The US dollar, which had been on a downward trend against the Cuban peso, has surged once more following the Cuban government's introduction of fresh economic policies. Just days after dipping below the 300 pesos mark for the first time since February, the dollar made a comeback as a new regulation regarding the "partial dollarization of the economy" was announced.
During the fourth ordinary session of the National Assembly, Prime Minister Manuel Marrero Cruz unveiled these new measures, highlighting the increasing dominance of the dollar in Cuba. The regime claims this strategy aims to reorganize key economic sectors while trying to rein in the informal exchange market, which has expanded due to the lack of official oversight.
The partial dollarization plan will impact several strategic sectors of the Cuban economy. This includes wholesale and retail trade in previously approved foreign currencies, as well as tariffs and service payments related to foreign trade for non-state management forms. Additionally, cash payments in dollars will be allowed in crucial areas such as tourism, Casas del Habano, pharmacies, optical stores, international clinics, and airports.
Economic Strategies and Challenges
Despite this so-called "flexibility," the government maintains its goal of moving towards de-dollarizing the economy, acknowledging that informal dollarization is rampant. Marrero blamed the rising use of the dollar on parallel exchange market practices and the private sector, warning that no one can trade in foreign currency without official approval.
This new measure underscores a critical economic predicament for the regime: the pressing need to amass foreign currency to alleviate the nation's structural crisis while striving to exert control over the economy. In this scenario, the dollar solidifies its role as a vital currency in the daily lives of Cubans, as the government tries to balance strategic sectors against the informal currency market.
The "Candy Effect" Phenomenon
Economists predict that the dollar might surpass 500 pesos in the coming months. This spike in the dollar rate is also creating uncertainty among citizens, who are dealing with what has been dubbed the "candy effect." With rising inflation and increasing dollarization, there are concerns that the purchasing power of the population could suffer even further.
The term "candy effect" emerged after the recent opening of the supermarket at 3rd and 70th, Playa, in Havana, which only accepts cash dollars or cards linked to foreign currency accounts, but gives change in candy. This phenomenon highlights the broader economic pressures facing ordinary Cubans amid escalating financial challenges.
Understanding Cuba's Economic Measures
What is the "partial dollarization" of the Cuban economy?
Partial dollarization refers to the recent measures allowing certain sectors of the Cuban economy to operate using foreign currencies, specifically the US dollar, in an attempt to stabilize the economy and control the informal exchange market.
Why is the term "candy effect" being used in Cuba?
The "candy effect" describes the situation where, due to dollarization, some establishments like the supermarket at 3rd and 70th in Havana provide change in candies instead of cash, highlighting economic challenges and the impact on purchasing power.