival in the US, Cuban exiles were given preferential treatment, with benefits including automatic qualification for citizenship after one year and one day of residency in the US and the possibility to participate in re-settlement programs (Eckstein and Barberia 2001: 3).
By allowing private remittances to flow to families, President Carter sought to support those Cubans remaining on the island, who were viewed as victims of communism. An additional feature of the Carter Administration's policy on remittances corroborates this proposition. In addition to allowing $500 in remittances to be sent to families on the island per quarter, the new 1978 CACR regulations added an additional $500 remittance that could be sent for relatives who were emigrating to the US (Kaplowitz 1998: 97). Interestingly, despite the numerous revisions to the CACR, the amount and clause on the sending of funds to assist those trying to leave the island has remained intact since 1978.
Moreover, the Carter Administration pursued this strategy not only by liberalizing remittance flows, but also by entering into secret negotiations with the Cuban government aimed at securing the release of 3,000 political prisoners to the US and the improvement of relations with émigrés through the relaxation of Cuban government restrictions on travel, remittances, and migration. Although inter-governmental negotiations were publicly replaced by the first negotiations between the Cuban government and a small group of 75 émigrés in the 1978 National Dialogue talks, the Carter Administration is recognized as having been the “architect” behind the scenes and in line with its human rights promotion agenda (Garcia 1996:48).