Dollarization and Its Discontents: Remittances and the Remaking of Cuba in the Post-Soviet Era

Abstract

Third World governments have long depended on foreign funding to supplement limited domestic private and official sources. Foreign sources include financing from private, public, bilateral, and multilateral institutions and direct investment. So too have governments depended on foreign exchange, from exports and tourism and more recently from remittances, to finance imports, loan repayments, and local development. At different times and in different countries the mix of foreign sources of capital and foreign exchange have varied, depending on global as well as domestic economic and political conditions. In the post-cold-war neoliberal world order, most slimmed down Third World governments have had less disposable domestic fiscal funds in addition to less access to multilateral and especially bilateral sources of capital. They have been pressed to rely increasingly on market-based options. With the gap in income opportunities widening within and across borders, ordinary people in the less developed world are, under the circumstances, increasingly creatively becoming their own capital fundraisers through emigration to countries offering better economic options, from where they remit some of their earnings to family members left behind. As of 2000 remittances infused more money into Latin America than foreign bilateral and multilateral aid and in some countries more money than direct foreign investment and bank loans. Remittances amounted to some $20 billion, with Latin Americans sending home, on average, an estimated $250 monthly. In six Latin American countries income from remittances represented more than 10 percent of GDP. The money has raised recipients' material and social welfare and provided seed capital for small businesses. On a national scale the cross-border transfers have had multiplier effects on the economy.' But conditions conducive to and effects of remittances must be understood contextually, and their individual and institutional impacts must be distinguished. First, remittances that may be good for individuals are not necessarily unequivocally good for states, for states have their own institutional economic and political, short and long term interests that may differ from the narrow self-interests of individual remittance recipients. Second, even when beneficial to recipients, Third World peoples