By Jerry Hart
April 17 (Bloomberg) -- The Cuban state pension that Juan Gonzalez-Corzo receives since he retired from a government job in 2003 makes life easier after more than 50 years of work.
So does the cash that comes regularly by wire from his son in West New York, New Jersey.
It’s part of an estimated $1.1 billion sent to Cubans last year by relatives and friends around the world, an amount equal to about 1.8 percent of the communist country’s 2007 gross domestic product. “Most of the remittances end up used for consumption,” said Gonzalez-Corzo’s son Mario, 39, a Cuban-born assistant economics professor at Lehman College in New York City who has studied remittances and provided the estimates. “It helps.” The money also helps the island’s $58 billion economy, as the Cuban government charges fees that take about 20 percent of exchange-wired dollars, Gonzalez-Corzo said. That troubles U.S. politicians who say the transfers support the totalitarian state created by Fidel Castro in 1959 and now run by his brother Raul. President Barack Obama this week eased restrictions that had limited money transfers by Cuban-Americans, most of whom live in southern Florida. “The Castro government will confiscate a high percentage of those dollars, further propping up a regime that suppresses human rights,” said Representative Kendrick B. Meek, a Democrat who represents parts of Florida’s Miami-Dade and Broward counties. About 735,000 people around the world -- more than half from the U.S. -- sent an average of $150 to friends or relatives in Cuba last year, according to a study by Inter-American Dialogue, a Washington-based research organization. The cash sent in 2007 was equal to 42 percent of the island’s tourism income and 4.7 times more than its sugar exports, Gonzalez-Corzo said.
Economic Prop
“Remittances are a key component to the Cuban economy,” where state wages averaging about $17 a month don’t cover basic living expenses, Inter-American Dialogue said in a statement when it released the study last month. “Cubans typically augment state wages with hard-currency obtained remittances.” That’s why Myriam Faya and Lourdes Rodriguez, sisters who are among the 795,000 Cuban-Americans in Miami-Dade County, the largest concentration outside Cuba, send money to the island. “I have an aunt who is 87 years old and her pension is very low so we send regularly, without any doubt, $50 a month,” said Faya, who works for an insurance broker. “My sister also sends money to her blind, 60-year-old sister-in-law.”
Wire or Mula
About 60 percent of the money sent to Cuba goes via electronic wire transfer, according to the Inter-American Dialogue study. The rest travels in the pockets of visitors. These mulas, Spanish for mules, bypass the government fees. “If you send by wire, it’s very expensive because the government takes 20 percent,” Faya said. “But if a friend goes there, you can give it to them.” On the other end are charges by transfer agents. Calls to wire services in Miami found fees of as much as $124 to deliver 100 pesos to a recipient in Cuba, or 24 percent. The nationwide average is 15 percent per $100, Gonzalez- Corzo said. Including what Cuba charges, the transaction cost for $100 becomes 35 percent. That’s more than the 5.8 percent cost for money wired to Mexico and the 9.5 percent for the Dominican Republic, data from the World Bank show. “Cuba is the most expensive remittance market in the world when it comes to the transaction cost,” Gonzalez-Corzo said.
Bush’s Restrictions
Under rules imposed by the administration of President George W. Bush in June 2004, money sent to Cuba could go only to immediate family members and the amount was capped at $300 each quarter. Travelers could carry only $300 into the country. Obama granted unlimited transfers and travel cash for Cuban-American families to anyone in Cuba, which is expected to reduce costs as competition grows, Gonzalez-Corzo said. The president’s action raised optimism among investors that other parts of the U.S. economic embargo against Cuba could be lifted. The Herzfeld Caribbean Basin Fund, a closed-end mutual fund of companies that could benefit from increased business with Cuba, rose 41 percent, the most ever, the day money transfers were eased. Companies that wire money to Cuba must be licensed by the U.S. Treasury’s Office of Foreign Assets Control, under economic sanctions imposed in 1963 after Fidel Castro established his Communist dictatorship. Castro, 82, turned over power to Raul Castro, 77, last year because of illness. More than 100 companies are authorized by OFAC, with three- quarters of them in Florida. The largest is Western Union Co., the world’s biggest money-transfer business.
10-Year Business
The company has been active in Cuba since 1999 and has 153 agents there, Stewart Stockdale, executive vice president and president for the Americas, said in an interview. He declined to break out the company’s revenue for transactions with Cuba. “We think lifting the restrictions is going to expand the business to Cuba significantly,” he said. Western Union charges $15 to wire amounts up to $100 to Cuba, Stockdale said. The fees are “something we’re reviewing,” he said. Gonzalez-Corzo favors anything that makes it easier for him to send money to his 70-year-old father in Santa Clara, in central Cuba. “I have personally gone through all the tribulations of sending money,” he said. “So I know how it works.”
To contact the reporter on this story: Jerry Hart in Miami at jhart@bloomberg.net.
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