Florida is an epicenter of outbound remittances for the Caribbean Basin, large portions of which have now evaporated because of the collapse in the state economy. A challenge is the scope and reach of the informal sector. Undocumented workers are not eligible for state unemployment benefits or federal stimulus checks. As a result, relatives at home are a residual concern when US-based income is scant.
The collapse in remittance flows to Cuba is directly relevant to Florida. The greater Miami area generates the vast majority of cash sent to the island, most of which has traditionally been carried in the pockets of airline passengers. Those flights do not exist at this time, requiring family members to rely on digital remittance channels, often for the first time.
But the shift from individual disbursement to fintech channels is not a direct substitution effect, given the downturn in the volume of money making its way to Cuba. Last year, according to the Miami-based Havana Consulting Group, Cuba saw remittances totaling as much as $3.7 billion. A conservative estimate suggests that number will fall by at least 30% this year.
Cuba is not the only region in the nation where we are likely to see outsized economic uncertainty. Haiti, for instance, is the among the most remittance-dependent countries in the region. Add El Salvador, Honduras, and Jamaica to the list. In truth, few countries will avoid an economic rout, with failed remittance flows amplifying domestic challenges.
As a sidenote, the shift in remittance-flow activity may generate unexpected opportunities for fintech companies that are focused on the region. Core remittances are now being sent entirely by digital channels, given social distancing requirements in recipient countries, as well the collapse of international travel. The end of cash-based, in-person services may occur sooner than otherwise expected. ■
Our Vantage Point: Across the Carribean Basin, we may not completely understand the severity of the economic downturn because of the important and misunderstood role of remittances.
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Image shows Havana’s Malecón at sunset. Cuba’s relative isolation means that the impact of the coronavirus could be particularly severe. Credit: Kmiragawa at Adobe Stock.
