Retail in Cuba with Dollar Accounts Heading for Failure, Economists Warn.

Economists comment on the new US dollar stores in Cuba.  Graphic: D-Cuba

“Any monopoly is harmful, when it comes to foreign trade the number of participatory, state-led, private companies, or businesses, needed to increase a while back.” (Omar Everleny)

“The time will come when these stores run out of supply. Given the Cuban State’s inefficiency, it won’t be long before this situation materializes.” (Joaquin Pujol)

By Vicente Morin Aguado

HAVANA TIMES – Two Cuban economists offer their early conclusions about the Diaz-Canel government’s decision to open up national trade of durable goods, by using cards issued by the Cuban banking system, associated with an account with deposits in US dollars or other convertible foreign currencies.

After the first month of its implementation, Havana Times has sought out answers from:

Omar Everleny, has a doctorate from Havana University, where he was the Director of the Cuban Economy Research Center. He has spoken at conferences in twenty-something countries. His work is a must-read within the economic sciences world. He was kicked out of both academic institutions here in Cuba, because of his critical opinions. He lives in Havana.

Joaquin Pujol, Dr. in Economics, Pennsylvania University. Long-standing experience at the International Monetary Fund, founder of the Association for the Study of the Cuban Economy (ASCE). An emigre from a very young age, he lives in the US.

Here are some topics and answers from our conversation:

HT: We’re looking at a feudal practice, if we look at the way it’s structured. You have to make a deposit in dollars, euros or other currencies the state-run bank considers “convertible”, in advance. The depositor receives a card which can be used to make payments at state-run stores alone, without being able to use the deposited cash for any other purpose. Dollarization? What’s going on with the so-called Cuban Convertible Peso (CUC) and with the vilified national currency, CUP?

OMAR: “In practice, it encourages the devaluation of CUC, and could be the beginning of a greater decline of this currency which is no longer a convertible currency at the end of the day, but just another national currency. Everything seems to indicate that CUP will dominate the national landscape, as a currency, but it still isn’t clear what the exchange rate will be for the population. We have to wait and see what happens with state companies where the official exchange rate is 1 USD = 1 CUP.”

JOAQUIN: “It’s an undercover devaluation, for both the CUC and Cuban peso. It implies a kind of tax for every Cuban living on the island, and especially for Cubans living abroad who send foreign currency to their relatives. Plus, it’s an attack on private business owners, the only profitable sector in the economy which has been growing in recent years. It’s an attempt to control a black market that is growing every day.”

HT: In fact, the socialist state has imposed its advantages on individual retail sellers. To what extent do they benefit consumers? And when?

OMAR: “It’s a measure that is benefitting the Cuban people and the State. But, the foreign currency collected to restock these stores should never be used for other state-led companies, leading to shortages again.

HT: Can we predict whether the new state monopoly will work well? Is it not another case of the never-ending socialist dilemma we Cubans call “A new broom sweeps well”?

JOAQUIN: In order to be able to import goods, the State needs to generate hard currency, which is already hard to come by. The time will come when these stores run into problems. The government has established new competitive prices, compared to those already-existing on the black market, thinking they can attract buyers; however, I doubt whether these prices provide sufficient revenue to uphold an inefficient and corrupt system.”

HT: There is a discussion about forced dollarization being extended to other commercial activities. What would the consequences of this be?

OMAR: “I don’t believe this measure will extend to food, clothes, although steps are being studied so it can extend to new and used car sales.”

JOAQUIN: “One consequence is that it differentiates those who receive dollars from abroad from the rest of the population, and given the fact that most of the population don’t have relatives who are able to send foreign currency back for these ends, it will lead to greater social differences.”

HT: From the Cuban capital, Omar Everleny talks about the possibility of an already common and everyday poor practice in the Cuban economy: misappropriation of resources. Joaquin Pujol, in Miami, is a lot more explicit:

JOAQUIN: “You’d have to be stupid to deposit these funds with the Central Bank. Some people let themselves be robbed blind by the same thieves. People who believed in the CUC, are a lot worse off today. This currency will lose all of its value.”

Vicente Morín Aguado: [email protected]

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3 thoughts on “Retail in Cuba with Dollar Accounts Heading for Failure, Economists Warn.

  • French, 5 years in Cuba now, lost the hope I had. 1 step forward, 2 steps back, what a waste of time and energy. Trying now to take my daughter, her mom and get out of here.

  • So will individuals be able to opt to receive payment in foreign currencies? Ha! As is commented on above, this move will further increase the social divide and the opportunity for forex to be funneled away from buying stock for these shops means that this kind of commerce will have a very short shelf-life. It seems like the Cuban government is trying to force a square peg into a round hole. CUC is not convertible (or is as convertable as the CUP); it exists only on the island and is of no interest to any other country outside of Cuba and without massive reform, the kind of foreign currency investment sought by Cuba is pie in the sky. The desperation is highlighted by the recent legislation to make it impossible for those leaving the country at airports to use up spare CUC. Exactly how much forex can be generated by ‘duty free’ purchases and one last mojito/cristal at the airport bar/cafeteria?

  • Bottom line is that dollars will remain scarce given the sanctions.

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