August 11, 2010 / 3:02 PM / in 7 years

"Mules" stretch limits of U.S. trade embargo on Cuba

<p>Cuban American passengers unload their luggage carts after they arrive from Miami at Havana's Jose Marti International Airport August 11, 2010. REUTERS/Enrique De La Osa</p>

HAVANA (Reuters) - It all starts with a description given over a mobile phone: “Look for a woman with long blonde hair, blue jeans, silver heels and a black T-shirt arriving on the next flight from Miami.”

When the woman emerges from Havana’s international airport pushing a cart loaded with bulky black duffel bags, she is greeted effusively by a man she has never seen before.

“They hug as if they had known each other all their lives. Once in the parking lot, the woman hands over the bags and says goodbye,” says Yanet, a Miami resident.

She is describing the tactics of growing numbers of human “mules” who regularly travel between the United States and Cuba carrying in their bags loads of clothes, food, consumer goods, electrical appliances and millions of U.S. dollars to the communist-ruled Caribbean island. They deliver the goods for a fee or free ticket, often to complete strangers.

“The system works beautifully,” said Yanet, making her second trip as a “mule” to Havana in less than a month.

“But you have to stage a little show because you never know who may be watching,” she added.

This burgeoning informal commerce between two neighbors whose governments have maintained a Cold War-era enmity for half a century belies the 48-year-old U.S. trade embargo against Cuba -- but also reflects recent relaxations of it.

Since 1962, the U.S. embargo’s intended aim has been to force the Cuban government to abandon its communist rule.

But informal trafficking of cash and goods to Cuba has boomed since President Barack Obama last year lifted restrictions on Cuban Americans traveling to their homeland and significantly increased the amount of money they could take.

His calibrated measures, part of a process of promoting “people-to-people” contacts Washington believes can foster political change in Cuba, also increased the type of consumer items that could be included in gift parcels for Cuba.

Also authorized under a telecoms initiative was the export or re-export to Cuba by visitors of donated personal telecoms devices, such as mobile phones, computers and software.

Travelers to Havana were already able to bring parcels of food and medicines, and the embargo has for some years allowed the export of U.S. farm products to the island.

“MORE TRAVELERS, MORE MONEY”

On the U.S. side, from where daily two-way charter flights ferry more and more Cuban Americans to Cuba on family visits, there is significant tolerance for passengers to load up with consumer goods.

But the mules also need to outsmart tight Cuban customs restrictions, where taxes are levied for baggage over certain limits and luggage contents are frequently inspected.

<p>Havana's Capitol building is reflected on the sunglasses of a man using earphones August 11, 2010. REUTERS/Desmond Boylan</p>

Chronic scarcity and the high prices of the narrow range of imported goods that are sold in Cuba’s state-run dollar stores have prompted thousands of Cubans to use the human “mules” to import everything from clothing to toiletries, electronics and money.

John Kavulich, who monitors commerce between the two nations at the New York-based U.S.-Cuba Trade and Economic Council, says it is impossible to accurately quantify this informal trade.

“But more travelers means more money and more expenditure in Cuba,” he said.

Manuel Orozco, a remittances expert with the Inter-American Dialogue think-tank in Washington, says Cuban exiles in the United States sent to the island some $636 million in 2008 and probably slightly less in 2009 due to the economic downturn.

“About 60 percent of that money is sent through informal channels or mules. That is quite a lot,” he said.

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Bureaucratic requirements in the United States, a lack of competition for services and a charge on foreign exchange charge levied by Cuba on transferred dollars make formal money transfers through financial agencies like Western Union costly.

UNDERGROUND FINANCE

Formal transfers cost 17 percent of the money sent, whereas mules cost around 13 percent, says Orozco, adding they deliver the money much faster.

The mules are part of an emerging underground industry of financial services offering credit and installment payments otherwise unthinkable in Cuba’s state-run economy.

There are no figures available for the size of the informal trade in goods, but it has become quite organized. There are even privately run places in Havana where Cubans can shop from catalogues sent by email. They pick an item, make a 50 percent down payment and 15 days later they get their order. All for a 25 percent commission.

Most of these informal businesses are family-run. A Havana resident, for example, sends a list of products to a relative in Miami, who then finds a Cuban American willing to transport them as a mule in exchange for a free ticket.

Cubans are crazy for big brands, says Diana, who sends items from Miami to Havana. “They ask me for instance to send sunglasses that say Dolce & Gabbana or Gucci. They’re cheap replicas, of course, but they sell very well because of the brands. Cubans love that,” she explained.

Profit margins are striking when it comes to high-end electronics. A flat screen TV bought in Miami for $700 can be sold in Cuba for up to $2,000. Such a television would likely cost $2,500 in a state store, if it were available.

The informal trade also feeds an endless network of informal vendors who receive small commissions.

But the “mule” business is not without risks.

“You need to be careful and make sure you don’t bring too many of the same products, because Cuban customs officers are not stupid and if they realize it is for sale they will take it away on the spot,” said Yanet.

Editing by Pascal Fletcher and Frances Kerry

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