Lack of cash in Cuban pesos adds to the difficulties on the island

2024-04-27 05:22:01

HAVANA (AP) — Alejandro Fonseca stood in line for several hours at the door of a bank in the municipality of Playa, in Havana, to withdraw Cuban pesos from an ATM. When it was almost his turn, the cash ran out.

Fonseca, manager of a small private food store, took his electric tricycle and traveled several kilometers to another branch where he finally managed to get money following wasting the entire morning. It wasn’t the first time it happened to him.

“It shouldn’t be so difficult to get the money you earn yourself by working,” the 23-year-old said angrily to The Associated Press.

Fonseca is one of many Cubans who, in addition to dealing in recent times with blackouts, food or medicine shortages, and lack of fuel, now face another daily problem: a shortage of Cuban pesos in cash.

In recent weeks, people have begun to form lines outside banks and ATMs in the Cuban capital in search of money to pay for the products or services they use daily.

“There hasn’t been any money in an ATM for three days,” said independent worker Ramiro Pupo before picking up his bicycle and speeding indignantly out of the door of a bank in the central capital neighborhood of Vedado. On this occasion, he did manage to get his cash from an ATM.

For experts, there are several reasons behind the cash shortage, all in some way related to the economic crisis that the island has faced in recent years.

The Cuban economist and professor at several foreign universities, Omar Everleny Pérez, listed at least four reasons among the factors that explain the lack of cash in ATMs: a growing fiscal deficit, the nonexistence of bills with a denomination greater than 1,000 Cuban pesos (equivalent to three dollars in the parallel market), high inflation and the non-return of money to the banks.

“Yes, there is money, but not in the banks,” said Pérez, who considered that the cash is not in the hands of employees, but in those of various private economic actors such as small or medium-sized businessmen who receive that money for transactions, but They decide not to deliver it to the bank out of distrust that they can later withdraw them or to convert them into dollars as quickly as possible before they depreciate.

Entrepreneurs have to import almost everything they sell—or the inputs to what they produce—and to do so they need to do so in foreign currency, mainly dollars. And since they do not have a formal place to obtain them, many first hoard Cuban pesos in cash, which they then end up exchanging for foreign currencies in the informal market.

But converting Cuban pesos to currencies also has its complexity: in Cuba there are different exchange rates, depending on whether the market is formal or informal.

Officially, one dollar is equivalent to 24 Cuban pesos for state companies and 120 for individuals or tourists. However, on any corner it is possible to exchange it for 350 Cuban pesos in the large parallel market, the only space where it can be purchased.

According to economist Pérez, in 2018 50% of the money in circulation was in the hands of the population and the rest in financial entities. By 2022, according to the latest information available, 70% was in the wallets of individuals.

Cuban monetary authorities did not respond to a request for comment from the AP on the specific situation.

As part of the complex Cuban monetary system, the authorities also established the MLC or freely convertible currency a few years ago, a virtual currency in parity with the dollar that is used through a special debit card and that is used to access products such as food. in state businesses. To fill gasoline, there is even another type of plastic.

However, some businesses, especially individuals, simply refuse to accept the cards.

Added to all this is inflation, which means that more and more bills are needed to buy a product. Officially, the price increase was 77% in 2021; 39%, in 2022, and 31% in 2023, but for citizens these figures barely reflect reality: in the informal market, inflation reaches three digits; while the monthly state salary ranges between 5,000 and 7,000 Cuban pesos (between 14 and 20 dollars in the parallel market).

“Living in an economy that, in addition to having several currencies, several exchange rates, has three-digit inflation is quite complicated,” Cuba expert and professor at the Javeriana University of Cali, Pavel Vidal, told the AP.

Inflation and product shortages began to be gradually noticed since 2021, when the authorities imposed a reform to eliminate the dual currency that existed at that time. This happened while the economy was paralyzed by the COVID-19 pandemic, especially in key sectors such as tourism.

The US sanctions once morest Cuba, imposed to pressure a change in the political model, also hit the Caribbean nation, even making everything it buys abroad more expensive. The island reported losses of $4.8 billion between March 2022 and February 2023 due to the North American embargo, a very significant figure for its finances.

In addition, families usually complete their food and hygiene needs with the increasingly scarce products from the supply book – which is subsidized by the government – ​​and with the remittances sent to them by relatives abroad, but those dollars They are exchanged for Cuban pesos on the street and not in the banks.

The difficulty in obtaining cash even extended to dollars – which are not obtained at ATMs, but rather at the counter, as long as you have accounts in that currency -, which mainly affects representations, firms and businessmen.

The official argument is that the country is not receiving the necessary amount of foreign currency either, remittances end up in the parallel market and exports or key sectors such as tourism have not rebounded, while the few funds that come in are used to purchase food and fuel to generate energy.

But for now, people remain concerned regarding getting the cash they need.

“There is no money, the ATMs are broken,” designer Idelsy Rodríguez, 62, recently complained outside a bank branch, recounting how she perceives the phenomenon. And, she added, “when they put money in, it’s not much.”

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Andrea Rodríguez is on X as www.twitter.com/ARodriguezAP

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