The Freely Convertible Currency (MLC) continues to stir up surprises within Cuba's unofficial marketplace. On Tuesday, its value rose once more, extending a trend of increases that began on February 14. As of the morning of February 25, the MLC is being traded at an average rate of 280 CUP across Cuba, marking a five-peso rise from the previous day, according to the independent outlet elToque, which tracks the fluctuations in currency values in the informal market.
Is the Dollar on the Verge of a Comeback?
While the dollar is still priced at 340 CUP, the median exchange rate for the past 24 hours has risen to 342 CUP for the sale of the U.S. currency, suggesting a potential price hike may be on the horizon. The median rate for the MLC stands at 287 CUP, indicating the virtual currency is likely to remain in active circulation in the near term.
Meanwhile, the euro remains unchanged, valued at 345 CUP. As of 10:43 a.m. on February 25, 2025, the exchange rates according to elToque are as follows:
USD to CUP: 340 CUP
EUR to CUP: 345 CUP
MLC to CUP: 280 CUP
Understanding the Recent Surge in MLC Prices
The virtual currency, which is used by the Cuban government in select stores and thought by some to be on the brink of obsolescence, has climbed by 35 pesos since February 14. This unexpected appreciation of the MLC has caught both citizens and experts off guard. Surprisingly, its value has risen despite a reduction in the number of stores accepting this currency, defying typical demand-driven expectations.
Economist Pavel Vidal, speaking with elToque, suggested that this increase might simply be a "temporary correction" following the significant depreciation at the start of the year. According to Vidal, from the Observatory of Currencies and Finances of Cuba (OMFi), such adjustments are typical after drastic shifts in currency valuations. Furthermore, the rigid price structure in a scarcity-stricken market encourages arbitrage operations, which could be temporarily boosting MLC demand.
Social media users have proposed additional explanations for this phenomenon. The lack of products in state-run stores that accept MLC could be a significant factor. One user noted that certain goods, purchased in MLC and resold in Cuban pesos at the current exchange rate, yield substantial profits.
Cigarettes have emerged as a pivotal product in this scenario. Their low price elasticity of demand ensures that smokers continue buying them regardless of cost. Some users claim that revenues can double the original value of MLC-bought products.
Other items like eggs, yogurt, sausages, detergent, and soap are also driving increased demand for this currency, thanks to the lucrative margins when resold in Cuban pesos.
Despite this recent uptick, Vidal sees these fluctuations as not significantly altering the downward trend the MLC has experienced in the informal market over the past two years.
Simultaneously, the Cuban regime is steadily moving towards a partial dollarization of sales, opening stores that exclusively accept cash payments or cards like VISA, MasterCard, and the government-managed Clásica.
Exploring Cuba's Informal Currency Market
Why is the MLC experiencing a price increase?
The MLC has risen in value due to factors such as market corrections following a prior depreciation, scarcity in stores accepting MLC, and opportunities for arbitrage in the informal market.
What impact does the MLC's rise have on consumers?
Consumers might face challenges as the MLC's value increases, potentially leading to higher prices for goods and limited access to products in stores accepting this currency.
How does the Cuban government influence currency transactions?
The government plays a role by managing certain stores that accept MLC and by opening locations that exclusively accept dollar payments or specific credit cards, influencing how and where people can spend their currency.