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Tuesday August 16th, 2022 8:39AM

In Cuba, caution and confusion meet eased US sanctions

By The Associated Press
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HAVANA (AP) — Marylín Álvarez seemed to be just the sort of person that eased American sanctions on Cuba were meant to help.

With the aid of money sent by a cousin living in the United States, she began transforming the entrance to her ground-floor apartment into a tiny cafe about four years ago. It was one of myriad small private businesses blossoming on the Communist-led island as U.S. President Barack Obama's opening to Cuba led to more money and visitors from the north.

She bought a freezer, a juicer and some cups. She installed a new water faucet and was about to add a sink to go with it, as well as chairs and ingredients for the food she was going to sell at her doorway in Havana.

And then it all fell apart. Former President Donald Trump tightened the six-decade-old embargo of Cuba and sharply restricted money transfers to Cuba in late 2020, shutting down the system that made them relatively easy: Western Union transfers to a government-owned Cuban exchange house.

Álvarez abandoned her application for a small business license.

Now the administration of new President Joe Biden is once again making it legal for Americans to send larger amounts of money to Cuba, saying it hopes to stimulate private enterprise there.

But so much has changed over the past two years that Álvarez is wary of reviving her plans — an example of the caution with which many Cubans are greeting the new measures and confusion about how they may work.

Cuba's economy has been devastated by the loss of tourism caused by the pandemic and by Trump's tougher sanctions. Fewer people would have money to buy the coffee and snacks Álvarez hoped to sell.

The government's lack of hard currency has hit imports, so it's extremely difficult to get reliable supplies of the flour, coffee and cheese Álvarez would need for her products — and prices for those scarce goods have been soaring.

That crisis also collided with the local government's effort to fix deep-rooted problems by eliminating an old two-currency system while raising pay and prices last year. That coincided with the emergence of a black market for foreign currencies and sharply added to inflation. While the new peso is supposed to be valued at 24 per dollar, people on the street sometimes offer 100.

“You earn very little with this. It doesn't give me enough to make an investment," said Álvarez, who has turned to a less costly form of making money for her family — giving manicures.

There are no official figures on how much money family and friends abroad send to Cubans, but the Miami-based Havana Consulting Group estimated it reached $3.7 billion in 2019 — with a similar value arriving in the luggage of visitors bringing food, household supplies, small appliances, tires and the like.

About 400,000 Cuban-Americans visited the island in 2018 and more than 500,000 in 2019. In addition, a half million other U.S. visitors came in 2018.

By 2021, remittances had fallen to about $1 billion, the Consulting Group calculated, and overall U.S. visitors dropped to just 60,000, according to government figures — partly due to Trump's tighter restrictions on travel but even more to the pandemic shutting off flights.

The impact of remittances far predates Obama, however. Cuban economist Pavel Vidal of Javerian Pontifical University in Cali, Colombia, said they averaged about $2.1 billion over he whole period from 2005 to 2020.

Much arrived in the wallets and handbags of travelers. But for years, Cuban-Americans also could send Western Union transfers to relatives on the island. That ended in November 2020 when U.S. officials barred dealings with a Cuban government agency, Fincimex, that distributed those transfers at hundreds of branches across the island.

The Biden opening removes many limits on transfers — but didn't specify how they can be made.

The old Western Union method through official channels may have been made obsolete in the meantime anyway due to Cuba's new single currency. With the street value of those pesos only a quarter of the official rate, few people would want to trade dollars for pesos at a state-run exchange house.

So Cubans are finding other ways.

“The flow of remittances never ceased to arrive. The Cuban, with his creativity, has invented excellent mechanisms" to send money, said Erich García, a 35-year-old programmer and specialist in cryptocurrencies.

Some people have used those virtual currencies like Bitcoin to shift money to Cubans electronically. Garcia estimated that about 100,000 have cryptocurrency accounts. But those, too, have complexities and drawbacks. Commonly used cryptocurrencies such as Bitcoin have lost more than half their dollar value since November.

Visitors to the island sometimes bring in dollars for their own relatives, or those of friends. Some do it for those they barely know, and charge a commission.

Others send in packages of food and personal care products, and recipients trade what they don't need to neighbors.

Some websites even let people pay Cuban cellphone bills from abroad — credits that Cuban recipients sometimes trade.

“We have to wait to see what solutions are offered by these measures," Garcia said.

During his campaign, Biden promised to undo many of the new restrictions Trump had imposed, though the tough Cuban government crackdown on an outburst of protests last year may have made that politically impossible for Washington.

Still, the measures announced this month, in addition to relaxing limits on transfers, also call for resuming the processing of visas for Cubans in Havana, as well as a family reunification program to let some people on the island join relatives in the U.S.

“The measures that President Biden has taken are going to have a not-insignificant impact in the short and above all in the medium term," said economist Arturo López-Levy, a professor of international relations at Holy Names University in Oakland, California, "Given the precarious situation of the Cuban economy, that should be considered a space for relief.

___

Andrea Rodríguez is on Twitter: www.twitter.com/ARodriguezAP

  • Associated Categories: Associated Press (AP), AP World News, AP Business, AP Business - Economy, AP Business - Financial Markets
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