The Cuban government has begun to implement a new wage payment scheme for certain foreign and mixed companies.
Companies are paying half of what they used to for salaries, but the foreign currencies are converted to local currency at a rate five times higher than that applicable to legal entities.
The measure includes the use of a rate of 120 Cuban pesos (CUP) per US dollar (USD), instead of the official rate set for legal entities, which remains at 24 CUP per USD.
The information -revealed exclusively this Monday by the agency EFE- specifies that the measure has been implemented since this month of March.
The information was confirmed by three sources directly linked to the reform, who requested anonymity.
Who benefits from the new salary payment system in Cuba?
This new exchange rate currently applies only to the payment of local salaries in certain productive companies with foreign investment located in the Mariel Special Development Zone (ZEDM), situated about 45 kilometers west of Havana and designed as an economic enclave with special conditions to attract foreign capital.
The first beneficiaries are the companies involved, which immediately achieve a 50% reduction in their labor costs without the need to cut staff, increasing their competitiveness and allowing them to offer better incentives to retain talent amid the current migration exodus.
Many of these foreign companies had expressed to the Cuban government, in recent years, the difficulties they faced when operating with the official exchange rate for legal entities, which was disconnected from the country's economic reality.
In contrast, the informal exchange rate already exceeds 350 CUP per dollar.
This disparity significantly increased their operations costs—funded by foreign currencies—and affected their efficiency, profitability, and competitiveness on the island.
Workers benefit from the measure: their salaries in Cuban pesos are multiplied by 2.5 (a 150% increase), which substantially enhances their ability to cope with the relentless inflation in Cuba.
Following the monetary reform of 2021, known as the Tarea Ordenamiento, prices in the formal Cuban market have tripled, according to data from the National Office of Statistics and Information (ONEI).
Foreign investment and national production
The declared goal of this measure is to stimulate foreign investment and, consequently, the influx of foreign currency into the country, as well as to boost domestic production.
Cuba, mired in an economic crisis for over five years, currently imports 80% of what it consumes, according to figures from the United Nations (UN):
For now, this exchange rate will not extend to other foreign or mixed companies outside of the ZEDM, raising questions about fairness in operating conditions within the country.
A potential generalization of the new exchange rate could further drive up inflation and reduce state revenues, as the government charges a commission for each contract processed through the employer agencies, which are mandatory intermediaries for foreign companies in Cuba.
The foreign exchange market is one of the most serious structural problems facing the Cuban economy. Parallel exchange rates, the coexistence of two national currencies, and a growing process of dollarization have contributed to the consolidation of a dynamic informal currency market.
This, along with inflation, has deteriorated the purchasing power of the population and worsened the lack of liquidity in the national banking system, which is predominantly state-run.
The implementation of this measure comes three months after Prime Minister Manuel Marrero announced a series of reforms in the official exchange market in Parliament, characterized by its artificial segmentation, exchange rates lacking economic justification, and its disadvantage compared to the informal market.
In this context, the government expressed its intention to move towards a floating rate that fluctuates daily, something it has not yet implemented.
As of the publication of this article, the Cuban government has not made the new salary scheme for employees of foreign and mixed companies in the country public.
The EFE agency indicated that it attempted to contact the authorities to obtain an official statement, but did not receive a response.
Coexisting with the partial dollarization of the economy
In recent days, Miguel Díaz-Canel acknowledged that Cuba will have to “coexist with the partial dollarization” of its economy, while announcing that work was underway on a new revision of the monetary policy, in light of the profound deterioration of the financial system and the rampant inflation affecting the population.
“We must continue working amidst all these situations and the distortions created by the implementation of the ordering process, to seek a more flexible and realistic currency unification than what we currently have,” declared the leader during a meeting with executives from the national banking system, broadcasted by Canal Caribe.
The head of the Cuban regime defended partial dollarization as a reality that must be accepted, even suggesting that it could become an incentive if properly managed by the financial system.
“Search for actions that allow us to control inflation, how to coexist with partial dollarization, and how partial dollarization of the economy can actually stimulate the influx of foreign currency,” he expressed.
Díaz-Canel also referred to other ongoing challenges in the system: “How to stimulate national production through banking and financial activities, how to achieve coordination between monetary policy, fiscal policies, and social policies, because we are in a process of socialist construction,” he said, thereby justifying the central role of the State in all economic decisions.
The leader concluded his remarks by reiterating the need to modernize banking and advance in digitalization and financial inclusion, though he avoided offering concrete measures to address the cash shortage, the collapse of ATMs, or the widespread rejection of electronic payments.
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