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

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C. Attempts to Control and Cap Remittance Flows

The US liberalization of remittances to Cuba initiated in 1978 lasted until 1980. However, the gateway that had been opened regularizing family ties was abruptly closed in 1980 by actions of both governments. Cuba, partly in reaction to the 1980 Mariel Boatlift exodus of over 125,000 Cubans from the island, limited émigré family visits. The Reagan Administration set out to return to the US's traditional approach of a comprehensive embargo on Cuba. In 1982, the Reagan Administration announced the revocation of general travel authorization, but maintained the modifications introduced by the Carter Administration allowing émigrés to return to the island to visit close relatives under the rubric of the general license (Kaplowitz 1998:123).

The sending of remittances, left untouched in the CACR’s revisions conducted in 1982, were restricted four years later in 1986 (Kaplowitz 1998:124). Further tightening occurred in 1988 when OFAC announced the institution of a licensing system for travel service providers and remittance forwarding agencies involved in Cuba-related transactions. Specifically, a new paragraph was introduced to Section 515.563 of the CACR regulations requiring that:
Persons subject to US jurisdiction, including persons who provide payment forwarding services and non-commercial organizations acting on behalf of donors, who wish to provide services in connection with the collection or forwarding of remittances authorized pursuant to this section must obtain a specific license from the Office of Foreign Assets Control (OFAC 1988).
By 1992, over 31 remittance forwarders had received OFAC approval for sending transfers to Cuba, 24 of which were located in the Miami-Dade County (OFAC 1992).

As the economic impact of the collapse of trade and aid with the Soviet Union hit Cuba, US policy sought to reinforce these impacts by furthering economic sanctions to speed Castro’s demise. The US pursued a similar policy with respect to remittances. First, official remittance flows were reduced. In 1991 OFAC announced an amendment to Section 515.563 whereby the limits of $500 per quarter would be reduced to $300 per quarter, reducing the annual amount of remittances that could be sent to the island by $800 or 40% (OFAC 1991). Although remittances for island families were reduced, the clause permitting a onetime $500 remittance allowance for migration, as stipulated since 1978, was left intact.

Three years later, President Clinton went one step further, banning family remittances altogether—except under extreme humanitarian emergencies—from August 1994 until 1998. Once again, the US reacted to Cuba's shattered economy and the triggering of a massive inflow of Cuban rafters in the August 1994 Balsero Crisis by restoring US policy to those standards that had initially been established at the onset of the breakdown in bilateral relations in the early 1960s. President Clinton revoked the general license clause in the CACR and announced that OFAC would require case-by-case specific licensing for family remittances. Under the new instructions, close relatives in the US could send remittances to Cuba for severe medical emergencies and/or terminal illness. For those fortunate enough to receive permission to migrate officially, the onetime $500 remittance benefit could be sent (OFAC 1995:7).
Precipitated by the August 1994 balsero crisis, the decision to ban remittances reflected a shift in US migration policy toward Cuba. For the first time, the US reversed its policy of granting preferential treatment to refugees from Cuba, a policy that had been in place for over 30 years. Instead of receiving the automatic asylum granted to Cuban refugees by the US since 1959, over 25,000 rafters were detained at the US-operated Guantanamo Naval Base. President Clinton denounced the balsero crisis and justified US policy on the following grounds: “the real problem is the stubborn refusal of the Castro regime to have an open democracy and an open economy, and I think the policies we are following will hasten the day when that occurs” (Smith 1996: 302). This shift in US policy had been loudly advocated by the Cuban-American National Foundation (CANF), which firmly opposed Castro's government and was convinced that starvation and depravity were the most effective means of toppling the regime. Lisandro Pérez reports that in meetings that took place with President Clinton in the aftermath of the balsero crisis, CANF President Jorge Mas Canosa “insisted that the President [Clinton] stop remittances entirely. The President agreed to do it” (cited in Azcri 2000: 11).
During the mid-1990s, Congressional legislation was enacted calling for the Executive Branch to implement further controls on remittance flows to the island. Indeed, both key pieces of US legislation passed in the 1990s focused on tightening sanctions and included a section on “restricted” family remittances to Cuba. The 1992 Cuban Democracy Act—commonly referred to as the Torricelli Act— primarily directed at strengthening sanctions by banning US subsidiary trade with Cuba and deterring shipping trade to Cuban ports—also called for tightening remittances. Section 1706 of Title XVII of the Act states that “the President shall establish strict limits on remittances to Cuba by United States persons for the purpose of financing the travel of Cubans to the United States, in order to ensure that such remittances reflect only the reasonable costs associated with such travel, and are not used by the government of Cuba as a means of gaining access to United States currency.”
Similarly, Title I, Section 112 of the Cuban Liberty and Democratic Solidarity Act of 1996, commonly referred to as Helms Burton, directs that the President of the United States should,
before considering the reinstitution of general licenses for family remittances to Cuba, insist that, prior to such reinstitution, the Cuban government permit the unfettered operation of small businesses fully empowered with the right to hire others to whom they may pay wages and to buy materials necessary in the operation of the businesses, and with such other authority and freedom as are required to foster the operation of small businesses throughout Cuba; and (b) if licenses described in subparagraph (a) are reinstituted, require a specific license for remittances described in subparagraph (a) in amounts of more than $500; and (2) before considering the reinstitution of general licenses for travel to Cuba by individual residents in the United States who are family members of Cuban nationals who are resident in Cuba, insist on such actions by the Cuban government as abrogation of the sanction for departure from Cuba by refugees, release of political prisoners, recognition of the right of association, and other fundamental freedoms.
In 1998, the Clinton Administration lifted its ban on the transfer of remittances to Cuba. After restricting remittances in the four-year period from 1994 to 1998, US policy in the latter part of the decade moved toward once again legalizing remittance flows, although maintaining tight controls on transfers. In March 1998, the President announced resumption of family remittances to Cuba at pre-August 1994 levels. Following the Pope’s Visit to Cuba in January 1998, OFAC re-authorized individuals subject to United States law who have relatives residing within Cuba to send up to $300 every four months, or $1,200 annually, under a general license. Remittance policy was liberalized further the following year. In January 1999, President Clinton announced his decision to expand legal remittances by permitting any US citizens, regardless of whether or not they had close Cuban family members on the island, and non-governmental organizations to send cash remittances to Cuba. The only limits on such transfers stipulated by the regulations were that funds not go to finance senior-level officials of the Communist Party or senior-level officials of the Cuban Government. Non-governmental organizations would be licensed, on a case-by-case basis, to send larger remittances to independent nongovernmental entities in Cuba.
Following the resumption of remittances in 1998, Cuban émigrés sending private money to their families using licensed OFAC remittance agencies in the US were required to sign a remittance affidavit certifying their knowledge about US remittance policy and to provide data on the US remitter and the Cuban recipient household. Although the decision to re-authorize remittances represented a step toward loosening restrictions on official transfers, the requirement of a remittance affidavit for Cuban remittances sent an alternative message to Cuban émigrés. Given the historical context and political environment in the Cuban-American community with respect to trans-border family ties, OFAC licensing requirements represented a significant deterrent. Hard-line opponents in the Cuban-American community viewed travel and the sending of remittances as treasonous acts in support of the Castro regime that had forced their exile. Bombings and threats to remittance service providers and travel agencies engaged in “trade with the enemy” had been common occurrences during the late 1970s and early 1980s when Cuban travel agencies and remittance businesses were first opened. Since OFAC regulations required “going public,” they provided a disincentive for remittance senders to use official channels for sending private transfers to their families in Cuba.54
able 6 presents a summary, based on data released by the Office of Foreign Assets Control and reported by the US-Cuba Trade and Economic Council (2001), of the number of licenses authorizing travel, carrier and remittance forwarding services for transactions with Cuba in 2001. By 2001, OFAC had issued 273 travel-related and service-related licenses to 115 United States-based companies including American Airlines, Western Union Financial Services, and Moneygram Payment Systems. The number of remittance forwarders rose from 31 in 1992 to 96 by 2001. With the majority of these companies located in the Miami-Dade Country, there were 66 companies authorized in Florida.

Citing a similar rationale and motivations used to justify previous decisions on migration and remittance policy, the US continued to hope its “pressure cooker” approach would yield results.55 The purpose of expanding the sending of remittances to Cuban families on the island, a senior official in the State Department explained, was “intended to strengthen support for the Cuban people," to allow them "some elbow room" and "some modicum of independence” (New York Times: 5 January 1999). It is important to note, however, that the US did not choose to liberalize flows altogether. Instead, caps on amounts were maintained and individuals sending remittances were still required to sign remittance affidavits.

US policy tightened and controlled remittances in the 1990s. Yet, officially reported flows suggest that these measures were not as successful as intended. In the period from 1994 to 1998 when the US banned remittances altogether, reported private family transfers to Cuba continued to rise, albeit at declining rates. Following re-authorization in 1998, net transfers increased by only 3%. Thus, neither the tightening nor the loosening of US policy appears to have had significant impact on the overall volume of official flows.

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