Among the causes of the momentary exchange rate paralysis are the “disincentives to the growth of imports from the private sector
14ymedio, Madrid, October 11, 2024 — The exchange rate from the peso to the dollar on the informal market has set a record of stability during September and the first days of October. The Observatory of Coins and Finance of Cuba (OMFi), directed by the Cuban economist residing in Colombia, Pavel Vidal, states that the dollar was at 320 pesos for 59 days in a row, an unprecedented duration since this type of operation was recorded.
This Saturday will be a week since the exchange rate began to rise, very slowly, first to 322 and, from this Wednesday, to 323 pesos per dollar. The OMFi is, however, cautious, and although it contemplates another increase, the forecast is more discreet, with 326 to 339 pesos per dollar, an increase of between 1.5% and 4.4%.
“The signs of equilibrium persist,” says the report, which recalls, like the previous one, that it is not the first time there has been a pause. “However, this time a new mark of 59 days without variations is established, from August 4 to October 1, 2024. In 2021, the TRMI [exchange rate] had remained unchanged for 57 days, and in 2022 for 56 days.” The same as last month, the economist insists that periods of calm have always been preceded by others of instability. The dollar reached almost 400 pesos in May, to the point that the Government accused El Toque of manipulating the exchange rate with the aim of bringing it to 500 on July 11, to force a social explosion coinciding with the anniversary of the largest demonstrations against the Regime, in 2021.
The Government has approved several measures to put the brakes on foreign purchases by private individuals
Among the causes of the momentary paralysis of the exchange rate in the parallel market, the report mentions the “disincentives to the growth of imports for the private sector.” The Government has approved several measures that can stop foreign purchases by private companies, such as capping the prices of six products considered basic necessities, and greater control over the main activity of MSMEs, but there are also others announced that keep the sector on guard.
In December, the authorities announced that the tax on imports of raw materials would go up by 50% to promote national production, while purchases of finished products would be penalized in the same amount. Although for now the rule applies only to tobacco and alcohol – presumably because of the fear of scarcity that the changes would produce – private businesses are not calm.
The increase in persecution of cash operations – for going against the government’s electronic payments policy – also appears in the OMFi report, which states that there are Cubans moving to the cryptocurrency market, with data on the rapid increase in the differential between the peso and the USDT (a cryptocurrency also known as Tether).
The OMFi report comes in the context of the dramatic economic crisis affecting Cuba, including the collapse of tourism. According to the text, the number of international visitors decreased by 3.5% at the end of August, compared to 2023, and is only 52% of those who arrived in the same period of 2019. “We would have to go back to 2002 (after the attack on the Twin Towers in New York) to have an eighth month with these levels, nothing more and nothing less than 22 years ago,” it explains.
In addition, even more serious, the report indicates that the number of rooms has doubled on the Island since that moment, and the investment (in tourism) does not stop.
Furthermore, for the OMFi, the lack of fuel is evidence of “the persistent financial problems and reflects the limits of the compensation that can be expected from allied countries”
It also emphasizes the decisive importance of the lack of energy on the economy, not to mention the quality of life of citizens. The document doubts the possibilities of the solar parks that are being built, at least for the moment, since at the end of the year, at best, only about 400 megawatts (MW) will be available, an insufficient amount given the deficits of more than 1,000 MW of the last month.
Furthermore, for the OMFi, the lack of fuel is evidence of “the persistent financial problems and reflects the limits of the compensation that can be expected from allied countries.”
The accumulated annual inflation, which is officially more than 19%, is barely 1.1% lower than for the same period in 2023, which does not detract from the severity of the panorama. “Prices grow less rapidly, but on an already very high level, along with incomes that remain lagging behind for a considerable part of the population.”
The report also reviews the negative fiscal deficit data (18% of GDP), the high issuance of currency (an error, according to most economists in an inflationary panorama), the fall in the value of the peso and a reduction in imports that threatens to restrict the precarious supply. In addition, the section closes with a revealing fact: the United States has surpassed Spain as a supplier to Cuba and is now second, behind China.
Translated by Regina Anavy
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