Something has seemed not quite right to me about the stories regarding Western Union, remittances, and the supposed elimination of Cuba’s ten percent surcharge on dollar-to-peso exchanges.
The surcharge was imposed, Cuban officials have explained many times, in response to U.S. financial sanctions that hinder Cuba’s cashing-in of accumulated dollar reserves in third-country banks. Those sanctions always seemed absurd to me, considering that for many years the dollar was used in Cuba by travelers from all around the world, and it was used in the course of legal travel and remittances by Americans. During those years, i.e. from the opening to tourism in the early 1990’s until 2004, Cuba naturally accumulated large amounts of dollars in cash. The convertible peso existed then but was barely used.
The surcharge, Cuba explained, was to create an incentive for travelers to use other currencies than the dollar, and to compensate for the extra trouble of exchanging dollars in the international financial system.
As for the current stories, some have intimated that the surcharge has been dropped. From what I gather, that is not the case – it is being maintained, but it applies now and has always applied to cash exchanges only. Since Western Union is now paying out remittances in convertible pesos, and since Western Union is apparently purchasing the convertible pesos through some kind of normal bank transfer that is not a cash transaction, there is no surcharge. (This 2006 Bush Administration action [pdf] that allowed remittances to be provided to Cubans in any currency but their own, is now apparently inoperative.)
So this is good for those who send and receive remittances; they no longer lose ten percent of their money through the surcharge.
It’s bad for Americans who exchange dollars in cash in Cuba; they will continue to pay the surcharge.
It’s probably good for Western Union’s business and bad for that of the “mules” who carry money directly to Cuba. The mules continue to provide door-to-door service, but now have a ten percent price disadvantage.
Since the remittances are cheaper, their volume will probably increase, which benefits Cuban receivers and, in some measure, the Cuban government. The Cuban government will also benefit from a cash flow acceleration, as the Western Union remittances are converted to Cuban pesos as they are sent, not when the receiver decides.
In the spirit of the season, pro-embargo advocates look at this latter impact and not at the benefits to Cubans who will buy more food or clothing for their families. They call it, with typical exaggeration, a “$1 billion bailout” engineered by the U.S. government, which is easier than blaming Cuban Americans themselves for wanting to help their loved ones.