Another economic turning point in Cuba: now it sells dollars and tries to create a foreign exchange market

Cuba will begin selling dollars to the population starting this Tuesday, authorities reported Monday, 20 days after banks and exchange houses began buying foreign currency at 120 Cuban pesos with the intention of build a currency market.

“We will start selling foreign currency starting tomorrow,” Economy Minister Alejandro Gil said on state television program Mesa Redonda.

The measure is aimed at “building a currency market” in the country “that allows a legal exchange of currency, which allows progress in giving the national currency greater purchasing power”, explained Gil.

With the intention of snatch dollars from the informal marketon August 4, banks and exchange houses began buying dollars at 120 Cuban pesos per US dollar, a rate similar to that in the informal economy at the time.

Devaluation

The sale of the dollar had been suspended since June 2021 due to lack of liquidity. The price of the US currency has risen nearly five times on the black market after the government implemented a financial reform in January last year, with which it fixed the currency at 24 Cuban pesos.

Three weeks ago, the authorities explained that, without having foreign currency to sell, they had to start with just the purchase.

The president of the Central Bank, Marta Sabina Wilson, said that the measure had a “favorable outcome”. In these 20 days, financial entities have “bought 10 times more foreign currency than they would have bought in a month with the exchange rate of 24” Cuban pesos.

But the sale of dollars will be aimed only at citizens, not at private small and medium-sized enterprisesrestricted

“The exchange rate that was taken into account (for the sale) remains 120 Cuban pesos per currency,” Wilson said.

restrictions

The sale of dollars will be limited to Cadeca branches, Cuban exchange houses, but the airport and banking offices will not be authorized for this operation.

These branches, located in the center of each municipality, “will only sell what they have bought,” said the president of the Central Bank, making it clear that each user can only buy up to $ 100.

This price of 120 pesos per dollar does not cover all economic activities.

Cuba imports 80% of the goods it needs, according to the United Nations, and the country’s current shortage is due in part to the currency shortage of the Cuban state, a communist system that maintains the monopoly of foreign trade .

Two types of exchange

The government maintains two exchange rates in effect. The official parity of 24 pesos will continue to be in place for state-owned company transactions and other activities of the socialist island economy.

When the purchase was announcedCuban economists criticized the measure incomplete, saying that the price of the US currency on the black market would skyrocket.

At that time the informal rate was around 120 pesos per dollar, this Monday it was trading at 140 pesos on the black market.

“We will defend the exchange rate at 120. Now we will find a way for the state, already involved in the sale, to defend that exchange”, assured Minister Gil.

As a first step, the authorities must “stabilize the exchange rate” so that the state can regain control of the foreign exchange market it had lost, he concluded.

With information from agencies

CB