‘It Would Never Occur to Me to Put My Dollars in a Cuban Bank’

Customers waiting in line outside a bank in Central Havana. (14ymedio)

14ymedio bigger14ymedio, Juan Diego Rodríguez, Havana, April 12, 2023 — None of the many people waiting in line outside a bank in Central Havana on Wednesday were there to deposit dollars, something they had been able to do since Tuesday thanks to a decree by the Central Bank of Cuba. On the contrary, they were suspicious of the government’s new measure, which does away with a temporary ban on dollar deposits issued in 2021.

When a young man in his thirties mentioned he was there to deposit a hundred dollars, an elderly man in line tried to dissuade him. “Once it’s deposited, it’s automatically converted to MLC [freely convertible currency] at a one-to-one exchange rate,” he explained, adding that the black market offers a much better rate for the U.S. currency. “An MLC is a virtual dollar; it’s not the same. For me at least, it would never occur to me to put my dollars in a bank. I exchange them on the street for pesos and use that to buy food.” Convinced, the young man left the line, but not before the older man joked, “The dollar was taken prisoner and now it’s been set free.”

Meanwhile, over on San Rafael Boulevard, black-market currency traders are doing a brisk business, as were the official Cadeca currency exchage bureaus like the one on Neptuno Street. “I don’t know if it’s because of that measure or what but nothing like this was happening here before,” observes one neighborhood resident. “It’s like everyone is desperate to buy dollars from foreigners.”

The experts, for their part, have criticized this most recent monetary about-face by the Cuban government and attribute it to the failure of the 2021 currency unification process which, during the early months of its implementation, included a ban on dollar-denominated deposits. “The components of this ’regulation’ (monetary and exchange unification, macro-devaluation of the peso, the end of subsidies, increases in wages and prices) ended up enhancing the effects of the pandemic and leading the country to ’stagflation,’ for which there is no end in sight,” writes Cuban economist Pedro Monreal in a Twitter thread. “Capped prices, partial dollarization, online import rackets, atrophied exchange markets, inspectorates, and now re-acceptance of the  USD at banks are actions that are not only marginal but also at odds with the accepted model of regulation,” he says.

Several economists consulted by the Spanish news agency EFE have expressed similar doubts. “What sense did currency unification make given the associated economic and social costs?” asks Madrid-based Cuban economist Elías Amor Bravo.

Mauricio de Miranda, a tenured professor and researcher at the Javeriana Pontifical University in Cali, Colombia, states, “Currency unification has been a complete failure. [It was] poorly conceived, poorly designed and poorly implemented.”

Monreal believes there never was a true monetary unification. As evidence, he points to the opening of MLC stores in 2019. “It is a very serious problem because the population is paid in one currency (CUP) which they cannot use to buy many of the goods being sold. This is unacceptable from a social and political point of view,” he says.

Officials claimed that currency unification, which began taking effect in January 2021, would end the dual currency system which, at the time, was made up of the Cuban peso (CUP) and the convertible peso (CUC), which was artificially set at one-to-one to the dollar.

Both the ban on greenback deposits and the reform itself gave a boost to the informal hard currency exchange market. The exchange rate on the street went from 70 pesos to the dollar in mid-2021 to 185 on Wednesday, a far cry from the official rate for individuals of 120 pesos to the dollar.


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