The Cuban peso reached a historic low of 230 to the dollar on the informal market, halving its value from a year ago amidst rising inflation and scarcity, according to a popular tracking source. Although considered illegal by the state, the informal exchange rate continues to be followed through the independent news outlet, El Toque. The official exchange rate remains at 120 pesos to the dollar, yet the government struggles with limited foreign currency reserves for exchange.
Experts have linked the depreciation of the Cuban currency to a deepening economic crisis that has persisted for the past four years, driven by a lack of convertible foreign currency and decreased production. While many authorities attribute the situation to heightened US sanctions and the impact of the COVID-19 pandemic, critics point to the slow implementation of market-oriented reforms.
“The fall of the Cuban currency reflects the slow-motion collapse of the island’s productive economy,” commented Bert Hoffman, a Latin America expert at the German Institute of Global and Area Studies in Hamburg.
The devaluation of the peso has further eroded the purchasing power of Cuban citizens, who mostly receive their salaries in pesos. These salaries rarely exceed 5,000 pesos per month, equivalent to $20 at the current exchange rate. Meanwhile, the local cost of imported goods that are priced in dollars continues to rise as the peso weakens.
Accompanying the decline in the currency is a shortage of essential goods, such as food and medicine, leading to long queues whenever these items become available. Approximately 40% of Cuba’s population, or 4.4 million people, solely relies on pesos and does not have access to dollars. Those fortunate enough to obtain US dollars typically receive them through remittances from abroad or by selling to tourists.
Havana primary school teacher, Sonia Nunez, expressed the difficulties faced by Cubans due to the rising dollar. “We have to work hard to earn enough money to buy three dollars just so we can afford a little detergent or tomato puree. The increase in the value of the dollar has been enormous; it has been something terrible.”
The weakening informal rate reflects a similar trend in the government’s electronic currency, which is used for purchasing goods from state stores that are relatively well-stocked compared to peso outlets. While the value of electronic currency is determined by supply and demand, it requires approval from the state.
Despite Economy Minister Alejandro Gil’s announcement of a 1.8% GDP growth in the first half of the year, the Cuban economy remains 8% below pre-pandemic levels. The government projects a 3% growth for the entire year. Gil also noted that annual inflation is currently around 45%, with prices growing by 39% last year. However, many economists argue that this figure underestimates the actual rate due to the growing importance of the informal market.
(Additional reporting by Mario Fuentes; Editing by Christian Plumb and Conor Humphries)
Credit: The Star : News Feed
