The OMFi report confirms Western Union’s loss of importance as a money transfer channel
14ymedio, Madrid, 14 February 2025 — Although it has not been even one month since Donald Trump assumed the presidency of the United States, many things have changed inside and outside its borders, including the return of some policies towards Cuba activated in his first term and softened by the Biden Administration. What remains unchanged – and nothing indicates short-term variations – is the informal exchange rate of the peso for the dollar on the Island.
According to the most recent report of the Cuban Currency and Finance Observatory (OMFi), of El Toque, signed by the Cuban economist Pavel Vidal, Washington’s policies could be felt throughout this year, but for the moment, any change is more in internal hands.
“The forecasts are subject to the appearance of new exchange rate policy announcements by the Cuban Government. More precise information about what the economic authorities intend with the ’resizing’ of the foreign exchange market and the floating rate, and the readings that the market makes on these signals, will probably become the main determinants of the short-term fluctuations of exchange rates in the coming months,” he summarizes.
With the available data, the forecast is that the month will end with very little variation in the exchange rate, which has been anchored at one dollar for 340 pesos since January 13 without a single movement. The minimum and maximum range for the US currency is 336-350, a paralysis for convulsive times in which several factors have influence, especially remittances.
With the available data, the forecast is that the month will end with very little variation in the exchange rate, which has been anchored at one dollar for 340 pesos since January 13 without a single movement
“A curious element is that dollar and euro rates have remained stable at the beginning of February despite the prospects that the US administration will strengthen the sanctions,” says the report, which puts on the table the non-impact of the suspension of Western Union (WU) money shipments last week, after the incorporation of Orbit S.A. into the List of Restricted Entities of Cuba. That company was created to take over the management of remittances in place of Fincimex, sanctioned in 2020 for its connection with the Cuban military.
However, Vidal admits that the situation was expected, since the reactivation of the service in January 2023 was not noticed either. “All this confirms the loss of importance of the remittance channel through WU as a result of the presence of a diversity of more competitive operators when making transactions with an exchange rate close to the informal rate,” he says.
“Both Orbit and WU were symbolic agents in the remittance business for quite some time,” says a Cuban economist on social networks who claims to have worked in the business. “Neither of the two could compete with the dozens of agencies that send remittances to Cuba in dollars in cash or in national currency with TRMI (representative rate of the informal market) as a reference. Their importance in the market is marginal.”
The expert, who qualifies the volumes of incoming remittances through the official way as “a laugh,” says that “there is a whole market of young people on Vespa-type motorcycles throughout Havana, who give you dollars in cash, something with which WU and Orbit cannot compete.” In addition, he maintains that he knows some of them, and they confirm that the market “is doing well” without anomalies.
The OMFi report says that one point against the remittances sent by WU is that they can only be deposited in accounts in MLC, which discourages that channel. In addition, it adds that “many emigrants choose to buy goods for their families instead of sending money.” The reflections are consistent with the data of the document prepared by Cuba Siglo 21 in December, which reported that Gaesa lost more than 95% of the market for remittances from the US to the Island.
This newspaper had also noticed, from street reports, the change in the uses and customs of senders and receivers of money from abroad electronically, especially through Zelle.
The OMFi report reviews the disastrous national economic panorama, starting with the fall in tourism that “not only puts pressure on state finances, but deals a blow to numerous families and businesses that offer services to visitors and that, in general, are distributed throughout the Island. This includes the spillovers that connect with the informal foreign exchange market.”
This newspaper had also noticed, from street reports, the change in the uses and customs of senders and receivers of money from abroad electronically, especially through Zelle
The sugar harvest is not expected to be good, nor can the improvement in the production of nickel and cobalt contribute positively, due to the drop in prices on the international market.
In this scenario, the pressure on wholesale and retail trade do not help, nor does the excessive leverage in foreign investment, criticized by Vidal. “Foreign companies expect to obtain profits that are repatriated, while private businesses are more intertwined with the Island’s economy.”
The report also analyzes dollarization and its possible impact, which could be positive according to the OMFi for some branches and companies, but at the expense of market segmentation and the marginalization of those who do not have foreign currency.
The expectation, in short, is less dependent on the United States than on any move that the Cuban regime decides to make at any moment to establish – as announced – a floating exchange rate
Translated by Regina Anavy
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