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.