Cubans lose access to vital dollar remittances after latest US sanctions

Dayane Medina, a 30-year old mother, had been due to pick up the equivalent of $65 that her grandmother in Jacksonville, Florida, sent her this week.

“I don’t like asking her for money – she is too generous,” she blushed, confessing that her grandmother sometimes sells food stamps to raise money. “But I’m not working at the moment and my husband is a doctor – we can’t get by on his [$62 a month] salary.”

But Dayane, her husband and their two young children may be forced to find a way.

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This week, Cuba announced the closure of more than 400 Western Union offices on the island, a move that will eliminate most remittances and aggravate the country’s profound economic crisis.

The decision was a reaction to new US sanctions: in June the Trump administration blacklisted Fincimex, a military-controlled firm that processes remittances for Western Union. Last week, the treasury department banned US companies from dealing with Fincimex altogether.

The secretary of state, Mike Pompeo, said the US measure aimed to cut the Cuban military out of remittances so as to deny “the regime its misappropriated resources”.

Sanctioning Fincimex effectively dared the Communist party to shift remittance processing from a military to civilian-controlled entity. But the Cuban foreign ministry issued a defiant statement saying the island’s financial set-up was a “sovereign decision”.

Fincimex, it argued, has processed remittances for more than 20 years and during that period not “a single cent” had gone missing.

These are “the cruellest and most inhumane measures yet taken by the Trump administration against the Cuban people”, said Ric Herrero, executive director of the Cuba Study Group, a Washington thinktank that advocates for engagement with Cuba. “Family remittances are a vital lifeline for millions of Cubans, especially the elderly and other vulnerable citizens.”

Remittances, most from Cuban Americans, channel more than $3bn a year into Cuba’s ailing economy. Though data on Cuba’s foreign exchange flows is sparse, family remittances are probably the island’s third source of hard currency after tourism and the export of medical services.

The measure will reduce revenue for Gaesa, an opaque military conglomerate whose role in the Cuban economy has grown over the last decade. But it will also leave the state with less hard currency to import food and medicine. Since Covid, Cubans have had to spend hours queueing to buy food like chicken. Many vital medicines, which Cuba provides at symbolic prices, are missing.

The measure will also hit the island’s fledgling private sector.

“Entrepreneurs use remittances to buy inputs and to invest, so many will have to suspend business,” said Emily Morris, an economist from University College London. “Lots of remittances are spent on services provided by other Cubans in both registered private businesses and informal activities. They are therefore an important source of income and employment.”

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The crackdown on remittances was the last in a string of moves by the Trump administration to crush the island’s economy. It has sanctioned tankers carrying Venezuelan petroleum that dock on the island, a measure which has reduced food production by forcing farmers to till fields with oxen instead of tractors.

US diplomats have threatened Latin American countries not to accept Cuban doctors and nurses during the pandemic. In recent months sanctions have prevented masks and ventilators from reaching the island.

Analysts agree this onslaught of new sanctions is primarily an electoral gambit to win votes in Florida. Behind in the polls, Trump will probably have to carry the country’s largest swing state – home to 1.5 million Cuban Americans – if he is to win next week. Polls show that Trump is enjoying huge support among Cuban Americans.

“Trump’s Cuba advisers believe that cutting off all hard currency inflows into the country will both precipitate regime change and help Trump’s electoral chances in south Florida,” said Herrero. “It’s completely asymmetric: they benefit from the rhetorical lift, and if they punish people on the island it doesn’t matter because they are still seen as tightening the screw.”