Despair Over Not being Able to Control Fall of the Cuban Peso

The Cuban government accuses the independent media “El Toque” of influencing more than its economic policies to stop inflation.

By 14ymedio

HAVANA TIMES – On Thursday, 2 May, Cuba’s Metropolitan Bank (BM) launched a WhatsApp channel with which it plans to counteract the “induced inflation” that, according to the entity, is exerted by the financial company El Toque. Although the Bank’s declared objective is to “keep the population informed,” its published exchange rate in force this Friday, stands at 123 pesos for 1 dollar or 134 in the case of 1 euro. The amount is light years away from the rate reported in the independent media, which is 390 pesos per euro and 385 pesos per dollar.

The dissertation continues accusing El Toque of seeking a social outbreak through the “artificial” increase of the dollar. The intention, the BM assures, is to reach 11 July 2024 – an unlikely date, three years after the ’11J’ nationwide protests on that date in 2021 – with the US currency at 480-500 pesos. “There is no economic or political justification for the price to rise in 24 hours, from one day to the next,” alleges the bank, which insists that the independent media is “secretly” financed by the United States and seeks to establish a false value of the Cuban peso, while promoting dollarization and reducing public spending.

“The disproportionate exchange rate difference between the official and informal markets is generated not by the low prices of the former, but by the high levels assigned to the dollar by El Toque,” ​​continues the long message, according to which, the exchange rate is replicated on social networks using big data. “Despite Cuba’s economic problems, the rising values ​​of the dollar respond to political intentions. It is not the state control or deficiency, which exists, that generates the high value of the rate that El Toque presents, but rather its hand and visible intentionality from computer tools of dubious origin,” it insists.

In the most virulent attack in memory from the regime against the independent media, the BM wonders why the US Office of Foreign Assets Control (Ofac) does not sanction El Toque, “managed by Cubans abroad.” The answer to this rhetorical doubt is that it is “a weapon of war of the US Intelligence community, previously used against Nicaragua, Argentina and Venezuela.” For this reason, the entity urges people to obtain information through its “channels.”

Faced with the onslaught, El Toque has not stood by and has responded, one by one, to each “reflection” of the BM. “As we are embarrassed by the level of ignorance shown by those who are supposed to understand something (even a little) about economics, we want to contribute to their understanding by listing 13 reasons that do explain why the dollar continues to rise in Cuba,” the media outlet stated on its X account.

Their argument is well known and is based on the fact that there is a very high demand for foreign currency and a very low supply, since state banks and exchange houses hardly sell foreign currency. This situation has been reached by a combination of factors ranging from the capital flight that has followed the massive emigration to the strong dependence of micro, small and medium-size private companies – MSMEs – on an informal foreign exchange market to which they are forced to go because of the refusal of the State to sell to them. This last fact explains the rapid variation in the price of the foreign currency, the media states, since it “generates volatility in the exchange rate and further weakens the value of the Cuban peso.”

In its explanation, El Toque returns the ball to the regime’s court and accuses it of being the one who promotes dollarization, through the introduction of cards and stores in foreign currency. In addition, there is a lack of support for accounts in freely convertible currency that is evidenced by the creation of the famous tarjeta Clásica (Classic card), in dollars, which offers discounts and other incentives.

“The shortage of cash indicates liquidity problems in the Cuban economy, which affects confidence in the peso as a medium of exchange,” the explanation continues. This fact, accompanied by an increase in the prices of electricity and fuel that affect the prices of all goods and services, demands more currency and, in turn, contributes to the loss of value of the national currency.

The message insists that the Cuban economy has not grown for a long time, is excessively dependent on the outside world – both in investments and in aid and remittances – and has production, distribution and supply problems. According to their figures, inflation has exceeded 400% which indicates a significant loss of value of the currency at a very high speed, combined with the lack of political decisions that could redirect the situation.

“The presence of stagflation indicates that the Cuban economy faces both high inflation and a lack of economic growth,” notes the media, which attributes to this disaster the lack of confidence among the citizens themselves towards their currency and their banking system, as well as the same lack of confidence among foreign investors, who prefer more stable currencies when investing.

The personalized and dedicated response to the frontal attack by the regime is joined by a report published this Thursday by Omfi, an independent project promoted by Cuban economists and journalists to provide information on the exchange market and the evolution of the country’s financial and economic indicators, signed by economist Pavel Vidal, professor at the Javeriana University of Cali (Colombia) and expert on the Central Bank.

In it, he notes that the informal exchange market has grown enormously since 2021, when the so-called Ordering Task* came into force, while the Cuban peso depreciated by 660% against the dollar.

The economist points out that El Toque extracts data from social networks and websites through artificial intelligence algorithms that allow obtaining information about who buys, who sells, what currency, at what rate and what amount.

“The intolerance of the Cuban Government towards an information medium critical of official policies constitutes a motivating factor for disinformation campaigns that occur in the state press and on social networks. Blaming an external entity for the devaluation of the peso and inflation fits well within the script that the Government has used for decades to evade responsibilities and divert attention,” Vidal points out.

For the expert, accusing El Toque of influencing the exchange rate is equivalent to doing so with the National Office of Statistics and Information (Onei) for providing inflation data every month. Despite this, Vidal explains in detail how the exchange rate is calculated to try to dispel the “legitimate doubts” that the medium’s methodology may generate and, after providing all the data, he concludes that “more consumption of financial information in relation to the rate that El Toque calculates does not temporally precede (does not affect) future variations in the price of currencies.”

*Translator’s note: The “Ordering Task” [Tarea Ordenamiento] is a collection of measures that include eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency which must be in the form of specially issued pre-paid debit cards, and a broad range of other measures targeted to different elements of the Cuban economy.

Translated by Translating Cuba

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