In an unexpected turn of events, the exchange rate for the Freely Convertible Currency (MLC) has seen a significant rise in Cuba's unofficial currency market, reaching 255 Cuban pesos (CUP) on Sunday, January 12, 2025. This swift increase of 15 CUP within less than a day places the MLC in a prominent position compared to previous weeks, reflecting a notable climb from the 240 CUP reported just two days prior. This has also raised concerns about the extent and future of the "partial dollarization" of the economy sanctioned by the Cuban regime.
The trend is not confined to the MLC alone. The euro, another highly sought-after currency in the informal market, also experienced a rise, trading at 347.5 CUP (an increase of nearly 7 CUP compared to the previous day), while the U.S. dollar remains around 340 CUP.
Currency Exchange Rates as of January 12, 2025
On Sunday, January 12, 2025, at 06:05, the exchange rates were as follows:
- USD to CUP: 340 CUP
- EUR to CUP: 347.5 CUP
- MLC to CUP: 255 CUP
These fluctuations underscore the high volatility that defines the island's informal market, reflecting the rising demand for foreign currencies among the population. The MLC's ascent has taken analysts and citizens by surprise, who attribute this trend to a myriad of factors. Chief among them are the challenges in accessing foreign currencies through official channels and the growing reliance on the MLC for everyday transactions in state-run stores.
Adding to this is the economic uncertainty, driving many to seek refuge in more stable currencies amid the ongoing devaluation of the Cuban peso. Since the beginning of the year, the informal market has exhibited a pattern of progressive currency appreciation. In early January, the MLC was around 305 CUP, and the euro was near 310 CUP. The rise in just a few days highlights a dynamic marked by the imbalance between supply and demand in a context of financial restrictions.
The MLC's surge, alongside the euro's increase, underscores the pressing need for effective solutions to stabilize Cuba's exchange market. Meanwhile, citizens continue to grapple with a complex scenario where access to foreign currencies becomes increasingly expensive and crucial for daily sustenance. Given this landscape, expectations regarding future movements in exchange rates continue to generate significant uncertainty among Cubans.
Understanding Cuba's Currency Market
Why did the MLC increase so rapidly in Cuba's informal market?
The rapid increase of the MLC in Cuba's informal market is attributed to limited access to foreign currencies through official channels and a growing reliance on MLC for transactions, compounded by economic uncertainty.
What factors contribute to the high volatility of Cuba's informal currency market?
The high volatility of Cuba's informal currency market stems from the imbalance between supply and demand, financial restrictions, and the increasing demand for foreign currencies among the population.