“If you don’t have dollars, you’re in trouble,” Cubans repeat over and over, one month after a major financial reform came into effect in their country. More coveted than ever, this currency 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 January 1 of this year. One of these is the CUC (Cuban convertible peso), which had a one-to-one parity with the dollar for a long time and will disappear in five months.
The CUC has co-existed with the Cuban National Currency Unit (CUP) for 26 years worth 24 units per dollar.
A month later the authorities will implement a strong adjustment known as “monetary realignment”, which officially confirmed the dollar’s price at 24 Cuban pesos, the US currency rose in the black market.
On portals like Revolico, a busy buying and selling website in Cuba, the casual dollar is priced at 50 pesos.
“I don’t think there are many countries in the world with such an overvaluation of their currencies,” said economist Pedro Monreal on Twitter.
In the midst of this painful adjustment, Monreal warns that “the informal rate is still being devalued and there could be pressure for another official devaluation”, in reference to the one-to-one exchange rate that benefited state-owned companies (85% of the economy).
Hunting for dollars
Faced with serious liquidity problems due to the tightening of the United States blockade under the last Donald Trump administration, At the end of 2019, the government carried out a partial dollarization of the economy to attract foreign currency.
Since then, Cubans have been able to purchase a wide variety of dollar products in a hundred markets, which are scarce in the rest of the country’s stores. In these settings, you can only pay with a debit 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, which are often essential, has accelerated demand for the US currency.
The dollar started to become scarce even before tourism, which represents the largest inflow of foreign currency into the country, decline as a result of the pandemic.
Previously, Washington had imposed restrictions on travelers who wanted to visit Cuba.
“By uniting the exchange rate at the already overvalued level, the possibility arises of an underground market forces, with the US currency already acquiring a price well above the official exchange rate,” economist Mauricio told AFP De Miranda, of Javeriana University. . from Cali.
During the economic crisis that Cuba went through in the 1990s, caused by the fall of the Soviet communist bloc, a dollar cost up to 150 Cuban pesos.
How high will it 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 country’s foreign exchange earnings are recovering,” warns De Miranda.
“Free hand for the black market”
Buying dollars is a luxury very few Cubans can afford, despite the fact that, as part of the adjustment, the government implemented a wage reform that raised the minimum wage five times to 2,100 Cuban pesos ($ 87 at the official exchange rate but 42 at the informal rate).
The reality clashes with the monetary system that 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 confirms that “it is not possible to speak of monetary regulation if the Central Bank of the country cannot offer the foreign currency at the officially determined exchange rate.”
“It’s carte blanche for the black market”, judgment.
This “super-trap” exchange, as defined by Monreal, leaves Cubans with no option but to acquire dollars in the informal market, which is not only illegal but also increases the price.
“You have to incorporate that 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 costs up to four times as much in a bar.