With up to one million state workers moving off the government payroll in the next year,  President Raúl Castro and the Cuban leadership seem committed to strengthening the microenterprise and small business sector—with self-employment now the certain future of so many Cuban workers.  Could remittances from the United States play a key role in providing finance to these new start-up enterprises, in the absence of private or public banks in a position to lend?

On January 19th, the Center for Financial Inclusion, in conjunction with the Cuba Study Group sponsored the “Cuba Small Business Summit,” which was hosted by the Council of the Americas, at its headquarters in New York. The summit focused on the outlook for profound change in the employment picture in Cuba in the wake of a new commitment to economic reform announced in September 2010 by the Cuban government.  One question was on everyone’s mind. Were the newly enacted economic reforms beginning to make a difference in the lives of ordinary Cubans?

The answer from the panel of experts, many of whom had recently visited Cuba, was a confident, if anecdotal, yes. Most compelling was the consensus finding that the government was doing everything it could to expedite the issuing of business licenses to the growing number of people wanting to establish micro-businesses—up to 75,000 since October. Whatever the number, more and more entrepreneurs are seen hawking their wares and services in the streets, and unlike in the past, the state media is no longer excoriating them for being “ingrates” and “pilferers,” but speaking of them with respect, if not reverence. This represents a sea change in the official view and the sixth Communist Party Congress in April will focus on the need for economic change and may go even further in endorsing the growth of private enterprise. (Already, the government has lowered remittance transaction costs.)

Fortuitously, on the eve of the summit, President Barack Obama used his executive authority to open the way for a vast expansion of remittances to the island—even now approaching more than $2 billion a year in hard currency and another $2 billion in merchandise remittances.  Residents of the United States will for the first time be permitted to remit to nonrelatives up to $500 per quarter, per recipient—with no limit on the number of possible recipients. At least in theory, remitted money could serve as a source of working capital for legions of new micro- and small businesses. Remittances could answer in the short term one of the greatest challenges of creating a microenterprise and small business sector from scratch in Cuba—the lack of financial capital. Merchandise remittances might also provide access to some key goods at near wholesale prices—the lack of wholesale markets being identified as a huge obstacle to business creation on the island.

And remittances will certainly increase in importance for the newly self-employed by cushioning the transition from cradle-to-grave social welfare (however meager) provided by the Cuban state, to a scary new world where the safety net is full of holes.

It is important to emphasize that most of the remittances flow to white Cubans on the island from their white relatives in the States.  Meanwhile, few members of the very large (possibly majority) Afro-Cuban population receive remittances, so this important group may have the most to lose if the economic reforms and privatization are successful. (For example, those not working for the state lose free childcare.) Race and class issues have clearly deepened over the last 15 years.

There are a number of obvious objections to an unorthodox remittance-fueled route to financing microenterprises that do not have easy answers:

1.    Remittances would come in the form of grants, not loans, and would therefore not wean Cubans from the habit of dependency.

2.    In other countries it has proved difficult to mobilize remitted money for productive purposes, as it is most often used for immediate consumption.

3.    The likelihood of unacceptably high and growing income inequality between the haves and the have-nots, who do not benefit from remittances, is not a small one and could spark understandable resistance to needed reform from low-income people, especially if there are racial issues underlying the differences. The solution might be the creation of a dedicated pool of remittance money by the Cuban Diaspora and others, targeting vulnerable populations.

Surely, the preferred alternative would be the rapid emergence of a well-regulated banking sector providing quality credit and savings products customized to the Cuban market. But this is unlikely to happen anytime soon, and it will certainly not happen overnight. In the meantime, $2 billion plus in remittances may be an indispensable driver of a new private sector in Cuba, however imperfect. 

Recent Articles

Date Title
2/28/11 Cuba intensifies campaign against dissidents
Anne-Marie Garcia and Paul Haven, Miami Herald
2/28/11 The New Cuba: Where a Citizen Can Go Bankrupt or Prosper
Yoani Sanchez, The Huffington Post
2/28/11 Cuba frees another prominent political prisoner
Paul Haven, Miami Herald
2/28/11 Lawyer for jailed American in Cuba also advocates case of Cuban spies jailed in the U.S.
Frances Robles, Miami Herald
2/25/11 US says Cuba has set date to try detained American
Paul Haven, Miami Herald
2/24/11 Would Cuba’s soldiers pull the trigger?
Marifeli Perez-Stable, Miami Herald
2/24/11 Cuban officials detain dozens of protesters honoring Zapata
Juan Tamayo, Miami Herald
2/24/11 US says Cuba has set date to try detained American
AP, Miami Herald
2/24/11 Orlando Zapata Tamayo: On The First Anniversary of His Death for Human Rights in Cuba
Yoani Sanchez, The Huffington Post
2/24/11 US denounces Cuba's treatment of dissidents
Paul Haven, AP
2/23/11 Arrival of Cuba offshore oil rig delayed again
2/23/11 Dozens arrested as protest gears up in Cuba
Juan Tamayo, El Nuevo Herald
2/23/11 Dead Cuban political prisoner’s mom becomes brave activist
Frances Robles, Miami Herald
2/23/11 Rappers 'Los Aldeanos' clash with police in Cuba
Juan Tamayo, El Nuevo Herald
2/21/11 Still no layoffs in Cuba 5 months after announced
Paul Haven, AP
2/20/11 Uncomfortable Freedoms
Ernesto Morales Licea, Little Brother
2/18/11 Rubio to press for flight restrictions to Cuba
Miami Herald
2/17/11 Rubio's attempt to block new flights to Cuba is rejected
Steve Huettel, St. Petersburg Times
2/17/11 A true terrorism list
Editorial Opinion, Los Angeles Times
2/16/11 Sen. Marco Rubio amendment would bar all flights to Cuba from U.S. airports
Juan Tamayo, El Nuevo Herald
2/16/11 Aseguran que liberar a Gross es beneficioso
EFE, El Nuevo Herald
2/16/11 Rubio's attempt to restrict Cuba flights angers some
AP, Tampa Bay Online
2/16/11 Report: Obama Has Authority to Ease Cuba Embargo
Latin American Herald Tribune
2/16/11 Rubio's ill-considered action on Cuba travel
Editorial Opinion, St. Petersburg Times
2/14/11 Mubarak and Castro: The Self-Deception of Dictators
Angel Sebastian, The Huffington Post
2/14/11 Cuba is no Egypt
Editorial Opinion, Miami Herald
2/13/11 Cuba frees 2 political prisoners against their wishes
Shasta Darlington, CNN
2/10/11 Cuban military officer testifies against militant Luis Posada Carriles
Alfonso Chardy, El Nuevo Herald
2/10/11 Wikileaks: Cuba expected to survive recession
Juan Tamayo, El Nuevo Herald
2/10/11 Fiber-optic communications cable arrives in Cuba
Andrea Rodriguez, Miami Herald
2/10/11 My Blog Is Once Again Visible In Cuba
Yoani Sanchez, The Huffington Post
2/8/11 Cuba unblocks access to controversial blog
2/8/11 Internet critic is identified in Cuba
Juan Tamayo, El Nuevo Herald
2/7/11 Cuban dissident who refused exile released
Juan Carlos Chaves, El Nuevo Herald
2/7/11 Cuba seeks 20 years for U.S. contractor
William Booth, Washington Post
2/7/11 Florida airports preparing for higher demand for flights to Cuba
William Gibson and Doreen Hemlock, Sun Sentinel
2/7/11 Hunger Protest Might End
2/4/11 U.S. Must Share Lessons
Jorge Piñon, Miami Herald
2/4/11 Florida lawmakers look to halt Cuba's offshore oil drilling
Lesley Clark, Miami Herald
2/3/11 In a Shift, Cubans Savor Working for Themselves
Victoria Burnett, The New York Times
2/3/11 U.S. Policy Pushes Cuba into the Arms of our Adversaries
Tomas Bilbao, The Havana Note
2/3/11 Cuba gives OK to unusual lawsuit
Juan Tamayo, El Nuevo Herald
2/3/11 Cuba to free 4 opposition prisoners
Paul Haven, Miami Herald
2/3/11 Egypt-like riots not likely at all in Cuba
Juan Tamayo, Miami Herald
2/2/11 Current Record
2/1/11 Strait Talk
Arturo Lopez-Levy, Foreign Policy
2/1/11 Cuba isolationists lose their hold
Sarah Stephens, Politico
2/1/11 Ted Piccone: To effect change in Havana, support the Cuban people
Ted Piccone, Sun Sentinel
2/1/11 Cuba hands out sentences in mental hospital deaths
Andrea Rodrigues, Miami Herald