Cuba reintroduced the US dollar, the value of the CUC fell
When his mother in Cuba asked Guillermo Prieto to send his monthly aid in US dollars instead of the convertible pesos known as CUC, the Homestead man figured it was buying a device in new government stores that only accept foreign currency.
But he was stunned, Prieto said, when his 75-year-old mother told him she intended to sell the dollars on the black market and make a profit.
“I always sent her $ 100 with Western Union, but she said it was better if I send her with mules,” he said, using Cuban slang for travelers delivering goods. and money on the island. “Because on the street she gets a better exchange rate. “
The Cuban government recently reintroduced the U.S. dollar into the island’s economy, hoping to capture more of the currency it desperately needs. He has opened stores that sell devices and auto parts only in dollars, previously only available to Cubans who have traveled abroad and returned with these products to sell.
As a result, the value of the CUC, established in 1994 by the government as a dollar-like currency, plunged to 30% on the black market. And those who receive remittances from the United States therefore receive more CUC per dollar.
Cuba has two official currencies: the Cuban or national peso, and the CUC, which the government sets at 97 cents CUC against the US dollar. One CUC is also equivalent to 25 national pesos.
Most wages are paid in national pesos, but most basic items are sold at CUC prices. In recent years, the government has allowed both currencies for purchases in state stores known as “hard currency collection stores” and has announced its intention to unify the national peso and the CUC.
Prieto said that before the return of the US dollar, he paid Western Union $ 115.99, including a commission of $ 12.99, to deliver 100 CUC to his mother in Cuba. But using “mules” he pays only $ 10 for every $ 100 he sends, and the money comes in dollars.
Economist Emilio Morales, head of the Miami-based Cuba Consulting Group, said that “the biggest loser” with the introduction of the dollar and the resulting devaluation of the CUC has been the Cuban government.
“The Cuban government does not collect the dollars it received through CADECA [government currency exchange shops]. People prefer to trade them in the informal market, ”Morales said. “The dollars remain in the hands of individuals who later travel abroad to purchase goods.”
The Cuban economy is going through difficult times. The country is in debt abroad and does not have the hard currency reserves needed to make its payments, Morales said.
The government maintains the official exchange rate at 0.97 CUC per dollar. The CUC can be legally exchanged for dollars, but the government has closed dozens of CADECA stores and limited bank withdrawals to $ 300 per person, he added.
He estimates that the government is suffering “losses by the millions”, which will become visible in the medium to long term and will further reduce its foreign exchange reserves, as dollars entering the island are traded in the informal market and not in shops. CADECA. .
“These measures were a strategic error of the government in an effort to immediately obtain dollars, without thinking about the structural changes required by the economy before taking this step,” he added.
A recent report from Morales’s company reflected the increase in remittances to the island, which reached $ 6.6 billion in 2018, including cash and merchandise. About 90 percent of remittances were sent from the United States. Remittances alone have grown from $ 1.45 billion in 2008 to $ 3.69 billion in 2018, Morales reported.
Claudia, a Cuban living in Miami who did not want to be identified further for personal reasons, is one of the “mules” who transport goods and money across the Straits of Florida. For her, the devaluation of the CUC meant an increase in her money deliveries.
“People ask me for more cash shipments. I almost always have to travel with $ 5,000, which is the limit that Cuba has put in place, ”she said.
Customs workers at Havana’s José Martí International Airport are among its best customers, Claudia said. Some of them take advantage of their work and contacts with tourists who arrive and leave to exchange dollars for CUCs in the informal market.
“I go there almost every week. When I arrive at the airport, they are already waiting for me, ”she said. “I hand over the money and get back the profits from the previous week. Then, I distribute the packages to the recipients, and I return to Miami. Everything is legal. “
The devaluation of the CUC has also benefited Cubans who live abroad and travel to the island.
“Every year I go to Ciego de Avila for 15 days to visit my mother and my mother-in-law. I came back from there a week ago and haven’t changed a single dollar at the airport, ”said Adrial Molina, a Cuban who has lived in Kendall for six years. “The money went a lot further, even though there are so many shortages in the stores that it didn’t do me much good.
Molina added that several private restaurants in Ciego de Avila had suggested that she foot the bill with dollars at a “very favorable” exchange rate.
“People have huge dollar fever. Many have told me that they feared suddenly eliminating the CUC or changing the exchange rate, ”he said. “It is not logical to think that one of these little papers from the Cuban government [CUCs] would have the same value as a dollar.
“It’s worse than ever there,” he said. “You can feel it in the air.”
This story was originally published November 29, 2019 6:00 a.m.