The U.S. dollar, which had started to decrease in value against the Cuban peso, has risen significantly again following the implementation of new measures by the Cuban government.
Just a few days after dropping below 300 pesos for the first time since February, the dollar saw an increase following the announcement of a new regulation regarding the "partial dollarization of the economy."
During the fourth ordinary session of the National Assembly, Prime Minister Manuel Marrero Cruz outlined the new provisions that reflect the growing influence of the dollar in Cuba.
This measure, according to the regime, aims to reorganize key sectors of the economy while attempting to control the informal currency market, which has been gaining ground due to a lack of oversight in the foreign exchange market.
The scheme of partial dollarization will impact several strategic sectors of the Cuban economy. The sectors involved include wholesale and retail trade in previously approved currencies, as well as the payment of tariffs and services related to foreign trade for non-state management forms. Additionally, cash payments in dollars will be allowed in key places such as tourism, Casa del Habano, pharmacies, optical shops, international clinics, and airports.
Evolution of the exchange rate
Despite this "flexibility," the government has insisted on its goal of advancing towards the dedollarization of the economy, acknowledging that informal dollarization is out of control. Marrero attributed the escalation of the use of the dollar to the practices of the parallel exchange market and the private sector, warning that no one will be able to sell in foreign currency without official approval.
The new measure reflects a crucial economic dilemma for the regime: the need to attract foreign currency to alleviate the country's structural crisis while trying to maintain control over the economy.
In this context, the dollar is consolidating as a key currency in the daily lives of Cubans, while the government attempts to manage a delicate balance between strategic sectors and the informal currency market. Some economists estimate that the dollar will exceed 500 pesos in the coming months.
This rise in the dollar rate is also generating uncertainty among citizens, who are facing what has come to be known as the "candy effect" with rising inflation and increasing dollarization, which could further affect the purchasing power of the population.
The term "candy change" comes about following the recent opening of the supermarket at 3rd and 70, Playa, in Havana, which only accepts cash dollars or cards linked to accounts in foreign currency, but gives change in candy.
Frequently Asked Questions about Partial Dollarization and its Impact on Cuba
What is the partial dollarization of the Cuban economy?
Partial dollarization involves the use of the US dollar in key sectors of the Cuban economy, such as wholesale and retail trade, payment of tariffs, and services related to foreign trade. This measure aims to attract more foreign currency and control the informal exchange market, despite the government also claiming it wants to advance towards dedollarization.
Why has the Cuban government decided to accept cash payments in dollars again?
The Cuban government has decided to accept cash payments in dollars to attract more foreign currency amid a severe economic crisis. This measure is part of an effort to improve the country’s liquidity through sectors like tourism, where credit cards often do not work, affecting the government's ability to generate revenue.
How does partial dollarization affect the informal currency market in Cuba?
Partial dollarization aims to regulate and reduce the influence of the informal currency market, where the dollar is traded at rates higher than the official ones. However, this market remains essential for Cubans to access foreign currency, as the government has not managed to establish an official exchange rate that reflects the real economic conditions.
What sectors will accept cash payments in dollars in Cuba?
The sectors that will accept cash payments in dollars in Cuba include tourism, Casas del Habano, pharmacies, optical shops, international clinics, and airports. Additionally, payments in foreign currency will be allowed for agricultural producers who replace imports and for manufacturers of exportable goods.
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