14ymedio, Zunilda Mata, Havana, 6 January 2018 — The fear of a sudden monetary unification, which would eliminate the dual currency system in Cuba, and its possible effects on the foreign exchange market is contributing to the rise in the price of the dollar in informal networks in Havana. In the last two weeks, the US currency has gained between 2% and 3% on the convertible peso, going from 0.92 to 0.95 or even 0.96 CUC per dollar.
The pressure on the exchange rate began to be noticed a few days after Raúl Castro pleaded before Parliament for the early elimination of the dual monetary system. The head of State recognized that this reform “will not magically solve the accumulated problems” but if it is not resolved “it is difficult to advance correctly” in the economic reforms that the country needs. The existence of two currencies is also a headache for the state business system.
Cubans, skilled in reading between the lines, have interpreted the words of the ruler as an ultimatum for economists to implement the plan for the unification of the two currencies circulating in the country: the Cuban peso (CUP) and the Cuban convertible peso* (CUC).
Several articles published in the official press feed speculation about the impending closeness of a monetary reunification. The economist Ariel Terrero said last week that “the monetary and currency duality” was “the determining obstacle today for the Cuban economy to expand its wings.”
The text, published in Granma, the official newspaper of the Communist Party, fed the rumors about the likeihood of an imminent change. The greatest fear of the population is that the process will happen “overnight” and upset the whole scenario of the fragile domestic economy.
The uncertainty surrounding the fate of the Cuban peso, also called the national currency, has led many to take refuge in the dollar, the holding of which was decriminalized in August 1993 and which has had a different exchange rate in informal markets than that offered by the official Currency Exchanges (Cadeca). In the last five years, the price of the dollar has remained stable in the informal market, with slight fluctuations between 0.91 and 0.93 CUC.
The attraction of changing the US currency in the black market is that in the Cadecas the Government imposes a 10% tax and the seller only receives 0.87 CUC for each dollar. To justify this tax, the authorities cited the alleged difficulties in carrying out commercial transactions in that currency.
In March 2016, Foreign Minister Bruno Rodríguez assured that the tax on the US dollar would be abolished if the obstacles created by the US embargo disappeared. The news jumped to the front pages of the foreign press, but the measure never materialized.
Families that receive remittances in the US currency frequently resort to private money changers to get a better rate. In addition, Cubans who, as of the Immigration and Travel Reform of January 2013, began to travel to Mexico, Panama or the United States to buy goods and resell them on the island, also resort to private channels to manage their currencies.
Those who have the most to lose in a devaluation of the convertible peso are those who run a private business where they accept payment in CUC and in CUP, or those who keep their savings in convertible pesos, popularly known as chavitos.
This is the case for Victoria, 81, who last week sold the Lada that had belonged to her late husband. A family in the city of Trinidad paid her 13,000 CUC in cash for the car, but the old woman has not yet wanted to deposit that money in the bank, precisely out of fear of the sudden unification of the currency.
“I have all the money in my house and I do not know what I’m going to do, because if they unite the currency from one day to the next I will lose instead of winning,” Victoria confesses to 14ymedio. “I thought about buying dollars but they have gone up in price and, in addition, the sellers with whom I have spoken only sell small amounts, at most 1,000.”
Victoria lives with the nightmare of waking up one day with the news that the CUC has suddenly disappeared. She does not want to go through that again because of what she experienced in August 1961 when the government forced a paper currency swap and cancelled all the bills in circulation, as well as limited the total amount of old bills that could be exchanged for new.
“For each family, only 200 Cuban pesos could be exchanged,” recalls the old woman, who along with her mother stood in a long line in front of the bank to obtain the new bills. “If that happens again I do not know what I’m going to do, because the money from this car is to support me for the time I have left of my life,” she says.
Several informal money changers consulted by this newspaper predict that the price of the dollar could continue to rise in the coming days in the black market. “There is high demand and people are afraid of being left with those colored papers (CUC) in their hands that might be totally worthless,” Darius, a buyer of dollars who advertises on various digital classified sites, told 14ymedio.
“Right now, every time I find someone who sells dollars, he is offering them above 0.95 CUC and yesterday I stumbled on the first one who already had a rate of 0.97.”
*Translator’s note: Although the CUC is called “convertible” it can, in fact, only be exchanged within Cuba and it is illegal to take CUCs out of the country. Additionally, although formally valued at 1-to-1 vis-a-vis the American dollar, in practice, as discussed in the article, one dollar does not buy 1 CUC.
The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.