Uphill battle to curb flow of U.S. cash to Cuba

Paolo Spadoni Special to the Sentinel
Posted November 28, 2005

It has been almost a year and a half since the Bush administration intensified its sanctions program with respect to Cuba by allowing Cuban-Americans to visit relatives on the island only once every three years, instead of annually, and limiting remittances just to immediate relatives.

Mainly intended to deprive the Castro government of U.S. dollars, Washington's new regulations consistently target a specific group of U.S. citizens who channel into Cuba more hard currency than any other group. In the past decade, remittances sent or personally delivered by Cuban-Americans to family members on the island, and mostly used for purchases in state-owned hard-currency stores, have provided an economic lifeline to the same government U.S. policy was supposed to undermine.


There is little doubt that President Bush's recent measures have significantly reduced the number of U.S. visitors to Cuba, thus depriving the latter of the hard currency that deterred travelers would have brought for their personal expenses and for relatives. Curbing the overall flow of remittances to Cuba, however, is a much more difficult task.

Here is why U.S. authorities face an uphill battle in trying to curtail money transfers to Cuba from the United States:

Instead of making use of formal wire-transfer services, Cuban-Americans tend to rely on relatively inexpensive and more user-friendly informal remittance channels. It is well known that a huge flow of remittances arrive on the island in the luggage of entrusted agents, or "mules," who travel to Cuba through third countries and carry money for cheaper fees than the ones charged by official agencies such as Western Union.

Cuban-American mules, who are generally U.S. citizens who hold a Cuban passport, can easily circumvent restrictions by using the U.S. passport to enter and leave the United States and the third-party country, while using the Cuban passport for the rest of the journey. And even placing U.S. inspectors in several third-country airports won't help much. Cuban-American cash can be sent or personally transferred to citizens of other countries (some mules are Mexicans and Colombians), who will then travel to Cuba and deliver the money to recipient families.

In the past year, mules' operations have become increasingly sophisticated, especially since late 2004 when Fidel Castro put an end to the commercial circulation of the U.S. dollar in Cuba in favor of the convertible peso or CUC, a local currency that has no value outside the island. Cubans who receive dollars from abroad must now exchange them for CUCs in order to make purchases in hard-currency stores. Their purchasing power has been greatly reduced after the 10 percent fee on dollar-CUC exchanges introduced in November 2004 and the re-evaluation of the CUC by 8 percent against all international currencies last May.

Currently, most Cubans are receiving remittances in CUCs rather than in dollars or other currencies. Given that mules carry substantial amounts of cash in single trips, and now probably even more money than before as travel to the island has become riskier due to Bush's new restrictions, the key issue is where they acquire CUCs before delivery. Cuba's strict financial controls make it unlikely that mules exchange tens of thousands of U.S. dollars, or eventually Euros or other major currencies, at local banks or exchange houses. One possibility is the existence of an unofficial organization in Cuba that dedicates itself to these exchanges, or perhaps ghost companies outside the island engaged in these transactions. Mules might also rely on local intermediaries to split the money and exchange smaller sums at different locations. After all, there is evidence that some remittances are delivered by Cuban nationals rather than foreign residents.

Remittances to Cuba are also facilitated by the emergence of third-country-based money-transfer services that allow funds to be transmitted to the island from the United States through the Internet. As transactions are routed via foreign banks, it is extremely difficult for U.S. authorities to exercise effective control. For instance, funds transferred to Cuba via Canada-based Transcard (used by an ever-increasing number of Havana residents) are credited to secure bank accounts in Canada. The recent proliferation of similar businesses located in Europe, such as Spain and Italy-based SerCuba and Switzerland-based AWS Technologies, further complicates the U.S. attempt to curtail remittances to Cuba.

After almost 18 months since the enactment of a new U.S. policy toward Cuba, most Cuban-Americans and their relatives on the island might be physically apart but still economically tied.

Paolo Spadoni is a Ph.D. candidate in the Department of Political Science at the University of Florida. He wrote this commentary for the Orlando Sentinel.

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