U.S.-Cuba Trade and Economic Council, Inc.

U.S.-Cuba Trade and Economic Council, Inc.
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How To Resume Electronic Remittance Transfers
Unilateral Decisions To Impact Respective Populations
No-Fees Until 31 December 2021
Link To Cuba Suspension of Duties And Fees On Imported Products
Western Union, Retail Agents, BFI, Fincimex, AIS Waive All Fees
Focus On Debit Cards & Bank Account-To-Bank Account Transfers
Temporary Reprieve From Cuba Restricted List
For The Greater Good Or Acceptable Faustian Bargain?
The Truth About Who-Gets-What From Each Transaction
Impact Upon 800 Publix Markets In Florida

The commercial, economic, and political impact of the COVID-19 pandemic upon the Republic of Cuba and the
United States may provide each government to lessen the distance between them through unilateral regulatory
decisions impacting longer-term the bilateral relationship.

Each government can permit temporary regulatory accommodations that demonstrate empathy and
humanitarianism for their respective populations while not furthering the divide between them.

The Biden-Harris Administration (2021- ) in Washington is seeking a politically viable means to re-establish
efficient and transparent cost-effective direct electronic remittance transfers from the United States to the
Republic of Cuba. It requires buy-in from the Diaz-Canel-Valdes Mesa Administration (2019- ) in Havana.

There are two groups who oppose a re-establishment of electronic remittance transfers from the United States to
the Republic of Cuba. The first group believes that until there is a means to deny the Revolutionary Armed Forces
(FAR) of the Republic of Cuba economic benefit, United States government policy constraining electronic
remittance transfers should remain in place. The second group believes until there is a means to deny all Republic
of Cuba government-operated entities economic benefit, United States government policy constraining electronic
remittance transfers should remain in place.

Relevant conundrums for the above-referenced groups are 1) How to support regularly-scheduled commercial
airline service from the United States to the Republic of Cuba, but condition implementation upon airlines not
making payments to Republic of Cuba government-operated entities- nothing for landing fees, nothing for
overflight fees, no ticket fees, no ground handling fees, nothing for fuel (if required), nothing for emergency
maintenance, nothing for provisions (if necessary)? 2) How to support wireless (cellular device) connectivity
through payments to Republic of Cuba government-operated Empresa de Telecomunicaciones de Cuba S.A.
(ETECSA), but require payments (for example, from United States telecommunication carriers, from individuals
subject to United States jurisdiction sending funds to the Republic of Cuba to make payments to ETECSA) do
not benefit the government of the Republic of Cuba?

The internal and external debates in the United States remain hampered (and distracted) by an inability to move
from the reality that some want to the reality that exists; and implement a solution and move on to the next issue.

Today’s choice (which some may define as a Faustian Bargain or “for the greater good”) is permitting the FAR
to have an overt participation in the electronic remittance transfer process or a covert participation in the
electronic remittance transfer process.

U.S.-Cuba Trade and Economic Council, Inc.

All electronic remittance transfers arriving to the Republic of Cuba are processed by and create benefit to the
government of the Republic of Cuba primarily through FAR-connected Republic of Cuba government-operated
Banco Financiero Internacional S.A. (BFI), Republic of Cuba government-operated Financiera Cimex
(Fincimex) and Republic of Cuba government-operated American International Services (AIS).

Remember: The Diaz-Canel-Valdes Mesa Administration was not inclined in the fall of 2020 (during the impact
of the COVID-19 pandemic) and is not thus far stimulated in summer of 2021 (during the continued impact of
the COVID-19 pandemic) to permit the use of non-FAR-controlled entities for the receipt of electronic remittance
transfers from the United States.

However, the foundation for a viable solution may be two decisions announced by the Diaz-Canel-Valdes Mesa
Administration. The first is a suspension of import duties and fees for some products (hygiene, food, personal,
cleaning products, etc.) in personal luggage and cargo on flights to the Republic of Cuba from 19 July 2021
through 31 December 2021. The second is an announcement on 14 July 2021 by H.E. Alejandro Gil, Minister
of Economy and Planning of the Republic of Cuba, who reported that during the coming weeks regulations would
be published for the operation of independent small and medium-size enterprises (SME’s).

The Biden-Harris Administration has during the last six months maintained that a focus of its Cuba Policy Review
is how to provide support to cuentapropistas (self-employed), non-government-controlled cooperatives, and to
independent SME’s.

The Remittance Proposal

Certain in-country events permit companies to operate non-conventionally for a certain period in support of relief
efforts, provide support for human suffering, and in furtherance of other objectives. Generally, the period is one
month to ninety days and included in contracts. Non-conventional operations for extended periods can stress
company relationships with other countries who may believe they qualify for exceptional treatment. Retail agents
are also not particularly enthusiastic about losing a source of revenue.

   •   What if Denver, Colorado-based Western Union Company (2019 revenues approximately US$5 billion),
       were to suspend its fees (the company fee and sender agent fee) through 31 December 2021 for electronic
       remittances transfers sent from any country to the Republic of Cuba, the same time-frame that the Republic
       of Cuba is waiving its fees and duties? In 2019, Western Union Company processed approximately 2.88
       million electronic remittance transfers to the Republic of Cuba.

   •   What if independent of the offer by Western Union Company, the Diaz-Canel-Valdes Mesa Administration
       announced that BFI, Fincimex, and AIS would suspend their fees relating to electronic remittance
       transfers from any country to the Republic of Cuba for the period through 31 December 2021 to further
       support the 11.3 million citizens of the Republic of Cuba during the impact of the COVID-19 pandemic?

There would be political indigestion from reversing temporarily a Trump-Pence Administration (2017-2021)
inclusion of BFI, Fincimex, and AIS on the Cuba Restricted List maintained by the United States Department of
State, but funds would arrive to the Republic of Cuba. If the Republic of Cuba ends its import duties and fees
waiver prior to 31 December 2021, then the temporary reversal could be reinstated.

A Western Union Company customer has four choices when making an electronic remittance transfer to the
Republic of Cuba where the recipient receives currency: 1) bank account 2) credit card 3) currency and 4) debit
card. Only the sender is charged a fee, which is disclosed prior to any transaction. Globally and nationwide,
electronic remittance commissions continue to decline as a percentage of each transaction due to customers using
less currency and credit cards and more bank accounts and debit cards, including bank account-to-bank account

U.S.-Cuba Trade and Economic Council, Inc.

transfers (not yet available for the Republic of Cuba) where there are sometimes no fees (the market-based foreign
exchange conversion offering a source of revenue), but may take up to four days to reach the recipient bank
account. Bank account-to-bank account electronic remittance transfers would benefit immensely the self-
employed and small and medium-size enterprises in the Republic of Cuba.

For the sender of an electronic remittance transfer, the highest costs for the customer is using a credit card, then
debit, then currency, and then in many countries, bank-to-bank. In terms of who-gets-what, for example, with
transaction fees ranging from approximately 3% to 7% the amount is divided between the remittance company,
the remittance agent used by the sender, and the agent(s) used by the recipient in the receiving country. The
public domain narrative that BFI, Fincimex, and AIS were collectively receiving approximately 20% as their
combined fee for each transaction is not true.

The transaction fees BFI, Fincimex, and AIS were receiving from Western Union Company were not inconsistent
with what non-government-controlled entities receive in other countries. In 2019, BFI, Fincimex, and AIS were
estimated to have received, combined, approximately 1%+ (approximately US$20 million) on an estimated
US$1.5 billion in electronic remittance transfers from all companies in the United States. The government of the
Republic of Cuba establishes the exchange rate for the Cuban Peso (CUP) to the United States Dollar, currently
US$1.00=24 CUP, which provides additional value to the government of the Republic of Cuba and the
government of the Republic of Cuba controls product (domestic and imported) pricing decisions which provides
an additional value to the government of the Republic of Cuba. The current unofficial street-rate for the CUP is
US$1.00=55.00 CUP. The Central Bank of the Republic of Cuba is anticipated to devalue the CUP by the end of
2021.

The Biden-Harris Administration could, as a condition of authorizing electronic remittance transfers, require the
government of the Republic of Cuba to again permit United States currency to be deposited and exchanged absent
any additional fees.

From the United States to the Republic of Cuba, electronic remittance transfers are sent primarily from
California, Florida, New Jersey, New York, and Texas. The overwhelming majority are from Florida. From
outside of the United States, the countries with the largest percentage of electronic remittances to the Republic of
Cuba include Canada, France, Germany, Mexico, and Spain.

With the overwhelming percentage of electronic remittance transfers to the Republic of Cuba originating from
Florida, retail agents given their interaction with the local communities, might be inclined to support the six-
month program. For example, Lakeland, Florida-based Publix Super Markets, Inc. (2019 revenues
approximately US$38 billion) has more than 800 locations throughout Florida.

For a six-month no-fee electronic global remittance transfer program to be managed efficiently and transparently,
the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury would need to 1)
authorize direct correspondent banking accounts and 2) re-authorize U-turn financial transactions.

   •   Direct correspondent banking provides for electronic funds transfers to arrive efficiently, transparently,
       and cost-effectively. In 2015, the OFAC authorized Pompano Beach, Florida-based Stonegate Bank
       (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-
       operated Banco Internacional de Comercio S.A. (BICSA). However, the Obama Administration would
       not authorize BICSA under a license from the OFAC to have an account with Stonegate Bank which
       would make fully-operational Direct Correspondent Banking, so funds to and from the United States were
       sent and received through Panama City, Panama-based Multibank, which had, but no longer has extensive
       dealings with the Republic of Cuba. From Bogota, Colombia-based Grupo Aval on 16 June 2020: “On
       May 25th, Banco de Bogotá, through its subsidiary Leasing Bogotá S.A. Panamá, acquired 96.6% of the

U.S.-Cuba Trade and Economic Council, Inc.

       ordinary shares of Multi Financial Group. As part of the acquisition process, MFG’s operation in Cuba
       was closed and as part of the transaction. Grupo Aval complies with OFAC regulations and doesn't have
       transactional relationships with Cuba.”

   •   U-turn financial transactions are essential for customers located outside of the United States to use
       Western Union Company for electronic remittance transfer to the Republic of Cuba. For example, when
       a customer in Spain uses an online portal or visits a retail location to send funds to the Republic of Cuba,
       Western Union Company needs to have an operating account in Spain from which to send the funds to the
       Republic of Cuba. Absent U-turn authorization, the remittance cannot be sent to the Republic of Cuba
       and cannon be sent to another financial institution.

Supporting Self-Employed

If the Biden-Harris Administration creates as expected a policy and regulatory framework whereby individuals
subject to United States jurisdiction may deliver equity investments and provide loans to cuentapropistas (self-
employed) and SME’s, then the existing financial transaction infrastructure throughout the Republic of Cuba will
be woefully inadequate to manage what would likely be thousands of commercial checking and savings accounts
with foreign exchange arriving (investments and loans), foreign exchange departing (investor dividends, loan
repayments, input purchases) on a daily basis. An efficient electronic remittance transfer infrastructure is essential
for supporting the re-emerging private sector in the Republic of Cuba. Bank-to-Bank transfers are preferred.

Debit Card Transfer Option

AIS has introduced a Multi-Level Cell (MLC) Card. In Spanish, MLC means “Moneda Libremente Convertible”-
free convertible money. Financial institutions in the Republic of Cuba accepting MLC Card include among
others: Banco de Crédito y Comercio S.A. (BANDEC), Banco Popular de Ahorro S.A. (BPA), Banco
Internacional de Comercio S.A. (BICSA), and Banco Metropolitano S.A. (BM). Western Union Company could
establish connectivity as a source for electronic remittance transfers to an MLC Card in position by a Republic of
Cuba national. The MLC Card would also be of value to the self-employed and for use by SME’s where non-
currency transactions are preferred to currency transactions.

The MLC is a no-fee debit product permitting funds to be used for retail transactions and provides for person-to-
person fund transfers. Funds may be withdrawn from any Automated Teller Machine (ATM) and through Casas
de Cambio de Cuba S.A. (CADECA S.A.) offices. The MLC Card can receive electronic transfers from outside
of the Republic of Cuba from countries in the 27-member European Union (EU), Canada, Iceland, Liechtenstein,
Norway, and United Kingdom among others. An individual may also use currency to add value to an MLC Card.

In July 2020, H.E. Alejandro Gil, Minister of Economy and Planning of the Republic of Cuba, announced that
end of the 10% tax on the exchange of United States Dollars in the Republic of Cuba.

In June 2021, the Central Bank of the Republic of Cuba reported that United States currency would temporarily
no longer be accepted for deposit by financial institutions in the Republic of Cuba.

Presently, the official exchange rate is US$1.00 equals 24.00 Cuban Pesos (CUP).

The unofficial, street-rate is US$1.00 equals 50 CUP to 60 CUP. In January 2021, after the Convertible Peso
(CUC) was removed from circulation, US$1.00 peaked at 70 CUP. The Republic of Cuba is anticipated to devalue
the CUC by the end of 2021.

U.S.-Cuba Trade and Economic Council, Inc.

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