This Tuesday, August 23, the sale of foreign currency began in 37 cadecas throughout the country, as part of the implementation of the foreign exchange market. At the Round Table on Monday 22, the Vice Prime Minister and Minister of Economy and Planning, Alejandro Gil Fernández, and the Minister President of the Central Bank of Cuba, Marta Sabina Wilson González, explained the operation of this exchange mechanism that complements the purchase of currencies, initiated on August 4.

Cubadebate visited three Havana cadecas (Mónaco, 23 and J, and 21 and 42) that began selling foreign currency to natural persons this Tuesday.

At the Monaco exchange house, the administrative provincial deputy director of Cadeca S.A. in Havana, Milagros Hernández González, commented that the demand “will always be greater than the supply”, because that establishment sells foreign currency to the extent that it is received.

“The availability we have, that is what is going to be sold to the population,” stressed Hernández González.

The purchase of foreign currency –acknowledged the Cadeca official– was carried out with the aim of “equipping ourselves with the currency to reach this moment”.

Although the workers of the Mónaco cadeca, in Diez de Octubre, were prepared to start operations, and tickets made in the establishment had been distributed to organize the queue, the sale of foreign currency was delayed until 9:20 a.m. due to software problems.

Susana Mérida, the third in line at Monaco, stated that the sale of foreign currency “is a measure that we have been waiting for a long time, because there are really many people on the street selling it at outlandish prices, and we always hope that the State, which the Government, was going to sell it much cheaper”.

The rate for the sale of dollars this Tuesday is 123.6 CUP.

Mérida declared that “I wish they would make it much cheaper, because going from 25 that cost a dollar to now, which is 120, is quite a lot, but it is also more expensive on the street. Since the government didn’t sell it, then you had nowhere to buy it and you had to buy it on the street. And, well, what remedy to buy it here. There is more security.”

She went to the cadeca because she needs to buy dollars to travel to Panama.

The possibility that the coleros control the queue at the Monaco exchange house is another issue that worries Susana Mérida.

“The man who was in front of me did not come to buy, he marked for two people who are the ones in front of me, and I got up at four in the morning to come here. We must take into account the fight against coleros, “she said.

For Adrián Robles, who was waiting to buy euros in order to transfer them to an MLC card, the sale is going to help the value of foreign currency go down in the informal market, but only if that operation is maintained.

“People who are going to leave the country, who need a certain amount of money, are not going to stand in this queue. If you need 10,000, 15,000 or 20,000, you are not going to stand in line, just bring your family”, he commented.

At the exchange house on 23rd and J, in Vedado, the provincial director of Cadeca, Kenia Meza López, said that during the morning “everything has gone very well and as planned, because the information was given to the population with the time, we gave him all the explanation of the currencies we have today and the number of customers we could serve”.

The workers planned to deliver 190 shifts for the day at that establishment.

Estrella Delgado arrived at the Vedado cadeca at five in the morning to buy foreign currency and later transfer it in a bank to an MLC account, in order to purchase basic necessities.

“Regarding the measure, I think it is important that there is a sales capacity for the population, but I think it does not really solve the problem, because there is no correspondence between wages and prices, since there is a lot of inflation in the country. ”, Delgado pointed out.

She also compared the rate of sale of euros (125.1 CUP) with the minimum pension, around 1,500 pesos, and with her salary as a professional, which does not reach 5,000 pesos. “I wouldn’t buy thirty-odd dollars from you,” she said.

The provincial director of Cadeca, Kenia Meza López, referred to the low number of ATMs that worked this day, a situation that affected the speed of service in the three exchange houses visited.

At 23rd and J, two cashiers served the population, however, at the Mónaco cadeca and 21st and 42nd, only one worked.

Meza López said that the cause is the fluctuation of personnel that Cadeca had during the covid.

“Unfortunately, a Cadeca cashier is not trained in a day, but takes preparation. We are working on that, in September there is another course, we have published the call for those interested in occupying the places on the network, but we are working with the tellers that we have at the moment”, she explained.

The cadeca of 21 and 42, in the Playa municipality, distributed 91 shifts before starting the service at 8:30 a.m.

(By Ana Álvarez Guerrero, Darío A. Extremera Peregrín y Abel Padrón Padilla/Cubadebate)

Monetary and exchange rate unification, experts agree, is necessary, but not sufficient, to the restructuring and updating of the Cuban economy, currently immersed in a crisis aggravated by the impact of the COVID-19 epidemic on the global productive system and the tightening of the U.S. blockade.
With the goal of understanding how much monetary and exchange rate duality affects us, its historical antecedents, and the ideal context for our development, Granma spoke with experts at the Central Bank of Cuba.

ORIGINS OF MONETARY AND EXCHANGE RATE DUALITY

During the 1990s, the collapse of the Soviet Union and the disintegration of the socialist camp hit Cuba hard. Between 1989 and 1993, the Gross Domestic Product declined by almost 35%; fuel consumption was cut in half; and foreign trade reduced more than 80%, since the island lost relations with socialist countries developed over 30 years.

Addressing the issue was Mercedes Yolanda García Armenteros, the Central Bank of Cuba’s director of economic research. In a measured, expert voice, she commented that, in this period, the fiscal deficit increased to 33% of the GDP, since expenses related to salaries, subsidies of essential products, and social programs, among others, were maintained.

At the same time, the economic, commercial, financial blockade imposed by the United States against Cuba was tightened, and along with the aforementioned, generated shortages in retail markets and created strong monetary imbalances, García explained.
This situation led to a process of “repressed inflation,” in which money in the population’s hands surpassed the country’s capacity to offer goods and services, the prices of which were not raised, thus exacerbating the lack of supply in stores, already impacted by the reduction of imports by 75%.

Nonetheless, despite the circumstances, the state made the decision to maintain the level of salaries and subsidies, in order to protect the people.
The Cuban peso was losing purchasing power at a rapid rate, along with its role as a means of exchange, of maintaining reserve value, and as a unit of accounting, the specialist explained, adding that the new context facilitated conditions for de facto dollarization, evident in the informal market.

These dollars came from incipient tourism, remissions from abroad and travelers who arrived in the country. The dollar, at that time, assumed the monetary roles of the Cuban peso and the exchange rate reached a level close to 150 pesos per dollar.
In this context, in 1993, a series of measures were designed to reactivate the economy, reinsert Cuban products in the international market and address the serious macro-economic imbalances present. The package of steps to be taken was discussed in the National Assembly of People’s Power.

Among the most important decisions adopted was the decriminalization of possession and use of the dollar by Cubans; the opening of stores to capture this hard currency; a plan to increase exports of services, in particular, tourism; a gradual opening to foreign investment; and the authorization of remissions from abroad.
The principal exporters were allowed to retain some of the hard currency earned and some transactions between Cuban state enterprises were conducted in USD, all of which – along with the promotion and expansion of exports by prioritized sectors to increase income for the country in hard currency – allowed for gradual reanimation of the economy.

CLEANING UP INTERNAL FINANCES

The Central Bank director of research noted that dollarization of the economy was never complete, since salaries, social security, and assistance, charges for basic services and prices of subsidized products, among other activities, continued to be in Cuban pesos.

In 1994, a process of re-calibrating internal finances was conducted, including the elimination of some gratuities and subsidies, as well as establishing a way for individuals to exchange pesos for USD.

In December of this year, the Convertible Peso (CUC) was introduced for purchases in a retail network simultaneously operating in hard currency alongside the new peso.

In 2003 and 2004, the economic recovery had reached a point which allowed for the withdrawal of dollars from circulation, first in the enterprise sector (2003), with the elimination of inter-enterprise commercial relations in this currency, replaced by the Convertible Peso.

In 2004, the process of retracting USD as a form of payment for the population began. From this moment to date, sales of products in the country were conducted in two national currencies, the Cuban peso (CUP) and the convertible, thus establishing monetary duality.

In 2011, on the basis of the Policy Guidelines approved by the VI Congress of the Communist Party of Cuba, a unification process was mandated as part of the country’s monetary re-structuring.

THE OTHER SIDE OF THE COIN

By the end of the 21st century’s first decade, socio-economic conditions in the nation had changed significantly, as compared to previous years. The measures taken had detained the economy’s decline and a gradual recovery had begun, as early as 1994.

Ian Pedro Carbonell Karell, Central Bank specialist in the Economic Policy Directorate, explained that the phenomenon of duality has two underlying problems that urgently need to be resolved.

One is the dual currency itself and the other is the dual exchange rate that establishes different exchange rates for the two national currencies, and between them and foreign currencies. This generates distortions in the enterprise sector and in the way the population interacts with this sector.

One of the problems associated with this duality that requires greater attention is the type of exchange rate established for enterprises (one CUP equal to one CUC equal to one USD) which is what we call “overvalued,” Carbonell stated, which serves as a brake on the development of productive capacity, as a negative disincentive for exporters which favors importers.

This situation also has considerable impact on operations and companies’ accounting, hampering accurate measurement of economic transactions and the effect incentives should have, he said.

For the population, the difficulty lies, above all, in the tedious process of using two national currencies in everyday life, which has been corrected to some degree with the possibility many facilities now have to operate in both.

Likewise, duality also produces, in many cases, an internal imbalance between retail and wholesale prices.

THE IDEAL CONTEXT FOR MONETARY EQUILIBRIUM IN CUBA

Karina Cruz Simón, specialist in the Central Bank’s Economic Studies Directorate, assumed the challenge of describing the ideal circumstances in Cuba, that would allow money to fulfill its roles.

Cruz cited “stability” for the national currency as key, which “is achieved by ensuring that the processes of issuing money are aligned with the real, productive economy’s evolution.”

Among the processes that can undermine stability, she mentioned inflation, that occurs when there is too much money in circulation and prices rise, impacting the purchasing power of the currency and its credibility.

Scarcity can also be generated (repressed inflation), excess liquidity (obligatory savings) and a greater role for the informal market, all of which damage the stability and purchasing power of the currency.

A favorable situation that would allow the Cuban peso to serve its purpose, with macro-economic equilibrium preserved, implies the sort of exchange in which supply matches the hard currency demand; the existence of clear rules governing the issuing of money, so the economy has just the amount needed; and disciplined management of government income and expenditures to control the public debt.

Additionally, she emphasized the necessity of coordination among entities responsible for conducting macro-economic policies, and moving from administrative direction to the use of financial mechanisms, so prices can offer indications to allow for better performance on the part of consumers, producers and economic planning in general.

Cruz also noted that maintaining a stable supply of quality goods and services that can be acquired in the national currency is key, along with the creation of conditions that encourage individuals and companies to save and seek credit in the national currency.

The economist concluded by emphasizing the importance of professional development for all involved in making this ideal situation as real as possible for Cuba.

(Source: Granma)