The informal currency market in Cuba has witnessed a significant surge in prices over the past week, highlighting growing economic uncertainty and a high demand for foreign currencies. Recent data from the independent platform elTOQUE reveals that the U.S. dollar (USD) has reached a rate of 315 Cuban pesos (CUP), while the euro (EUR) soared to 320 CUP. Meanwhile, the Freely Convertible Currency (MLC) remained at 250 CUP, underscoring the uncertainty surrounding the future of this monetary measure introduced by the Cuban regime in July 2020 to capture foreign exchange.
Exchange Rates as of Saturday, January 4, 2025 - 03:07 in Cuba:
USD to CUP according to elTOQUE: 315 CUP
EUR to CUP according to elTOQUE: 320 CUP
MLC to CUP according to elTOQUE: 250 CUP
The recent increase in currency prices in Cuba's informal market is closely tied to the "partial dollarization" measures enacted by the Cuban regime. In mid-December 2024, the government approved regulations allowing the use of the U.S. dollar in sectors like wholesale and retail trade, as well as in tariffs and foreign trade services.
This partial dollarization has spurred a heightened demand for foreign currencies among the population, who are eager to safeguard their savings and access goods and services now offered in dollars, such as those available in the new supermarket in the Miramar neighborhood of Havana.
Moreover, the announcement of a new exchange regime with a more flexible rate, scheduled for 2025, has fueled expectations of a Cuban peso devaluation, further driving the demand for foreign currencies as a safe haven asset.
The fear of a further devaluation of the Cuban peso and the ongoing shortage of foreign currencies in the state banking system is escalating demand in the informal market. The week began with an exchange rate of 300 CUP per dollar, which swiftly rose to 310 CUP by Friday, closing the week at 315 CUP. The euro followed a similar trend, increasing from 310 CUP to its current value of 320 CUP.
This upward trend directly affects Cubans reliant on remittances from relatives abroad, as they receive fewer pesos for the same amount of foreign currency. Additionally, prices in MLC stores, governed by the official Central Bank rate, starkly contrast with the realities of the informal market, exacerbating economic inequalities.
The scarcity in MLC-accepting stores once again exposes the regime's strategy for foreign exchange capture, implementing policies that have consistently disadvantaged recipients of family remittances in euros and dollars.
Experts warn that the situation could worsen if effective measures are not taken to stabilize the value of the Cuban peso. Meanwhile, citizens continue to face an uncertain economic landscape marked by inflation and declining purchasing power.
The sustained rise in currency prices reflects not only market volatility but also the desperation of a population seeking to protect their income amid a crisis-ridden economy.
In conclusion, the Cuban regime's partial dollarization policies and announced exchange rate reforms have directly contributed to the soaring currency prices in the informal market, reflecting economic uncertainty and a citizenry's quest for financial stability in the face of ongoing neoliberal-style measures.
Understanding Cuba's Currency Crisis
Why has there been a surge in currency prices in Cuba?
The surge is linked to partial dollarization policies and increased demand for foreign currencies as a safeguard against economic uncertainty and anticipated peso devaluation.
What are the implications of the rising foreign currency prices for Cubans?
Rising currency prices reduce the purchasing power of remittances, increase economic inequality, and reflect broader economic instability in the country.