Cuban Businesses Try to Artificially Lower the Dollar
Businesspeople, private and State, made the resolution to try and lower the price of the US dollar after participating in a recent forum in Holguin, Cuba.
HAVANA TIMES – At least 14 entrepreneurs, owners of SMEs (small private businesses) in the province of Holguín, have agreed to close ranks with the aim of lowering the price of the dollar artificially, assuming, like the regime, that it is possible. The agreement, reached at the beginning of this month, has an uncertain future amid the rise in the value of currencies against the Cuban peso. “In the Foremp (Business Forum) the issue that was most talked about was precisely the cost of the dollar that is practically becoming priceless,” the owner of a private business — who participated between April 30 and May 2 in the second edition of this event, which took place at the Brisas Guardalavaca Hotel in Holguín told 14ymedio.
The meeting was attended not only by owners of private businesses but also by representatives of State and academic companies, such as economist Juan Triana Cordoví. Among the more than 180 participants, the greatest concern was the depreciation of the Cuban peso, which, they complain, forces them to need more and more national currency to acquire dollars, indispensable for the import of products and raw materials.
“There we met several entrepreneurs from Manzanillo, Granma, who came together to stop the price of the dollar and not buy it at the prices that El Toque publishes, and they have managed to lower it two or three pesos. It seems little, but it’s something,” the businessman tells this newspaper. “Several of us who were there in Holguín decided to do the same, because if things continue as they are now, we will have to close our businesses.”
Without the physical availability of dollars in the Cadeca (State exchange houses), the owners of small businesses must acquire the currency in the informal networks, where the exchange rate responds to the law of supply and demand and is very far from the official one (24 pesos per dollar). The U.S. currency is essential for them to buy products and raw materials abroad. “In my case, I have a store that sells food, cleaning products and household supplies. I import almost everything from Panama,” explains the source, who prefers anonymity.
“In Panama I have to use the dollar for everything I buy, and right now I can’t find it on the street unless I buy at 395 pesos,” he says, giving the exact figure that, this Friday, appears in El Toque. “Since we met at the beginning of this month in Guardalavaca until now, the dollar has not stopped rising. It goes up all the time, and no one can keep up with it. Our profits fall every day with those exchange rates,” he acknowledges.
During the Foremp meetings, 14 Holguin entrepreneurs agreed to publish on their social media accounts and other anonymous profiles alleged sales or purchases of foreign exchange at a price lower than the El Toque rate. “Although they are fictitious ads, the idea is for people to believe that this is the price on the street,” says the entrepreneur. The strategy, however, does not seem to be bearing fruit.
After concluding the event, businessman Gilberto Licea Parra made a summary of the commitment and published that the participants had jointly decided “not to pay for the dollar at more than 350 pesos,” and even gradually lower it. “It’s the best for everyone; I assure you that together we can do it,” he wrote on his networks, where he has joined the campaign against El Toque.
Entrepreneurs have also created a WhatsApp group in which messages are exchanged with the alleged purchase and sale of dollars at a price that does not exceed 390 pesos. However, this newspaper could not find any way to acquire the currency at those values. In all cases, the response of the alleged merchants was that they had already sold “all the dollars” they had, or they simply did not respond to the requirements of an alleged customer interested in their exchange rate.
“For the many ads we have placed, we have not managed to get dollars at the prices that we publish,” laments the entrepreneur from Holguín. In a similar vein, the Facebook page El Dato, allegedly associated with the Cuban Government, published this Friday that the value of the dollar is just 320 pesos, well below the 395 of El Toque.
In the comments at the bottom of the publications of El Dato there is no shortage of criticism and jokes. Several Internet users propose to buy the currency at the rate announced by the official website and subsequently sell them at the value disseminated by El Toque. Digital classified sites do not seem to pay attention to El Dato and, despite the occasional announcement of buying dollars at prices between 350 and 375 pesos, most foreign exchange sellers offer them above 390.
An avalanche of questions has also fallen on the official website Cubadebate, which in its edition this Thursday lashes out against the exchange rates disseminated by El Toque because, according to the newspaper, “they have generated a negative impact on the monetary scale of the country, which has had an impact on the increase in prices and, consequently, has affected the Gross Domestic Product” of the Island.
In the comments, however, few seem to accept officialdom’s version that El Toque is a tool of the United States’ economic war against Cuba. Several Internet users place the responsibilities for the depreciation of the peso in another direction: “We do not produce anything, we do not export, we do not generate wealth, the economy is partially dollarized, the demand for dollars is enormous and the country does not sell them,” warns a commentator who signs as Albe.
In the same vein is Luis Hernández, for whom El Toque “has only taken the door that has been left open by the small businesses.” He recommends that the authorities of the Island “examine themselves and not look for external enemies,” because with that strategy “we look more and more like the caricature of a witch doctor all over the world.”
Despite the efforts against the reality of the entrepreneurs of Holguin, this week on the streets of the city, sales of goods in Cuban pesos were governed by the El Toque rate, and the foreign exchange market also followed in the footsteps of the news site. Since the businessmen met in Foremp, the dollar has increased its value by more than 20 pesos and seems unstoppable.
Translated by Regina Anavy for Translating Cuba.
You can’t fight the laws of supply and demand.
“Without the physical availability of dollars in the Cadeca (State exchange houses), the owners of small businesses must acquire the currency in the informal networks, where the exchange rate responds to the law of supply and demand and is very far from the official one (24 pesos per dollar).”
This is probably the most economically sound statement in the whole article. Any currency in general, be it the American dollar operating in Cuba or the island’s Cuban peso, is totally dependent on its perceived store of value to its holders, and the confidence its holders believe the currency’s value will continue to hold in the short and long term.
And what determines a currency’s perceived store of value and confidence? Exactly what the article’s quoted sentence says: “. . . where the exchange rate responds to the law of supply and demand . . .”. Period.
In Cuba today because of the totalitarian government’s mismanagement of the Cuban economy for decades, ordinary Cubans, Cuban businessmen/women plus foreign investors have lost confidence in the national currency (peso) and those with the means have flocked to the American dollar – a currency with an inherent high store of value and its holders having unwavering confidence in its appreciating value.
The economic law of supply and demand kicks in exceedingly quickly when Cubans unload worthless pesos consequently flooding the internal economy creating excessive supply. The peso’s precipitous spiralling free fall will continue unabated as long as the black market for valuable foreign currency operates freely.
On the other hand, the American dollar in short supply in Cuba and in great demand in Cuba will continue to operate in the exact opposite direction continually gaining value creating excessive demand.
The article says: “At least 14 entrepreneurs, owners of SMEs (small private businesses) in the province of Holguín, have agreed to close ranks with the aim of lowering the price of the dollar artificially, assuming, like the regime, that it is possible. “
In any economy anywhere in the world, those trying to “artificially” influence the value of a currency, particularly the king of currencies – the American dollar – are engaging in a futile endeavour. Even the Cuban totalitarian government cannot impose its will on prevailing market forces, even though it keeps trying, to try and lower the value of the American dollar. How can 14 entrepreneurs in one Cuban province lower the dollar’s market price for any length of time? Give them credit for trying to salvage the unsalvageable.
Until the Cuban economy begins increasing its morbid productivity rate and begins producing things that the rest of the world wants to buy, the Cuban economy will continue to sputter and stagnate causing its currency to continue deflating indefinitely.
No amount of artificial currency tinkering either by well intentioned Cuban entrepreneurs or by inept government policies will remedy the current, ongoing, money morass which hinders and handcuffs the crumbling, crippled Cuban economy.
Friends in holguin tell Friday the rate to buy U S dollar was 420 to 435 pesos. We can not ship anything into Cuba at these rates. The only solution is a change in the economic system. With the shortages and higher prices Cuba is no longer a good choice to visit
What a great idea that will surely help Cubans put food on their tables. Maybe it could be extended to artificially producing food and other products in the country.