Dollar Value Sees Slight Increase in Cuba's Informal Market

Recently, the U.S. dollar has experienced a slight uptick in value within Cuba's informal market, following several consecutive days of decline. As of this Saturday morning, the dollar is valued at 300 Cuban pesos (CUP) per unit, marking a two-peso increase from the previous day's rate, which had dropped to 298 CUP. Notably, the dollar, which nearly reached 400 pesos in May, hasn't fallen below 300 since February.

Meanwhile, this December 28, the euro remains steady at 300 pesos, presenting the unusual situation where both the American and European currencies share the same average selling price in the informal market. The Freely Convertible Currency (MLC) is currently at 250 CUP, maintaining the price reached on Friday.

The shift in currency values in Cuba's informal market began its downward trend in mid-month, following the regime's announcement to implement a more flexible official exchange rate by 2025. This rate is expected to respond to market supply and demand dynamics. "This change might coincide with the arrival of residents from abroad, who come to celebrate the end of the year with their families. Their arrival typically increases the circulation of foreign currency, thereby boosting supply," suggested an article by elToque recently, offering an alternative explanation for the sudden drop in currency values in Cuba.

Nonetheless, economists caution that this type of currency appreciation is temporary and does not signify a structural improvement in the economy.

Current Exchange Rates as of 12/28/2024 - 7:47 a.m. in Cuba:

According to elToque:

USD to CUP: 300 CUP
EUR to CUP: 300 CUP
MLC to CUP: 250 CUP

Conversion Equivalents for Available U.S. Dollars and Euros to Cuban Pesos:

U.S. Dollar (USD) to Cuban Peso (CUP), based on December 28 exchange rates:
1 USD = 300 CUP
5 USD = 1,500 CUP
10 USD = 3,000 CUP
20 USD = 6,000 CUP
50 USD = 15,000 CUP
100 USD = 30,000 CUP

Euros (300 CUP per euro):
1 EUR = 300 CUP
5 EUR = 1,500 CUP
10 EUR = 3,000 CUP
20 EUR = 6,000 CUP
50 EUR = 15,000 CUP
100 EUR = 30,000 CUP

Anticipating the "Floating Exchange Rate"

Last Wednesday, the Cuban government disclosed plans to introduce a floating official exchange rate, which will be adjusted according to market supply and demand, attempting to compete with the informal currency market. Although the specifics and implementation date of this rate remain unknown, it aims to regulate the currency exchange landscape, which has been predominantly influenced by the informal market.

This initiative is part of a partial dollarization of the economy, expected to impact strategic sectors such as wholesale and retail trade, tourism, and foreign commerce. Additionally, it will allow the use of cash dollars in sectors like pharmacies, airports, and agricultural exporters.

In an economic environment characterized by inflation and the failure of previous economic policies, the regime is making yet another attempt to regain control over a situation where the informal market largely dictates the economic reality for the general population.