Another Financial ‘Corralito’ of the Cuban Regime to Seize Deposits in CUC

This week the Central Bank of Cuba extended the term to exchange CUCs in pesos or foreign Currency. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Valencia, 3 April 2022 — In the history of the Cuban communist regime there have been several processes in which the State has appropriated people’s bank deposits and checking accounts. It happens that, with the passage of time, these operations that in Che’s time were simply changing the format of the bills, have now become a little more sophisticated, perhaps so that they will go unnoticed.

But the motive is the same as in 1960: to seize the financial capital of the people, to impoverish Cubans in order to swell the coffers of the state with economic resources that they do not have. Let’s go to the facts.

Why has the Central Bank of Cuba decided that fixed and certified term deposits in CUC* will now be extended until December 28, 2022? The decision is included in a recent resolution, number 74/2022 published in the Official Gazette No. 24 Extraordinary of March 30, 2022.

This decision has been surprising, because since the start of the Ordering Task**, the Central Bank reminded the population on several occasions of the deadlines stipulated for the exchange of currency during the currency unification process. On the one hand, commercial banks would continue to exchange convertible pesos (CUC) for Cuban pesos (CUP) in cash at bank branches until December 30, 2021, the date of the initial term of 180 days granted in the Resolution No. 178 of June 15, 2021 to carry out this operation, as published by that institution on its website expired six months later.

On the other hand, the same resolution established that it would only be until March 31, 2022 that the accounts in convertible pesos for on-demand savings, fixed-term deposits and certificates of deposit of natural persons would be kept in that currency. During this period, the holder could decide whether to convert the account to Cuban pesos or opt for the certificate of deposit in foreign currency, according to the conditions established for this product. There were no other alternatives for the destination of those deposits.

There was so much insistence on the urgency of this change that many people went to formalize the established exchange operations, even with significant losses in value. Already at that time, the price of the dollar against the peso in the informal market exceeded 100 units at times, completely eroding the purchasing power of the national currency. Opting for the exchange at that time was unprofitable, especially considering how little could be bought with Cuban pesos. Now, it’s worse.

Therefore, extending, as they have, the period to keep deposits in CUC until December of this year is a decision that entails risks for the holders of CUCs, and that the regime, only concerned about making cash for the State, cares little that this is so. The option of converting the account to Cuban pesos makes little sense, due to the loss of value affected since 2021 by the 77.3% inflation that has reduced the real value of the deposits to 30%.

On the other hand, turning these accounts into the deception of the certificate of deposit in foreign currency is even worse, if one takes into account that this type of format can become uncollectible, considering the prospects for the circulation of foreign currency in the national economy.

As has been pointed out on previous occasions, the certificate of deposit in MLC (freely convertible currency) is an example of a “financial corralito” [bank freeze] created by the regime to appropriate the currencies contained in these deposits in CUC or dollars or euros, which follow the same pattern.

This modality of certificates of deposit is inefficient for savings at times like the present, when exchange rates between currencies are distorted by inflation and the negative dynamics of the Cuban economy, with all its sectors paralyzed. If someone needs that money in foreign currency at some point, forget about the certificates because availability will last a long time. It would be a serious mistake.

In the case of “collaborators,” the resolution details that they may request, from their account in Cuban pesos, to fully or partially convert the balance they had at the end of December 2020 in their accounts in convertible pesos, to a certificate of deposit in foreign exchange. Here the corralito is ready.

In this case of collaborators, the power of attorney is allowed, in cases where the holder of the bank account is abroad, to convert the total or partial balance of the accounts into convertible pesos for on-demand savings, fixed time deposits and certificates of deposits in foreign currency, provided that the representation is accredited by special power of attorney. Such is the urgency that the authorities do not hesitate to impose limitations. The objective is to control those currencies deposited in the accounts, as soon as possible.

Finally, the resolution states that there will be no more terms, and, therefore, bank accounts for current savings, fixed-term deposits and certificates of deposits in convertible pesos of natural persons, in that currency, as of 28 December 2022, are automatically converted to Cuban pesos, at the exchange rate of twenty-four Cuban pesos for one convertible peso, in the modality and term originally contracted, and generate interest in this currency at the corresponding rate. A mandatory warning that involves many legal problems.

These postponements are coming to an end, but if the previous guidelines are followed, the first objective of the Ordering Task, the unification of the CUC with the CUP, should have happened long ago. The reason that led the communist leaders to cause the worst crisis in the Cuban economy in recent decades, is still kicking in the form of bank deposits.

However, now, the terrible tourist campaign, and the non-entry of foreign currency, has led the regime to start capturing the deposits in dollars and CUC, which are in the hands of natural persons, and they have put an end to the conversion processes, and in addition: in only two ways: receiving pesos that are worth nothing, or contracting an uncollectible. This is how much Cubans matter to the regime. The umpteenth financial corralito in the history of Cuba, and it will not be the last. And then they want people to trust the banks.

Translator’s notes:
* CUC = Cuban convertible pesos, one of two currencies used in Cuba between 1994 and 2021.
**Tarea ordenamiento = the [so-called] ‘Ordering Task’ which is a collection of measures that includes eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency which must be in the form of specially issued pre-paid debit cards, and others. 


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