This Tuesday, November 5, 2024, the informal currency market in Cuba registers a new rise in the value of the US dollar (USD), according to elTOQUE.
The new estimates place the average price of the US ticket at 327 CUP, increasing 1 CUP in the last 24 hours.
Meanwhile, the euro (EUR) remains at 345 CUP and the Freely Convertible Currency (MLC) is currently anchored at 265 CUP, according to the latest data from elTOQUE.
This adjustment reflects the high demand for foreign currency in the country and has profound consequences for Cubans, especially for micro, small and medium-sized businesses (MSMEs), which largely depend on these currencies to operate.
Impact of the rise in currencies on prices and the daily economy
The sustained increase in the price of the dollar has a direct impact on the cost of living in Cuba, where MSMEs are forced to acquire inputs in foreign currency due to the limitations and limited supply of the formal market.
Private companies, which have grown in number in recent years, depend on the informal market to access the raw materials and products necessary to maintain their operations.
Since these purchases are usually made in dollars or euros, any increase in exchange rates generates an increase in operating costs, which are then passed on to the final prices faced by consumers.
In this context, essential products and basic services in the hands of the private sector – from food to hygiene items or transportation – have experienced continuous increases, which seriously affects the purchasing power of the population.
Inflation in the country, driven by these fluctuations in the informal currency market, continues to hit the pockets of Cubans. Those who are forced to allocate a greater proportion of their income to basic necessities.
Restrictions of the formal market and dependence on the informal market
The situation also highlights the difficulty that authorities face in stabilizing the economy. Despite attempts to regulate the official exchange market, the shortage of foreign currency in formal financial institutions continues to force citizens and businessmen to turn to the black market to obtain foreign currency.
The exchange rate in the informal market, well above the official one, signals the inability to satisfy the growing demand for dollars, euros and MLC, accentuating the dependence on informal rates.
In this context, MSMEs, like citizens who need foreign currency to purchase basic products in MLC stores, are trapped in a circle of economic dependence that continues to weaken the Cuban peso and raise the cost of products and services throughout the country. the economy. The one who suffers the most is the Cuban who does not receive remittances or receive his salaries in foreign currency.
Current equivalents of each currency in CUP
To facilitate understanding of the impact of the current exchange rate, detailed equivalences in Cuban pesos (CUP) are presented below:
US Dollar (USD) to CUP:
- 1 USD = 327 CUP
- 5 USD = 1,635 CUP
- 10 USD = 3,270 CUP
- 20 USD = 6,540 CUP
- 50 USD = 16,350 CUP
- 100 USD = 32,700 CUP
Euro (EUR) and CUP:
- 1 EUR = 345 CUP
- 5 EUR = 1,725 CUP
- 10 EUR = 3,450 CUP
- 20 EUR = 6,900 CUP
- 50 EUR = 17,250 CUP
- 100 EUR = 34,500 CUP
MLC and CUP:
- 1 MLC = 265 CUP
- 5 MLC = 1.325 CUP
- 10 MLC = 2.650 CUP
- 50 MLC = 13,250 CUP
- 100 MLC = 26,500 CUP
Prospects for the informal market and the future of the Cuban economy
The rise in informal market exchange rates could be just a sign of a deeper situation. Recent fluctuations in the dollar and euro could lead to further price increases in sectors such as food, transportation and basic necessities. Directly affecting MSMEs and citizens who must face prices in national currency.
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**Interview with Economic Analyst Juan Pérez on the Rise of the US Dollar in Cuba**
**Interviewer:** Thank you for joining us today, Juan. The informal currency market in Cuba is seeing a significant rise in the value of the US dollar, reaching an average price of 327 CUP. What do you think is driving this increase?
**Juan Pérez:** Thank you for having me. The increase in the dollar’s value can largely be attributed to the high and persistent demand for foreign currency in Cuba. This demand is fueled by a variety of factors, including the limitations of the formal currency market and the growing needs of micro, small, and medium-sized enterprises (MSMEs) that rely heavily on foreign currency to operate.
**Interviewer:** You mentioned MSMEs play a crucial role in this context. Can you explain how fluctuations in the informal exchange rate impact them and the overall economy?
**Juan Pérez:** Absolutely. MSMEs often need to purchase raw materials, many of which are only available in foreign currencies like the dollar or euro. When the exchange rate goes up, their operating costs increase, and they then pass these costs on to consumers through higher prices. This creates a cycle where essential products and services become increasingly expensive, straining the purchasing power of the average Cuban.
**Interviewer:** The report mentions that essential goods and services in the private sector are witnessing continuous price increases. How is this affecting everyday life for the citizens?
**Juan Pérez:** The impact is severe. Inflation, driven by rising exchange rates, means that people are spending a larger portion of their income on basic necessities. Items that were once affordable are becoming luxuries, forcing families to make difficult choices. There’s a palpable sense of frustration among the population as they struggle to maintain a decent standard of living.
**Interviewer:** Given the challenges presented by the informal market, what do you think the Cuban authorities can do to stabilize the economy?
**Juan Pérez:** It’s a challenging situation, to say the least. The authorities need to develop strategies to increase the supply of foreign currency in the formal market, which could help stabilize exchange rates. Additionally, implementing policies that promote local production and reduce dependency on foreign imports could diminish the reliance on the informal market. However, this requires careful planning and resource allocation.
**Interviewer:** Looking ahead, what should citizens and businesses brace for in terms of the economy?
**Juan Pérez:** Unfortunately, if the current trends continue, we may see ongoing inflation and instability in the purchasing power of the Cuban peso. Citizens should prepare for potential price hikes on essential goods and understand that they may need to budget more carefully. MSMEs will need to adapt their strategies to cope with rising costs, potentially looking for innovative ways to source materials or adjust services available to consumers.
**Interviewer:** Thank you, Juan, for your insights on this pressing issue. It’s clear that the effects of these currency fluctuations are deeply felt throughout the Cuban economy.
**Juan Pérez:** Thank you for the opportunity. It is crucial for us to keep discussing these issues, as awareness is key to finding solutions.
