The Cuban military, which for more than two decades profited from handling $7 billion in remittances sent from abroad, suffered significant financial losses from sanctions imposed by the Trump administration in 2020 aimed at cutting the flow of hard currency to the island’s armed forces, secret documents reviewed by the Miami Herald show.

The sanctions, still in place, ban companies connected to Cuba’s military from handling the money Cuban Americans — many if not most in South Florida — send to their families on the island. The military controls much of the Cuban economy though a conglomerate known as GAESA.

Leaks of internal Cuban government documents, especially from military companies, are extremely rare. The documents reviewed by the Herald were prepared by Cimex, one of GAESA’s leading subsidiaries, and included remittance data that has never been made public. They show the Cuban military went from controlling almost $800 million in remittances sent to the island in 2019 to barely processing $35 million this year as of May.

Money sent by Cuban Americans and other Cubans abroad are a lifeline for many families on the island. But the military directly benefits from remittances sent through its companies, not just because they take cut from each transaction but, more significantly, because they keep the actual dollars and instead pay the recipients in Cuba in local currencies.

In 2020, the Trump administration banned Fincimex, a Cimex subsidiary registered in Panama, from handling money transfers from the U.S., prompting Western Union and Miami-based agencies VaCuba and Cubamax to suspend remittances to Cuba.

The military has used the money to build several hotels on the island in recent years, even when tourism was shuttered during the COVID pandemic and despite the low occupancy rates that have plagued the island recently. Economists and activists have questioned the building frenzy at a time marked by a severe economic crisis, when authorities say they don’t have enough money to buy food, medicines or oil to keep the lights on.

Hidden ties

The Herald has reported that to get around the Trump sanctions, the Cuban military secretly created a new company, Orbit SA, to process remittances from the United States. The Cuban government concealed Orbit’s ties to the military to get the U.S. Treasury Department to once again allow remittances to flow in 2022.

But by the time Cuba’s armed forces apparatus came up with the new scheme, and Western Union started operating again in Cuba in 2023, most of the money sent by Cuban Americans to their relatives on the island had moved to an informal market that bypasses the military-controlled companies. Cuban Americans now send money either through people traveling to Cuba, known as mulas — mules — who carry it in their luggage, or through alternative money-transfer agencies, usually working without U.S. government authorization, that filled the gap left by Western Union.

Another setback for the regime: Because government stores are mostly empty, Cubans on the island now prefer that their relatives abroad buy them food, medicines and other basics directly from online supermarkets that deliver on the island, rather than sending them money.

The documents show the Trump sanctions worked, and the military has been scrambling to regain control of the dollars entering the island ever since.

One document marked “secret” states that between 2000 and May 2024, Fincimex and Orbit processed $7.157 billion in remittances, a figure the Cuban government has never publicly disclosed. That number is the total amount of remittances handled by the Cuban government in that period by the military, because no other financial entities were authorized on the island to provide such services.

In 2019, the peak year for remittances, the documents show Fincimex processed $794.6 million. The document reveals that ninety-three percent of that amount was sent though Western Union, confirming that it was the most popular service for remittances to Cuba.

Remittances are key

At the time, experts estimated that remittances were the island’s second-largest source of foreign revenue and that Western Union held a large chunk of that market through customers from 43 countries. The island was receiving an estimated $2 billion in remittances per year. Those figures included money sent through informal channels — the mulas – as well as the value of food, medicines, clothes and other articles carried by travelers or sent in packages through agencies like VaCuba and Cubamax.

But when Western Union pulled out of Cuba after the U.S. sanctions on Fincimex, remittances decreased 67% in 2021 and have “never” recovered, the Cuban government documents say. Western Union went from having 92% of the remittances market to only 12% as of May of this year.

Western Union fully resumed operations in Cuba in March 2023, but again suspended its services in January of this year for three months after a “cybersecurity incident” reported by Cuban authorities affected Cimex’s payment system. The incident costs Cimex $12 million in lost remittances, the secret document says.

According to the document, between late January and May of this year Cimex companies processed $44 million less than in the same period in 2023.

The document also shows the Cuban military is fully aware of why remittance money is not reaching its companies.

A list of “main reasons” for the decrease mentions the proliferation of the informal channels to send money to Cuba, that people preferred to receive food packages instead of cash, and that Cubans seeking to migrate prefer to receive actual dollars, which is only possible through mulas.

It also lists the difference between official and black-market currency exchange rates as another problem. The document does not explain it, but unofficial peso exchange rates for the dollar, the euro and a Cuban virtual hard currency known as the MLC are significantly more attractive than the government-set rate —the reason many Cubans prefer to get their hands on actual dollars.

Notably, the secret document also confirms earlier reporting by the Miami Herald first describing how remittances have helped finance Cuba’s emergent private sector. And it provides evidence that, in its fight for dollars, the Cuban military has been pushing to curtail the expansion of private enterprise.

A private lifeline

Because the government does not sell dollars to private business owners and most of those businesses lack bank accounts abroad, Cuban private entrepreneurs have been using Miami-based money transfer agencies to pay abroad for supplies and products for the Cuban businesses. The business owners pay back the Miami agencies in local Cuban currencies — money already in the country — that the agencies use to make good on the delivery of remittances.

Official figures reveal that the private sector imported food and other goods valued at $1.3 billion in 2023 and another $936 million this year until June, providing a lifeline to the Cuban population during the country’s worst economic crisis in decades.

The secret documents say the private sector’s high demand for dollars abroad “has caused the ‘hijacking’ of dollars for remittances to Cuba.” It proposes to “limit or prohibit the payment of imports abroad” by private enterprises.

In a session of Cuba’s National Assembly in July, the country’s prime minister, Manuel Marrero, widely seen as representing the interests of the military, hinted at new restrictions for the private sector that finally came out in August. The new regulations limit the number of private companies that can import products from abroad and require them to use only the Cuban peso and their Cuban checking bank accounts for “all” their business transactions.

“For the first time, remittances are flowing mostly through the hands of private Cuban citizens, both in the U.S. and on the island,” said Ric Herrero, the executive director of the Cuba Study Group, a U.S. organization that supports independent entrepreneurs on the island. “The military has seen that as a threat, and that’s among the reasons the government has cracked down on the private sector.”

©2024 Miami Herald. Visit at miamiherald.com. Distributed by Tribune Content Agency, LLC.