“If you don’t have dollars, you’re misleading,” Cubans always repeat, a month after a deep financial reform came into force in their country. This currency is much more coveted than ever and is traded on the black market at twice the official rate.
Until the end of 2020, Cuba maintained a complex two-currency system that changed on 1 January this year. One of them is the CUC (Cuban convertible peso), which has long had a one-on-one parity with the dollar and will disappear in five months.
CUC has coexisted for 26 years with the Cuban national currency (CUP) valued at 24 units per dollar.
A month later authorities will launch a strong adjustment known as “monetary reorganization”, which officially reaffirmed the price of the dollar at 24 Cuban pesos, the US currency rose on the black market.
On portals like Revolico, a busy buying and selling site in Cuba, the informal dollar is priced at 50 pesos.
“I don’t think there are many countries in the world that have that level of overvaluation of their currencies,” economist Pedro Monreal says on Twitter.
In the midst of this painful adjustment, Monreal warns that “the informal rate continues to be devalued and could create pressure for a new official devaluation”, with reference to the one-to-one exchange rate benefited by state-owned companies (85% of the economy).
Dollar hunting
Faced with serious liquidity problems due to the tightening of the US blockade under the last administration of Donald Trump, At the end of 2019, the government undertook a partial dollarization of the economy to attract foreign currency.
Since then, Cubans can buy a wide range of products in dollars in a hundred markets, which are rare in other stores in the country. In these units you can only pay with a bank card in dollars, which are normally deposited by family or friends from abroad.
The need for Cubans to go to these markets to access products, often essential, has accelerated demand for the US currency.
The dollar began to become scarce just before tourism, which is the largest flow of foreign currency to the country, decrease due to the pandemic.
Washington had previously imposed restrictions on travelers wishing to visit Cuba.
“By unifying the rate at the already overvalued level, the possibility of a functioning underground market is created, in which the US currency already acquires a price that far exceeds the official exchange rate,” Mauricio economist told AFP De Miranda at Javeriana University. from Cali.
During the economic crisis that Cuba experienced in the 1990s, generated by the fall of the Soviet communist bloc, a dollar came to cost up to 150 Cuban pesos.
How high will he climb this time? “It is very difficult to estimate how far the value of the dollar could go,” because “it depends on how quickly and at what level the levels of foreign exchange income in the country recover,” warns De Miranda.
“Free hand for the black market”
Buying dollars is a luxury that very few Cubans can afford, despite the fact that, as part of the adjustment, the government has implemented a wage reform that has increased the minimum wage fivefold to 2,100 Cuban pesos ($ 87 at official exchange rate, but 42 at the informal rate).
The reality is that the monetary system prevents banks and exchange offices in the country from selling foreign currency and only allows the sale of $ 300 to people leaving the country.
In addition, De Miranda states that “one cannot speak of monetary regulation when the country’s Central Bank cannot offer foreign currency at the officially established exchange rate”.
“It’s a white paper for the black market,” decision.
This “super-trap” of exchange, as defined by Monreal, leaves Cubans no choice but to buy dollars on the informal market, which, in addition to being illegal, increases its price.
“You have to incorporate this important difference in the price of your product,” explains economist Ricardo Torres of the University of Havana.
As a result, a beer that is normally worth 24 Cuban pesos ends up costing up to four times more in a bar.