They warn that the currency will reach or even exceed 400 pesos.
14ymedio, Madrid, June 9, 2025 — The calm that parallel exchange rates have experienced in Cuba over the past year seems to be coming to an end. So believes the Cuban Currency and Finance Observatory (OMFi), which shared on Monday its monthly report warning with a spoiler: “June could be a busier month in the informal Cuban currency market”. Thirteen months ago, the dollar hit its peak, selling for 395 pesos on May 9, 2024, and after a long period of stagnation at 340, the rise has been consolidating slowly, to reach 375 pesos.
By the end of this month, the OMFi estimates a rise of at least 15 pesos (4%) in a central scenario, but warns: “In the maximum (most extreme) scenario, the dollar rate would increase 38 CUP (10%); which would occur if the excess demand expands”. A similar account remains for the euro, which has remained higher recently but may rise more slowly, between 3% and 7%. This would mean that both currencies will come to touch or even surpass 400 pesos.
If this situation is reached, warns Pavel Vidal, the Cuban economist responsible for the Observatory, it is possible that a “downward correction” will happen, since in the past, the exchange rate of 400 pesos per dollar worked as a “psychological barrier”. In that case, a scenario of uncertainty and volatility in the market would return, which has not been seen since last year.
It is possible that a “downward correction” will happen, since in the past, the exchange rate of 400 pesos per dollar worked as a “psychological barrier”
In that context, the Cuban regime unleashed a campaign of attacks on El Toque, the media to which the OMFi belongs and the first to publish the rate of the informal foreign exchange market daily, which it accused of manipulating prices and generating expectations. The Government accused the publication of wanting to bring the rate up to 500 on dates close to July, seeking a repeat of the Island-wide 11J protests in 2021, which had erupted three years ago. But time eventually showed that the markets stabilized and currencies fell regardless of the alleged dark interests attributed to El Toque to push them up.
In this Monday’s newsletter, the OMFi analyses the latest inflation data, as well as causes and prospects. The May CPI showed that prices are contained in the official market, a very partial figure given the great weight of the informal economy in the daily life of the island, even though they continue to rise: 0.8% in May, 7.45% monthly and 16.4% year on year. The respite is not trivial, since in May 2024 it was double (15.2% accumulated and 31.1% year-on-year), but the mere number is not useful if we do not look at all facets.
As the OMFi report warns, the fall of the CPI is positive in that it transfers less uncertainty to businesses, which can count on fewer price swings and thus plan with more margin and tranquility. But it indicates that the deficit is being contained, as the government has been warning since last year, which in turn has another good consequence: less currency issue is needed to finance it, and this cuts the excess cash in circulation, which puts pressure on prices.
Inflation has been high for so many years, without compensation for wage depreciation, that the population is overtaken
However, in the social sphere it has counterproductive aspects. On the one hand, which has been much talked about, it reveals a lack of public spending, supposedly aimed at improving the living conditions of the population or meeting the needs of the most vulnerable. On the other, inflation has been high for so many years, without compensation for the depreciation of wages, that the population is overtaken. In fact, as several economists have already stressed, including the OMFi in previous reports, the fall in inflation may also be due to the limit at which families seem to be reaching.
“Certain key products may have reached a price ceiling in the short term because of the impossibility for the consumer to continue paying for them. This does not imply that supply conditions have improved but that limits of demand are becoming determinant in price behavior,” states the report. In addition, there is another factor that will not appear in the data analysis: there are goods that simply do not exist, no matter how much money is available. This is the case for many basic services, such as electricity, water and fuel: even if some remain on the informal market, shortages are rampant.
“A lower rate of inflation does not mean that prices go down or that households gain purchasing power,” the report regrets. In addition, it warns of a curious phenomenon approaching in the short term. In the next official data, there will be a significant upsurge in inflation, forced by the stratospheric rate increases of Etecsa, the so-called ‘tarifazo’. The telecommunications sector has been stagnating for years with figures around 0.1% for most of its price increases. Next month there will be several figure increases for phone and internet services, resulting in a high CPI that will surprise no one.
But, warns the OMFi, “nevertheless, its net effect over time can be anti-inflationary since it also helps to generate tax revenues and reduce the amount of pesos in the hands of the population”. It would be the same reason why the high CPI of the months in which tobacco and alcohol costs multiplied, as well as fuel prices, ended up resulting in the containment of inflation.
“The new rise in prices of public services is part of a logic of adjustment which disproportionately affects the purchasing power of households, while the government continues to evade structural reforms of the exhausted centralized economic model monopolized by state enterprises. Since the government does nothing important to promote productivity and economic efficiency, it seeks to expand income extraction through selective dollarization and price increases”, concludes the document.
Translated by Regina Anavy
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