Why the US Dollar Has Risen Sharply in Cuba

[El Presidente]

 

https://havanatimes.org/features/why-the-us-dollar-has-risen-sharply-in-cuba/

Why the US Dollar Has Risen Sharply in Cuba

 February 8, 2022

Photo: David Estrada.

By Glenda Boza Ibarra and Laura Seco Pacheco (El Toque)

HAVANA TIMES – Foreign currency prices – as well as the Cuban magnetic card currency (MLC) – have shot up on Cuba’s illicit market in recent weeks.

According to the rates tracked by El Toque on a daily basis (which are calculated by taking the average of figures found on buying and selling ads of foreign currency), the USD went up from an exchange rate of 72 pesos on January 1, 2022, to 100 pesos today.

In June 2021, the annoucement of a “temporary suspension” of cash deposits in USD at Cuban banks made the 50 peso value stay below other currencies such as the euro and the MLC.

Ever since then, “transactions began to appear involving USD deposits for MLC cards and these began to show a higher value than cash, which is explained by the fact they can be used to purchase goods that are only sold at stores created for this purpose,” economist Mauricio de Miranda explained. “The need to buy goods led to a preference expressed in USD deposits for the MLC cards and not in cash.”

In October 2021, Cuban economist Pavel Vidal identified some events that impacted supply and demand of foreign currency on the street:

 “The pandemic, a drop in tourism, economic recession and flights being canceled, can all be identified as the key factors that continue to keep the number of dollars and foreign currency entering the market low. Meanwhile, public sector wages and pensions have gone up, as has inflation, institutionalized dollarization, and pesos cannot be exchanged for foreign currencies legally at bureaus de change and banks.

“Meanwhile, uncertainty surrounds currency policy, all leading to an increased demand for foreign currency: whether this is because more foreign currency is needed on the illicit market to make a transfer or because people are just seeking security in more stable currencies at times of currency crisis,” noted Vidal.

A drastic spike in USD value in recent days has not only meant that it has exceeded the MLC, but that it now stands closer to the euro – its value stands at 0.07 cents less than the international rate – for the first time ever and, even more interesting yet, it could be a sign of other things getting worse.

 

CONTINUED

 

[Corylax18]

That was tough to read. I'll have a report from the ground in about 1 months time. Who knows what changes will happen between now and then.

[riderpride]

In Varadero currently. I can't speak to currency conversion,  but there's no differentiation in currency with retailers/vendors/transportation.  They say 10, it's whatever 10 you have. 

I'll report more when I'm back, but it seems they'll take any foreign currency they can take straight accoss when speaking with the Germans and Russians here.

Cheers!