Record number of Cuban migrants – approximately 180,000 have reached the US-Mexico border since last year – has driven a steep decline of the Cuban peso.
HAVANA TIMES – Rider Gonzalez, who runs a small cafe in Havana’s tourist center, faces a challenge every day in a country where staple foods in cafes, such as milk and flour, are in shortage, and sometimes even impossible to buy.
But now that the Cuban peso has hit a record low in the past 30 years on the illicit market, according to El Toque – an independent digital newspaper. Gonzalez says that preparing the cafe’s daily menu has become a great headache, writes Dave Sherwood from Reuters news agency.
Gonzalez needs to find food in stores selling in dollars, but he charges his customers in pesos. As the local currency becomes weaker, he needs more money to buy the same amount of ingredients.
“We have to print new menus (with these new prices” every day,” Gonzalez told Reuters, while getting ready to open up the cafe early in the morning. “Of course, customers don’t like it.”
In early August, the Government reopened bureaus de change that had been closed for almost two years, while announcing a favorable price on the par with the flourishing illicit market, a measure it said would help to stabilize the peso.
“The State needs to regain control of the exchange market,” the minister of Economy, Alejandro Gil, said. “We will defend our (…) 120 pesos : 1 USD rate,” he pointed out.
However, the informal market on the island is still influencing currency rates.
Last Thursday, the peso dropped to 155 pesos : 1 USD, according to El Toque, a record low since the so-called “Special Period” in Cuba, a severe economic crisis that followed the USSR’s collapse in 1991, its former benefactor. [By Tuesday September 13, the rate is 163 pesos to 1 USD.]
“Prices of the dollar are the price you find, not the price the Government wants to set,” Ricardo Torres, a Cuban economist living in the US, said. “The reality is that the Government hasn’t gone to the heart of the problem and solved it.”
Torres said that a record number of Cuban migrants – approximately 180,000 have reached the US-Mexico border since last year. He notes that this movement is an extraordinary factor that has driven a steep decline of the Cuban peso.
If every one of these migrants needs 8,000 USD to make this journey, that’s a total of over 1.4 billion USD, some of which was likely purchased on Cuba’s illicit market, Torres said. “This is money that left all in one go. These people bought the dollars in Cuba, a currency that is already in shortage and they took it with them,” he pointed out.
The economist explained that these dollars aren’t being replaced because tourism, exports, and remittances – key sources of revenue that Cuba desperately needs – haven’t returned to pre-COVID levels, amidst pressure of US sanctions and a faltering global economy.
Cubans haven’t had any other choice but to do business with dollars on the black market since 2020, after the Government closed its bureaus de change, stopping the loss of foreign currency that was needed to buy goods outside the island.
After the Government reopened the formal exchange market, long lines formed outside many bureaus de change, known by its abbreviation “CADECA”, to take advantage of its favorable rates in the beginning.
Moises Gonzalez, a painter and sculptor that waited in line this week to buy foreign currency in the El Vedado neighborhood, was one of the lucky ones. “This option granted by the State is much better because we aren’t taking a risk on the illicit market,” he said.
Other Cubans such as Julio Cesar, a 36-year-old tour guide who’s been out of work for months because of low levels of foreign visitors, has no way to buy USD and needs to live off the few pesos he can save.
According to him, we have a clear lesson to learn from this growing exchange crisis. “Anyone without foreign currency in Cuba is in a fix,” he pointed out.