The Dollarization of Cuba, a Symptom of Structural Collapse
HAVANA TIMES – At the recently concluded 9th Congress of the National Association of Cuban Economists and Accountants (ANEC), Cuba’s Minister of Economy and Planning, Joaquin Alonso Vasquez, confirmed to delegates that the partial dollarization of the economy will not only continue but is the official strategy for the near future.
According to press reports, Alonso acknowledged the existence of three exchange rates and how this has led the dollar to become the main “mechanism of interconnection” within the Cuban economy.
“To correct these exchange distortions, it is necessary to link the rates through foreign currency. We have no choice but to move forward with partial dollarization, although the ultimate goal remains de-dollarization,” he stated.
Beyond the wordplay, the official statement confirms a policy that economists are quick to describe as a symptom of failure. “Dollarization is usually an alternative when there is a lack of credibility and functionality in the national currency,” warned Pavel Vidal, a Ph.D. in Economics, suggesting that the measure is an admission of the government’s inability to manage the economy.
Living in Dollars, Getting Paid in Pesos
For millions of Cubans, dollarization is a dead-end. Many families are forced to seek basic goods in a market where prices are set in foreign currency, while their salaries and pensions are paid in increasingly devalued Cuban pesos. At the same time, the prices of some public services are also rising, or have a dollar-priced “alternative” (such as ETECSA data packages).
“The partial dollarization of the economy means the dollarization of people’s expenses, but not of their income,” summarized economist Mauricio de Miranda.
According to Miranda’s analysis, this divide forces citizens into a desperate search for foreign currency, feeding the informal market and accelerating the depreciation of the currency in which they are paid for their labor.
This policy also creates a structural disincentive, as work is not rewarded with a salary that can cover basic needs.
Beyond what dollarization means for the average Cuban’s wallet, the government defends its implementation — and expansion — as the main measure to save the country. Thus, it insists on “recovering remittance flows” through the sale of goods and services in dollars (stores, service centers, transportation).
The diaspora is considered the main alternative to the shortage of foreign currency, given that other sources — such as the export of human resources (mainly medical brigades) or tourism — have not recovered after the decline during the COVID-19 pandemic.
In the case of tourism, Minister Alonso Vazquez admitted that the targets set for 2025 will not be met due to a very poor “first quarter.”
Experts agree that the monetary crisis reflects a deeper collapse.
Economist Ricardo Torres has emphasized that the most critical issue is the lack of government policies to stimulate production. Without measures to boost domestic supply, the economy becomes heavily reliant on imports. This dependence drives up the value of foreign currency and creates a vicious cycle that worsens the situation.
As Torres explained, the economy is an interconnected system; therefore, partial solutions that “solve one problem by creating another,” such as dollarization, do not resolve the crisis. The measures must be comprehensive, aimed at reactivating production to reduce external dependence and stabilize the market.
In light of this outlook, Mauricio de Miranda argues that only two coherent paths exist: either move toward full dollarization, where wages are also paid in foreign currency, or take the necessary steps to “strengthen the national currency.”
His preferred option, the latter, would involve a real commitment to making the Cuban peso the sole means of payment for all domestic transactions, backed by a functional and transparent productive system and exchange market — not temporary fixes.
The economist concluded that as long as the government fails to choose one of these paths, partial dollarization will continue to operate as a factory of inequality, punishing those with the least and exposing the profound structural crisis of an exhausted economic model.
First published in Spanish by El Toque and translated and posted in English by Havana Times.
Only an idiot would peg this country’s economy to the currency of his enemy!!!!
The US will sabotage what ever Cuba does, also the anti-Cuba lobby profits from this mess.
Sadly the US is civil and gets along with Communist Vietnam, Communist Cambodia, etc. But when it comes to Cuba is a mad dog that won’t stop bitting.
I’ve met many people in Cuba last 4 years during vacations. With several staying in touch. All very good, intelligent, hard working people. It is not in their hands to change something. All agreed that it is a big miss management of their government. But they are not revolutionaries, very family oriented people. I think only straight negotiations with Cuban government can change things. Same way as it was in Soviet Union or China – direct contact between top leaders. Diplomacy will melt the ice. Not sanctions, which only hits regular people and makes leaders more privileged.
The article and comments are incisive and fascinating. I agree with Roj: make Cuba our 51st State. Trump and the Caribbean real estate/beaches have unlimited potential!
And yet the restaurants and shops in Havana are full of Cubans paying the same prices as tourists. Big question is how and why these Cubans are able to do this if monthly wages are no more than 5000 pesos. Kids are walking around in genuine designer trainers with the latest mobiles and buying from the ice cream parlours at 350 pesos – a third of the weekly wage. Some Cubans are making a lot of money and inequality is becoming increasingly visible.
Cuba start same journey like ex USSR in 1991 until now, you have 2 or 3 currencies, get salary in rubles, but buy everything in USD or EU.
Some simple questions come to mind:
Since Cuba does not pay its salaries in USD, but forces everyone to make purchases in USD, how is this not genocide? Why does the United Nations and developed nations not speak out against this awful human rights violation? Do we just sweep it all under the rug and pretend it is not occurring in our own backyard?
Maybe not so simple question.
To the commenter James Ritchie: When I write the Castros, I am largely referring to the malingering leadership cabal of castristas who currently run Cuba. However, to be sure, the ailing Raul Castro is still on the scene. He is still the head of the communist party. His blindly obedient hand-picked successor Diaz-Canel is very much in charge of the kamikaze trajectory of the Cuban economy. And even after “el chino” kicks the bucket, his boot will remain up the butts of Cuban leadership. The few remaining “historicos” plan to keep a watchful eye on the batch of the young 50 and 60 year-olds currently responsible for day-to-day operations. The Castros are anything but long gone.
Corruption in government or unknowlegable beaurocrats.
Join the US as a state. All problems immediately solved. I’m sure Trump would be open to it.
In 1958, the Cuban Peso CUP was so strong, it was worth $0.02 cents more than the USD. Leave it to the Castro Communists and their dictatorship to destroy the Cuban economy – and the CUP…
The communist government is incompetent and does not know to run businesses. The result is poverty.
Moses ; The Castro’s are long gone.
To continue would be a disaster.
The government would have to privatize at least 50% of its present values to reinvest in itself and
It’s people.
Do use the U S dollar but Mexico pesos or Cd dollar make a deal in return to set up light manufacturing and 40% of the agr land on a 10 ur lease with options for another 10 yrs to provide some foreign currency good t be used in Atms and to trade for needed item with basic human rights a small generator inverter $600 cd on sale is $1100 U S in cuba or almost 3 time the price same many other items are 2 times more than in Mexico yet wages in Cuba are 10% to 20% of those in Mexico or 5% of wages in United States no way to live or run a country
We had this in ex YU many years ago. Stabilization of the market was achieved within few days. Everyone could go to the bank to sell or buy foreign currency at fixed price.Of course after a while government had to adjust price for about 20 percent and continue with painful reforms that suppose to turn economy to the “market” oriented. Everything ended up in a total brakeup of economy followed with political insurgency and finally brakeup of the country and the kind of civil war.In the same time a lot of workers were already in Western Europe supporting their families that stay in ex Yu. Privatization and free elections were extremely painful especially in a parts of ex Yu where tourism was not developed. So many families decided to emigrate. After that we understood that political and market reforms were “coditio sine qua non”.But China proved that market economy and Central Comitty of Komunist Party can exist together.So…
Why doesn’t the Castro dictatorship seriously consider full dollarization of the Cuban economy. I’m too lazy at this moment to investigate this but doesn’t the US embargo prohibit Cuba from using US dollars as a medium of exchange in foreign transactions? As I write this, the current informal Cuban peso to USD exchange rate is as much as 380 to 1. When we were in Cuba last year, one of my wife’s sandals broke while we were walking in Old Havana. We dropped by a shoe store on the ground floor of a luxury hotel to purchase a new pair. Nothing fancy, just something to walk in. We couldn’t believe our eyes! She settled for a pair that although was real leather, was nothing she would have purchased in the ‘States. We paid 35,000 Cuban pesos! For an ugly pair of sandals. The average monthly salary of a Cubans at that time was a little more 6,000 pesos. Do the math. A Cuban would have to work 6 months to buy these sandals! How can this economic crisis continue?