How Cuba's monetary reform will take place

[El Presidente]

Nothing too new but some interesting insights. 

https://www.reuters.com/article/cuba-economy-reform-explainer/how-cubas-monetary-reform-will-take-place-and-impact-the-economy-idUSKBN28L2AD

• the peso at a single fixed rate of 24 to the dollar, scrapping other more favorable rates in the first official devaluation of the peso since Cuba’s 1959 revolution.
• Economists expect triple digit inflation, and the government has said the initial devaluation will be accompanied by a five-fold increase in average state wages and pensions even as many state-controlled prices also may rise.

[NSXCIGAR]

21 minutes ago, El Presidente said:

Economists expect triple digit inflation

I don't think you need an economics degree to figure that out.

[Nino]

8 hours ago, NSXCIGAR said:

I don't think you need an economics degree to figure that out.

Already happening - electricity rates going up 500% as of January 1st.

Transport & basic food prices also expected to rise.

https://www.14ymedio.com/cuba/tarifas-luz-subiran-proximo-enero_0_3002099764.html

Las tarifas de la energía eléctrica subirán un 500% el próximo 1 de enero

La subida del transporte y de los alimentos de la canasta básica también es una realidad

[NSXCIGAR]

12 hours ago, nino said:

Already happening

I'm still a bit confused...if the CUP was already about 26:1 which is also the "official" Jan 1 exchange rate why are they raising prices at this point? Is the Jan 1 24:1 immediately going to be thrown out the window? 500% price increases would indicate ~125:1 initially, not 24:1. Why even set that rate?

[Nino]

1 hour ago, NSXCIGAR said:

Why even set that rate?

I believe it is because salaries also rise as of Jan. 1st - the minimum salary will be 2100 CUP or ca. 88 US$.

The highest salary for state employees will be 9510 CUP

https://www.14ymedio.com/cuba/salario-minimo-subira-mensuales-partir_0_3001499824.html

El salario mínimo subirá a 2.100 pesos mensuales a partir del 1 de enero

El más elevado se establece en 9.510 pesos para el último grupo de trabajadores del sector estatal con jornadas de 44 horas

------------------------

But even in Cuiba they don't believe that the US$ to CUP exchange rate of 1-24 is realistic ...

https://www.14ymedio.com/economia/tipo-cambio-dolar-pesos-irreal_0_3001499825.html

Un tipo de cambio con el dólar de 1 por 24 pesos es irreal

Habrá que esperar a ver qué dicen los mercados informales, que serán los que reflejen realmente la cotización del peso cubano con el resto de divisas

[JohnnyO]

What used to be basically free on the monthly ration card will now cost locals 1500 CUP per person. This will be a basket of subsidized goods that may not last the month. If they are not working (retired, children) they still have to come up with the CUP. Right now you can get 36-40 CUP for one USD. There will be panic to get rid of CUC for the next couple of weeks, especially if you just sold a car or a house in CUC. After January 1st the CUP will continue to devalue, as many local markets are switching to USD. Any alteration of salaries or price adjustments are just Jedi-mind tricks to keep the locals entertained. John

[NSXCIGAR]

9 hours ago, nino said:

But even in Cuiba they don't believe that the US$ to CUP exchange rate of 1-24 is realistic ...

Right, so if the official exchange rate remains at 24:1 using bank cards is still off the table. If they go to cards only that would be a disaster for tourists and really is nothing more than a huge government scam. 24:1 doesn't seem like it's even in the ballpark of reality. What is the salary in USD currently? $35-40? That won't change, so we're probably looking at at least 50:1 right off the bat if they're increasing it to 2100 CUP.

[Nino]

11 hours ago, NSXCIGAR said:

Right, so if the official exchange rate remains at 24:1 using bank cards is still off the table. If they go to cards only that would be a disaster for tourists and really is nothing more than a huge government scam. 24:1 doesn't seem like it's even in the ballpark of reality. What is the salary in USD currently? $35-40? That won't change, so we're probably looking at at least 50:1 right off the bat if they're increasing it to 2100 CUP.

Presently the salary tends to be more like 20 to 30 US$ ...

I fully agree with you on credit cards only being a gvmt. scam but there have been so many scams before that it is fully in the cards, but they would have to allow payment in CUP I guess.

Yes, I think the Euro would be 60 against the CUP in a decent black market situation, we'll see ...

[NSXCIGAR]

34 minutes ago, nino said:

Presently the salary tends to be more like 20 to 30 US$ ...

Still that low...wow. I had heard it was a bit higher recently. 

It's just not possible that the salary could rise to 2100 CUP at a 24:1 rate. That would be real wage increase of 300% and we know that's not happening. This 24:1 "official" rate is baffling. At 24:1, they wouldn't need to raise wages or prices at all. It's at 26.5:1 right now. Based on the 2100 salary figure, we should be expecting 300% inflation immediately, so why even announce a 24:1 rate? Are they seriously going to keep store prices at 24:1 while the off-market rate is 75:1? No tourist will be dumb enough to fall for that. Once they decouple from USD inflation is going to run rampant. Like 1% per day. They'll have to put on a new price sticker every other day. At least CUC was pegged to something and they could get tourists' USD/Euros with it when they arrived. Toilet paper is literally worth more than CUP.

Something's going on and I guess we'll see what happens...very odd though. I really hope we're not looking at a ban on cash but based on all these facts I'm getting concerned...

[Nino]

1 hour ago, NSXCIGAR said:

Still that low...wow. I had heard it was a bit higher recently. 

It's just not possible that the salary could rise to 2100 CUP at a 24:1 rate. That would be real wage increase of 300% and we know that's not happening. This 24:1 "official" rate is baffling. At 24:1, they wouldn't need to raise wages or prices at all. It's at 26.5:1 right now. Based on the 2100 salary figure, we should be expecting 300% inflation immediately, so why even announce a 24:1 rate? Are they seriously going to keep store prices at 24:1 while the off-market rate is 75:1? No tourist will be dumb enough to fall for that. Once they decouple from USD inflation is going to run rampant. Like 1% per day. They'll have to put on a new price sticker every other day. At least CUC was pegged to something and they could get tourists' USD/Euros with it when they arrived. Toilet paper is literally worth more than CUP.

Something's going on and I guess we'll see what happens...very odd though. I really hope we're not looking at a ban on cash but based on all these facts I'm getting concerned...

Well I can assure you that a good friend working for the gvmt. as something akin to an inspector earns exactly 500 CUP a month right now ....

I fully agree with your thoughts ( except for the toilet paper part as the toilet paper comes from Vietnam to Cuba ... ?

And looks like the Cubans agree with us - see what jewel of information I just found on Revolico, the Cuban Ebay, in the currency buy/sell section - I'm surprised it hasn't been deleted or censored :

Do not worry the dollar will rise irretrievably

Fortunately the price of the dollar will be put by the market, this month is not good to sell MLC (freely convertible currency), the best thing is to wait until the end of the next month for the state to inject all that amount of cup with the new salaries, CUP that are useless because in the stores there is nothing nor will there be anything. The demand for MLC will rise because people will have more CUP to buy it, it is difficult to be exact but it will undoubtedly be above 75 CUP per USD, we already saw it at 120 and even 150 at the beginning of the 90's, anything else is just silly.

[purodoro]

I thought there would be no shock therapy. At least that's what the Cuban gov said. Wishful thinking again I suppose. 

[helix]

A bankrupt government .... everyone gets screwed.

[Nino]

Just found this information - the Cuban Central Bank has decided that accounts in CUC can be converted to US$ or Euros BUT  the accounts will be frozen, no money can be withdrawn from them or be re-converted into other banking products ( guess it means credit cards for the supermarkets ) until Cuba has the means to pay for them.

In other words - you cannot touch your own money.

Same as what happens to foreign investors in Cuba for years now.

 

[NSXCIGAR]

4 hours ago, purodoro said:

I thought there would be no shock therapy. At least that's what the Cuban gov said. Wishful thinking again I suppose. 

"Shock therapy" is prices rising. Prices won't rise--it's called price controls. So there are shortages. So while prices aren't shocking, the store shelves are shockingly empty.

10 hours ago, nino said:

it is difficult to be exact but it will undoubtedly be above 75 CUP per USD

Right, this is exactly what I thought--about 300% immediately. So how can prices even start at 24:1? 

I can't wait to see what the reports are after Jan 1 in the shops when the prices are all in CUP. 

[J-Slay]

19 minutes ago, VKUTT said:

https://www.cigaraficionado.com/article/cuba-is-getting-rid-of-the-cuc

Thanks for this. Couldn’t quite understand the other thread. 

[Fugu]

2 hours ago, NSXCIGAR said:

12 hours ago, nino said:

it is difficult to be exact but it will undoubtedly be above 75 CUP per USD

Right, this is exactly what I thought--about 300% immediately. So how can prices even start at 24:1? 

 

I’d say, ‘official’ rates will become pretty much irrelevant. They simply had to set an initial figure, and then see what happens.

Subsistence will soon be back to relying mostly on self-supply, the USD as hard currency (injected from expatriates, more than ever before), barter transactions and a flourishing black market.

[NSXCIGAR]

4 hours ago, Fugu said:

They simply had to set an initial figure, and then see what happens.

Sure, but they won't even be able to keep up starting that low. You're going to see 75:1 within weeks. And you can rest assured the "official" rate and rate for card transactions is going to lag way behind the actual rate.

Again, we should be exchanging off-market and using cash only.

[Nino]

11 hours ago, NSXCIGAR said:

I can't wait to see what the reports are after Jan 1 in the shops when the prices are all in CUP. 

Prices have been in CUP for a little over a year and purchases could be made in CUP as well - until the arrival of the "MLC card only" stores.

[Nino]

Buy now as prices will triple from January 1st warn Cuban private sellers :

https://www.14ymedio.com/economia/Compren-ahora-partir-valdra-triple_0_3003899590.html

"Compren ahora, a partir de enero valdrá el triple"

Los comerciantes privados dan por hecho el incremento de precios a partir del 1 de enero

14ymedio, La Habana | Diciembre 15, 2020

[Nino]

More bad news from the island :

1)You will only be able to re-exchange local money on departure up to $300 as there is no foreign currency available.

2) All LCDH stores will implement payment in US$ or foreign currency only.

As usual the Cuban gvmt. blames the embargo for all these issues.