Cuban currency hits record low as dollarization gains ground
The import-dependent country's government mainly blames U.S. sanctions targeting foreign exchange earnings for the crisis that has led to an 11% contraction of the economy since 2019. Critics blame a sluggish reform of the economy.
Prime Minister Manuel Marrero said in December that a partial dollarization of the economy was needed to capture greenbacks circulating in the country as part of efforts to fix the economy. Partial dollarization refers to the dollar replacing the local peso for certain goods and services.
The peso has depreciated nearly 25% this year, according to Miami-based tracker El Toque, used by most residents in the Communist-run country to gauge the peso's true value. The dollar was trading at 305 pesos on January 1 and 40 pesos when the tracker debuted in 2021.
The currency's weakening this year has coincided with government moves to open well-stocked retail outlets that accept only convertible currency in cash, foreign credit cards, or a state-issued dollar card, and increased use of those forms of payment in tourism, wholesale trade, and to pay customs duties.
Government officials have acknowledged dollarization and inflation have increased inequality in a country where about 40% of the population has no access to foreign currency through remittances or other sources. That dollar-less population generally does not earn enough in state jobs or on pensions to meet basic needs.
'To overcome this (economic) situation, we have been forced to accept the partial dollarization of the economy,' President Miguel Diaz-Canel told the National Assembly last month.
'This in some ways benefits those who have certain capital resources or receive remittances, which translates into an undesirable widening of … social inequality."
The government maintains a fixed exchange rate of 24 pesos to the dollar, plus a "discretionary" rate of 120 pesos, with the latter increasingly used to exchange money with tourists and set prices for subsidized goods and services such as public transportation and gasoline.
At the same time, a growing private sector is banned from using official sources of foreign exchange and follows the informal rate to price its mainly imported goods.
'Here, almost everything is in dollars. Cuban money is worthless for buying food and barely anything else … and I don't have a single dollar,' said retiree Freddy Portillo, who has a 1,500-peso pension, as she walked through a main shopping area in the old town of Havana.
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