‘Bankification’ of the Economy and the Circulation of Counterfeit Banknotes: Another Blow to Credibility

ATMs in Cuba are often unreliable because there is no electricity, or the cash runs out and is not refilled.

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 1 August 2023 — Cuba’s state press reports that last Monday a meeting of the executive committee of the council of ministers of the regime was held, an organ that between meetings of the council of ministers is responsible for the decisions that are attributed to it.

With the presence of President Díaz Canel and Prime Minister Marrero, this executive committee addressed several issues of the economic and social life of the country; among others, food production, the distribution of the regulated family basket, the transport of cargo and passengers, the supply of water, and the generation of electricity.

However, even if it was outside the agenda that was initially disclosed to the press, the executive committee addressed an undoubtedly relevant issue, which has already been referred to in previous entries on this blog. I am referring to the program for the ’bankification’ of the country, an issue that they have been working on in recent months and that includes a set of measures to gradually encourage the use of electronic channels for collection and payment in the national territory.

Whether Cubans use banking to carry out their usual economic transactions, as happens in other countries, depends on their seeing that it is useful and provides some kind of benefit. And even that there is availability of money in the accounts for different electronic transactions. The communist authorities should be aware that bankification of the economy depends on the people, the economic actors, seeing it as convenient and useful, and in Cuba, at least for the time being, this is not the case.

To begin with, following Minister Gil who reported on these issues in the Assembly a few months ago, it makes no sense to pay in installments in the national money [Cuban pesos] and the freely convertible currency created by the regime, in a proportion of 70% to 30%. A dual monetary system, which was one of the objectives set by the Ordering Task,* continues to be a brake on the integration of the national market, and, therefore, Cubans do not use banks.

Second, Cubans have a growing distrust in the banks. It hasn’t been a peaceful relationship. The banks, as instruments of the state, put the regime’s demands ahead of those of the citizens. And that’s why, when a Cuban is going to withdraw cash at an ATM, a simple operation within the banking system, he encounters the unavailable cash cartel. Cubans are wary of any confiscation of their savings and the impact of inflation on their deposits.

Perhaps for this reason, in Cuba, cash in the hands of the public continues to reach one of the highest percentages in the world, not only for the purchase of goods and services in national currency, but for transactions in informal markets — in particular, the exchange of the peso with the dollar. Even the small and medium-sized enterprises are dedicated to operating in cash and do not use banks as happens in other countries; in this case, so as not to have to be giving explanations to banking employees about the origin of the funds.

Well, in the executive committee it was reported that in the coming days managers of the banking sector will offer all the details to the population about the bankification process, which they describe as “of vital importance for the Cuban economy.”

And since there are no two without three, in the same edition of the state press in which the regime’s interest in bankification of the economy is reported, the Central Bank authorities, through their website, were forced to deny that banknotes in the denominations of 100 and 1,000 CUP [Cuban pesos] circulate in the country with errors in their printing or are false. The note added that so far in the bank branches, no customers have met with this situation. In the case of banknotes dispensed by ATMs and the present difficulty in their printing, customers can go to the nearest bank branch. The report ended by pointing out that the population should follow the official sites and channels to stay informed.

Where’s there smoke, there’s fire. It is still significant that counterfeit banknotes are appearing in the Cuban economy and that it can happen, just when the regime wants Cubans to use banks for their economic transactions and reduce the use of cash. Of course, they couldn’t have chosen a worse time to announce the measure. So much so that there are those who see the two reports as the result of small internal battles, skirmishes, between different factions of the Cuban communist nomenclature, who are putting up roadblocks to cause stumbling.

If this is the case, it is recommended that they choose other areas for that dangerous little game, and that they leave the functioning of the economic institutions alone. With this type of news about counterfeit banknotes in circulation, which undoubtedly causes alarm in the population, the Cuban financial system, the Central Bank and the authorities lose the little credibility they have as managers of an economy that isn’t getting back on its feet. There is no point in announcing the intention of bankification if Cubans wake up in the morning with the news of counterfeit banknotes in circulation. The Cuban economy is in such a serious state that it doesn’t need this type of experiment.

*Translator’s note: The Ordering Task is a collection of measures that include 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 a broad range of other measures targeted to different elements of the Cuban economy.   

Translated by Regina Anavy


COLLABORATE WITH OUR WORKThe 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.