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The dollar loses value in Cuba, will that trend continue?

For the first time since the so-called Ordering Task began in Cuba, the US dollar registers a considerable drop in its exchange rate against the Cuban peso without there being a reason for it at first glance.

Although similar oscillations were seen before, as in April and May, this was clearly determined by objective reasons. Or to be more precise, due to the expectations that were generated in the population based on objective elements such as:

  • The Cuban government’s announcement that it would start selling foreign currency to a certain group of economic actors;
  • The United States government statement referring to the facilitation of trips to the provinces of the island and the elimination of limits on remittances to Cuba

When both factors were combined, a slight appreciation of the national currency against the dollar was generated, since many assumed that the availability of dollars in Cuba would increase, and consequently the demand would decrease. Anticipating the possibility of such a scenario, not a few went ahead to sell their dollar reserves before it fell too low in the informal market, however, in just a few days the US currency resumed its upward trend.

Later, with the resumption of the activity of buying and selling foreign currencies in the country’s banking institutions, a slight oscillation was also noted in the exchange rates of the dollar, the euro and the MLC in the informal market. However, the tide soon turned when it was understood that it was just a façade, an unintelligent maneuver on the part of the government that only served to further shoot up the prices of foreign currencies in the informal market itself.

190 pesos per dollar?

Only two weeks ago the USD reached a historical value against the Cuban peso, when it was exchanged $1.00 USD for $200.00 CUP. A ceiling that for many seemed unattainable.

However, in recent days this upward trend seems to be deflating without there being an apparent reason for it, because, as we have said, the government’s intervention in foreign exchange activity has not only been irrelevant, but has also favored the rise.

And on the other hand, inflation, that is, the increase in the cost of essential consumer goods, continues to run rampant in the country. The demand remains high from those who are forced to buy foreign currency to access the stores in MLC, and much more so among those who need large volumes of dollars to emigrate from the island mainly through Nicaragua.

It seems that the price between the dollar and the Cuban peso has found a kind of equilibrium or almost natural balance, as if the buyers themselves had put a stop, refusing to pay the US dollar more than $200.00 CUP. However, this could not be explained if it were not for the fact that another variable remains constant: the availability of dollars and euros in the country.

You can check here the official exchange rates, and those shared by El Toque, related to the informal market

In other words, although there are not as many dollars in Cuba as the population and the government itself would like, evidently a certain balance has been maintained in the supply of foreign currency in the informal market, which allows buyers to be in better conditions when negotiating or agree (read haggle) on a price.

It is, as we said, an equation or balance in which several factors intervene, and none of these is currently very sustainable, since one cannot speak of an economic miracle in the country, or a considerable arrival of visitors to the island. (Official sources say that up to August, just over a million visitors arrived on the island) that they enter considerable amounts of foreign currency.

The drop in the dollar exchange rate in Cuba should not be interpreted with too much optimism, since the forecasts and forecasts on the performance of the national economy in the short and medium term could not be more discouraging.

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