Tourists and Some Cubans Are Happy about the CUC’s Devaluation

Morales estimates that the State is “losing millions” that will be seen in the medium and long term and will damage its foreign exchange reserves. (14ymedio)

14ymedio bigger14ymedio, Luz Escobar / Mario J. Pentón, Havana / Miami, 26 November 2019  — When his mother asked him to send the usual monthly remittance in dollars, Guillermo Prieto — a Cuban man living in Homestead, a town south of Miami — thought it was so she could buy a household appliance at one of the new government-owned hard currency stores.

He was quite surprised when the 75-year-old woman told him about exchanging it on the black market. “I’ve been sending her a hundred dollars through Western Union but she says it would better if I sent it through ’mules’ because she can get a better exchange rate on the street,” says Prieto.

Competition from the dollar, which the government has reintroduced as a payment option in stores designed to compete with private imports of appliances and auto parts, has reduced the value of the convertible peso (CUC) by 30% on the black market. As several economists consulted for this article point out, those who rely on remittances from the United States now get more CUCs for their dollars.

Prieto says that, for his mother to get her 100 CUC, he had to pay Western Union $115.99, which included a $12.99 commission. One dollar is now worth 0.97 CUC at the official exchange rate. If he sends it through mules, however, he pays only $10 for every $100. And she gets it in green backs.

According to economist Emilio Morales of the Havana Consulting Group, the big loser in the CUC’s devaluation is the state. “The Cuban government is not bringing in the dollars that it previously got through CADECA currency exchange offices because people prefer to change their money on the informal market. Dollars remain in private hands, which then leave the country and are invested in retail purchases,” he explains.

Morales calculates that the state’s losses in the short and medium term will be in the millions, jeopardizing its hard currency reserves. “These measures have been a strategic error by the government. It took this step out of a desire to acquire dollars immediately without first thinking about the structural changes the economy needs,” he added.

The economist is author of a study describing the growth of remittances, which in 2018 amounted to 6.6 billion dollars in consumer goods and hard currency, 90% of which came from the United States. In the last decade cash remittances to Cuba increased from 1.45 billion dollars in 2008 to 3.69 billion in 2018.

Irma and Luis feel fortunate that their trip to Cuba in this November coincided with a rise of the dollar on the informal market. The Mexican couple, who frequently travel to the island, were advised not to change their dollars at the airport’s official exchange office. “The driver we’ve had on other occasions wrote us to say we could sell him all the dollars we brought with us,” Irma says.

“He just sold an apartment and had the proceeds in convertible pesos so he bought all the dollars we had to spend,” adds Luis. “He offered us a special friends’ price and gave us 1.20 CUC for every dollar. For us it was great because we expected to lose out at the official exchange rate but in the end we came out ahead.”

“We rented a car and, in addition to Havana, we spent two weeks in Varadero, Viñales and Trinidad,” says Irma. “Everywhere people asked us if we had dollars to sell, more times than they offered us tobacco.” For the couple, who have friends and a goddaughter in Cuba, it was surprising to see the “race for the dollar.”

When they were driving near Cardenas, a town near Veradero, they recall that people were selling fruit along the highway. “Vendors would first quote prices in dollars and only after much insistence would they give us the price in convertible pesos.” For this Mexican couple who live in Ciudad Juarez, very near the U.S. border, “this kind of dollar fever really says something.”

When it came time to return home, the couple regretted not holding onto a few dollars in order to buy something at Havana’s Jose Marti International Airport. “We had to spend all our convertible pesos before going inside.* But after waiting more than an hour and a half in the boarding area, we couldn’t even buy a box of cigars.”

For Claudia, who transports consumer goods and cash across the Florida Straits, the devaluation of the CUC has been good for her foreign exchange business.

More and more people are asking me to transport cash. I have to travel with almost $5,000, the legal limit in Cuba,” she said in a telephone conversation.

Claudia, who asked that her last name not be used for security reasons, said airport workers are among her best customers.

“I go almost every week. When I arrive the airport, they’re already waiting for me,” she says. “I hand over the cash and pick up the previous week’s earnings. It’s perfectly legal and a better way to pay the rent than working at a factory in Hialeah.”

*Translator’s note: The Cuban government does not allow convertible pesos to be taken out of the country, forcing international travelers to spend them before departure.


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