Short on Cash, Cubans Face a Highly Unusual Inflation
By Amado Viera
HAVANA TIMES – On the front porch of a house, a small sales stall like many others in the area doesn’t reveal the true nature of the business behind it. There are no signs or visible announcements, only word of mouth, personal recommendations, bring potential clients there. And that’s enough.
I saw it for myself the first time I visited the place, while I waited beside a shelf full of baby creams and disposable diapers meant for a specific audience: pregnant women attending appointments at a nearby maternity hospital. In the few minutes I waited to be attended, two other men arrived asking for the same service as me. “He’s with a customer right now, but he shouldn’t be long,” the young attendant told each of us.
Shortly after, it was my turn to walk down the short hallway, sit at the table to make the transfer, and then count out my 5,000 pesos, minus a 10% commission. The whole process took less than five minutes. “We’re here every day, except Sundays. Though if you’re coming for more than a million, it’s better to call ahead to see if we have enough cash or need to get more. It’s not common, but we might’ve just had a really big operation,” the man in charge explained.
For non-Cuban readers, it might be hard to understand how a business that charges to exchange digital money for cash can be viable. But in Cuba, it makes perfect sense. Rather than spending days in line outside a bank or waiting for one of the few working ATMs to be refilled, many Cubans prefer—or have no choice but—to turn to private money changers.
Omar, a rice farmer from the central province of Camagüey (550 kilometers east of Havana), is one of those who must rely on them. Along with other staple foods in the Cuban diet, rice is considered a “nationally balanced product” by the government, which in plain terms means that farmers are required to sell nearly their entire crop to the state. “At first, it’s not a bad business, though the state no longer includes fuel, fertilizer, or pesticides in the payments like they used to,” Omar admitted. The problem is that the payment isn’t made in cash—it’s done by bank transfer.
Where Theory and Practice Don’t Match
In theory, that money should allow the farmer to cover their investment in the growing season, prepare for the next, and support the family. Omar first heard that explanation in August 2023 during a meeting with officials from the Ministry of Agriculture. He thought they were joking. Neither he nor the others who believed them realized the truth until several weeks later, when they arrived to deliver their harvests to the state mill. “Everything was going fine until they started asking us for bank account numbers. Before, they gave you a date to go pick up your cash from the company, but now they insisted that payments had to be made by bank transfer,” he recalled.
The result was predictable: in the next season, rice deliveries dropped even more than they had since the start of the pandemic. In 2023—the last year with official statistics—national production was only a quarter of what it had been in 2018. And all signs point to even worse numbers in 2024.
“Many people are planting less or have stopped planting altogether. And those of us still doing it have to get creative—like hiding rice to sell it on the side and get a little cash, or go to the money changers. These are illegal things we have to do to keep producing,” Omar confessed.
According to the logic of “Bancarization”—the Cuban government’s policy to replace cash with digital money—he shouldn’t have to do any of that. On paper, with the funds in his account, he should just be able to make the necessary transfers to employees and suppliers “from the comfort of a mobile phone,” as the official propaganda says.
Nothing could be further from reality. Finding someone who accepts digital payments is an exhausting task. Omar’s workers, for example, outright refuse, taking advantage of the leverage they have due to the shortage of farm labor. Most of his suppliers also avoid digital payments. “Put yourself in their shoes and it makes sense. With so many blackouts and connectivity problems, who would propose trading cash for digital money? Not to mention the price of phones, essential for managing accounts, equal to at least three or four months’ salary. When I pay the workers, I have to do it bill by bill, no arguments,” he explained.
To cash out his transfers, Omar usually pays the money changer commissions between 7% and 10%. He considers it a necessary expense.
A lack of cash money can even lead to harvest losses. That became clear in early March in the provinces of Artemisa and Mayabeque, where hundreds of tons of potatoes were nearly lost due to the lack of labor to harvest them. Without cash, many farmers in both provinces were left without “temporary workers” (who are paid by the day, mainly for planting and harvesting).
“I live off what I get paid each day I work. I don’t have a phone or time to stand in line at the bank hoping they’ll let me withdraw 1,000 or 2,000 pesos. If I’m not paid in cash or goods, I go somewhere else,” declared one farmworker on national TV.
Since those potatoes were destined for Havana, the issue quickly drew public attention. That spotlight helped make cash appear so workers could finally begin the harvest.
Such a large amount of money could only have come from the national offices of the Central Bank of Cuba, since local branches barely have enough cash to function. In fact, the shortage has become so extreme that most local governments have ordered state-run businesses to deposit all their daily income in the bank.
That practice has virtually eliminated services like “extra cash” (which allowed people to withdraw money at stores, cafés, and restaurants). As of February, Granma, the Communist Party’s main newspaper, reported that in Granma province (750 kilometers southeast of Havana), fewer than half of the 862 extra cash points created two years ago were still operational. “For months now, withdrawing money has become a mission impossible,” lamented a resident interviewed for the article.
Holding Firm
Cuba’s cash shortage stems from two tightly linked factors: insufficient printing of banknotes by the Central Bank, and a government crackdown on the currency exchange market.
Until early 2023, buying and selling foreign currency happened mostly through government-run digital payment platforms. But the authorities wanted people to sell them remittance dollars at much lower rates than in the informal market. Instead of offering incentives, they decided to limit the amount and frequency of transactions each user could make. It was a complete disaster: those transactions, once worth billions of pesos daily, shifted to cash.
Another tipping point came shortly after, when cash withdrawals were restricted in an attempt to keep money in the banks. Thousands of private businesses and even regular savers stopped depositing cash. “Why leave it there if I can’t take it out when I need it most?” I heard a middle-aged man say as he waited outside a Havana bank to cash out part of his salary.
Meanwhile, the Central Bank hasn’t printed enough money in years to compensate for the deterioration of banknotes and keep up with inflation, which has remained above 40% annually since 2021. As early as August 2023, at the start of the Bancarization policy, prominent economists like university professor Oscar Fernadez had already recommended printing higher-denomination bills, pointing out that the lower-value notes didn’t even cover their own printing costs due to devaluation. But the Central Bank insisted that such was not in their plans.
“There are answers to the problems of Bancarization. And those answers must be found in the municipalities, because that’s where farmers need to solve issues like the lack of cash,” insisted Felix Duarte Ortega, president of the National Association of Small Farmers, a few weeks ago.
In the local assemblies being held across the country since early this year by that organization, criticism of the government’s financial policy has been widespread. To the point that officials have had to respond with formal-sounding phrases like the one above. Among those listening are many who must regularly turn to informal money changers to pay their workers and meet other expenses.
ESTADO FALLIDO!!!