Is change in sight? Cuba is considering a new official dollar exchange rate to address the economic crisis, according to its top officials. This week, they announced what it will entail and when it will be implemented.
The Cuban government is currently working on a resolution that could profoundly change the way foreign currency is managed on the island.
As reported this week by the official newspaper Granma, the Council of Ministers is currently evaluating a proposal to modify the system of official exchange rates and establish a new mechanism for management, control and allocation of foreign currency, as part of its strategy to "correct distortions and boost the economy."
Currently, in Cuba there are two official exchange rates: one of 1 USD for 24 Cuban pesos (CUP) for legal entities and another for 1 USD for 120 CUP for natural persons.
However, the informal market operates with a much higher exchange rate, which is around 365 CUP per dollar, creating a significant gap that causes economic distortions, inflation and loss of confidence in the financial system.
Will the new official dollar exchange rate bring stability to Cuba?
La First Deputy Minister of Economy and PlanningMildrey Granadillo de la Torre, he pointed that the "risks and consequences" of the new exchange rate model are being analyzed, which could represent a profound transformation in the Cuban monetary system.
In addition, they are being made adjustments to the implementation schedule of the new currency system and experts are consulted due to the complexity of the matter.
This new approach also seeks to review the self-financing schemes in foreign currency, a model that allows certain strategic sectors—such as health, biotechnology, tobacco, tourism, and energy—to use a percentage of the foreign currency they generate for their own operations.
For five years, Cuba has been facing a serious economic crisis marked by shortages of basic products, uncontrolled inflation, growing dollarization, frequent power outages and a deep contraction of the productive apparatus.
Added to this are factors such as the pandemic, US sanctions, and domestic economic decisions that have failed to reverse the situation, as well as the systematic corruption of several leaders, including former Economy Minister Alejandro Gil.
This potential new exchange rate system not only aims to improve access to and control of foreign currency, but also to stabilize the economic environment, attract investment, and allow both the state and the private sector to operate more efficiently in an extremely complex environment.
As the implementation of this new exchange rate system approaches, the eyes of analysts, businesspeople, and citizens will be focused on how it will evolve. For now, the Council of Ministers is still discussing when the new rate will be implemented, and the question of when it will be implemented remains unclear: a month or two?
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8 comments
Good afternoon to the group
Very good information about the new change that is coming.
Now the important thing is that this is for the good and benefit of the people.
Good afternoon to the group
Very good information about the new change that is coming.
Now the important thing is that this is for the good and benefit of the people.
This unreal and fictitious story of the floating exchange rate in the state foreign exchange market, announced for the first time more than a year ago by the previous Minister of Economy, is identical to that of the program to correct distortions and relaunch the economy, neither of the 2 exist, in my opinion they are aimed at making us believe a matrix of favorable opinion and hope that is being worked on and while we wait time continues to pass, in the current financial conditions of the country, of almost total economic collapse, it is less than unlikely that the government will intervene in the foreign exchange market and back in convertible currencies the more than 700 billion pesos of national currency, put into circulation without any backing in production and services, consequences of the disastrous task of ordering, time will tell who is right. Greetings.
The never-ending story, they don't know what or how they're going to do it. But every time they announce something it just makes everything worse.
I ask. And when will the Certificates of Deposit be paid?
The experts they consult are the ones I fear. They're almost always people incapable of defending a point of view or contradicting one another, and everything ends up as usual, with decisions far removed from what we really need. They rarely consult those at the Cuban Economic Studies Center or other academics who can truly contribute a lot; they end up seeking out stubborn but "reliable" old fogies. Just look at the members of the famous Innovation Advisory Committee. They've been in training for several years, I don't know how many meetings with the president, and they've achieved nothing.
Honestly speaking, every time a new measure is announced, we wonder if it will solve the problem or make it worse... It wouldn't be the first time that measures taken achieve the opposite effect of what they were created for... It's about time they started cleaning up the mess they themselves so efficiently created...
If it is about increasing foreign investments.
On the other hand, they're freezing all foreign currency deposited in banks. Will this law attract foreigners who want to invest in Cuba? I don't think so, unless we're dealing with extremely foolish investors.
and I don't think they are really stupid, but quite the opposite.