The freefall in the price of foreign currencies in Cuba's informal market shows no signs of stopping. This past Saturday, a dramatic five-point drop was recorded in the main reference currencies. Just like the day before, both the USD and the EUR dropped five Cuban pesos, putting the American currency at 350 CUP and the European one at 360 CUP.
The freely convertible currency (MLC) was also caught up in this sharp decline, dropping five points as well to reach 290 CUP, according to the values recorded at 7 AM local time on May 25th.
Current Exchange Rates in Cuba as of May 25, 2024
Exchange Rates According to elTOQUE:
- USD to CUP: 350 CUP
- EUR to CUP: 360 CUP
- MLC to CUP: 290 CUP
Alternative Exchange Rates from Other Platforms:
- USD: Buy at 341 CUP, Sell at 350 CUP
- EUR: Buy at 354 CUP, Sell at 361 CUP
- MLC: Buy at 287 CUP, Sell at 296 CUP
The American dollar has dropped 45 pesos over nine consecutive days of decline. While many Cubans view the fall in informal currency prices as beneficial for their wallets, they question why consumer goods prices have not similarly decreased, which they consider should be a coherent response to the current situation.
What is Happening in Cuba's Informal Currency Market?
The independent media outlet elTOQUE provided insights into the sharp decline in the value of the USD, EUR, and MLC in the informal currency market, citing several potential factors influencing this scenario.
Economist Pavel Vidal Alejandro suggested that one cause could be the "market sentiment," meaning that an increasing number of people started to believe that currency prices were excessively high and decided to sell before a potential drop, which spiked the supply.
Vidal noted that since mid-May—coinciding with the start of the fall in these three reference currencies—there has been a significant increase in the supply of foreign currencies in virtual marketplaces. However, he did not consider this to be a real revaluation of the national currency.
He also mentioned that it is normal to see "temporary corrections after an extended upward period in the market" and highlighted that since 2022, there have been six pronounced and consecutive drops in currency values, with sharp increases in low-priced virtual offers lasting for weeks, although they eventually recovered.
Nonetheless, the economic analyst estimated that the fundamental factors explaining the internal and external imbalances of the Cuban economy have not changed and that therefore, "the current rate inflection should not be associated with a modification of the long-term trend."
Offering another perspective on the alleged cause of the currency plunge in Cuba, Cuban economist Emilio Morales stated in an interview with CiberCuba this week that it is "impossible" for the Cuban peso to have revalued on its own.
Morales attributed the fall in informal currency prices to a non-economic reason: maneuvers by the UCI (University of Information Sciences) in Cuba.
In his opinion, the only news that could revalue the peso on its own would be "if the government fell." Morales also dismissed the idea that the drop in the prices of USD, EUR, and MLC in Cuba is due to an alleged injection of foreign currencies into the informal market.
Meanwhile, the Cuban government remains silent.
Understanding the Drop in Cuban Currency Exchange Rates
In light of the recent sharp declines in foreign currency exchange rates in Cuba, here are some questions and answers to provide more clarity on the situation.
Why are foreign currency prices dropping in Cuba's informal market?
Economists suggest that the drop is due to increased market sentiment that the prices were too high, leading to more people selling their foreign currencies, which increased supply and drove prices down.
What are the current exchange rates for USD, EUR, and MLC in Cuba?
As of May 25, 2024, the USD is at 350 CUP, the EUR is at 360 CUP, and the MLC is at 290 CUP according to elTOQUE.
Is the Cuban peso actually revaluing?
No, experts like Pavel Vidal Alejandro and Emilio Morales indicate that the peso is not genuinely revaluing. The current scenario is more likely due to temporary market corrections and other non-economic factors.
What could be the long-term trend for currency exchange rates in Cuba?
Analysts believe that the fundamental imbalances in Cuba's economy have not changed, and therefore, the current rate inflection should not be seen as a long-term trend modification.