The Cuban government has approved a new exchange rate regime aimed at providing greater flexibility to the foreign exchange market, aligning with the partial dollarization of the economy amidst the severe crisis facing the island.
Prime Minister Manuel Marrero Cruz unveiled the details of this mechanism, which, according to the government, "aims to improve the management, control, and allocation of foreign currency to the country's economic actors," as reported by the official profile Cubadebate.
"This new system will allow for greater variability in the exchange rate, adapting to the changing conditions of supply and demand for foreign currencies, which means the exchange rate may fluctuate," the official stated.
The measure, however, is part of a complex process that involves the participation of various sectors, including the state, non-state entities, and the population, with multiple exchange rates in play that complicate people's lives.
"The new exchange rate regime adopts greater flexibility in the exchange rate by establishing that the rate must change when the supply and demand conditions for foreign currency shift. This is a complex process due to the involvement of all economic actors," explained Marrero Cruz in his remarks.
The government also addressed the issue of partial dollarization, which will begin to be implemented in several strategic sectors of Cuba's struggling economy.
In this regard, the use of foreign currency has been authorized for wholesale and retail sales, payment of duties, foreign trade services, and in non-state management forms. Additionally, payment for exportable products and agricultural goods that substitute imports will also be conducted in foreign currency.
In the tourism sector, the government will allow the acceptance of cash in foreign currency at establishments such as Casas del Habano, pharmacies, optical stores, international clinics, airports, and other authorized locations. This will facilitate transactions in foreign currency and contribute to the inflow of foreign currency into the country, stated the regime.
Paradoxically, just as it announced the implementation of partial dollarization, the government reaffirmed its policy of advancing the de-dollarization of the Cuban economy.
Marrero Cruz acknowledged the existence of an informal currency market outside state control and blamed it for the phenomenon of illegal dollarization in the country. He stated that through this reform, the government aims to regulate and control the use of foreign currency more effectively, minimizing the impact of the black market.
Experts warn, however, that this process could bring additional challenges, such as price fluctuations and inequality in access to foreign currency.
Frequently Asked Questions about the New Exchange Rate Regime and Partial Dollarization in Cuba
What does the new exchange rate regime in Cuba aim to achieve?
The new exchange rate regime aims to provide greater flexibility to the currency market. The Cuban government intends for the exchange rate to fluctuate according to supply and demand conditions, seeking to improve the management and allocation of foreign currency. However, this takes place within a context of partial dollarization and an informal currency market that complicates the economic situation for the population.
What does the partial dollarization of the Cuban economy involve?
Partial dollarization allows the use of the dollar in certain sectors of the Cuban economy. This includes wholesale and retail trade, tariff payments, and foreign trade services. The government will also permit the use of foreign currency in cash in strategic sectors such as tourism, aiming to reorganize and attract more foreign currency income amidst the economic crisis.
How does the new exchange rate regime affect the informal currency market in Cuba?
The Cuban government intends to regulate and reduce the influence of the informal currency market. However, this market remains a crucial channel for Cubans to access foreign currency, as the regime has failed to establish an official exchange rate that reflects real economic conditions. This has led to fluctuations in the value of the dollar and other currencies in the informal market, complicating the economic situation in the country.
In which sectors will it be possible to pay in cash in dollars?
The sectors that will accept cash payments in dollars include tourism, Casas del Habano, pharmacies, optical shops, international clinics, and airports. Payments in foreign currency will also be allowed for agricultural producers that substitute imports and for manufacturers of exportable goods, as part of the effort to generate more foreign currency amid the economic crisis.
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