Editor’s note: The following is a lightly editid opinion feature taken from Prensa Latina’s website.
Monetary and exchange unification is a necessary condition at present, although it is not enough to reorder and update Cuba’s economy, according to experts.
In that regard, Yolanda Garcia, director of Economic Studies at the Central Bank of Cuba (BCC), said that the current situation cannot be ignored, including the impact of the coronavirus pandemic, the tightening of the blockade imposed by the United States, and the origins of monetary and exchange duality in the country.
She recalled, in statements quoted by Granma newspaper, that in the 1990s, the demise of the Union of Soviet Socialist Republics and the disintegration of the socialist camp strongly hit Cuba.
Between 1989 and 1993, Cuba’s gross domestic product dropped nearly 35 per cent, fuel consumption decreased to less than 50 per cent, and foreign trade shrank more than 80 e, she pointed out.
At the same time, she added, the Washington-imposed economic, commercial and financial blockade was tightened, thus reducing the supply of products in retail markets and creating strong monetary unbalances.
That way, Garcia explained, the Cuban peso lost its purchasing power and its functions as an exchange currency, a store of value and unit of account, thus facilitating the conditions for a de facto dollarisation in the informal market.
Granma recalls that in light of that situation, a group of measures were taken in Cuba to reactivate the national economy, reincorporate it into the international market, and deal with major macroeconomic unbalances.
However, Garcia underlined that dollarisation never reached the entire economy because salaries, social security and assistance, services, regulated products, among other activities, continued to be charged in Cuban pesos.
Later, in 2003 and 2004, the level of economic recovery allowed the Government to withdraw the US dollar from circulation and replace it with the Cuban convertible peso. Since then, two national currencies have coexisted in the commercialisation of products — the Cuban peso (CUP) and the Cuban convertible peso (CUC) — thus creating a monetary duality.
In 2011, after the approval of the Guidelines of the 6th Congress of the Communist Party of Cuba, unification was established as part of the process to achieve the country’s monetary ordering.
Ian Pedro Carbonell, an expert with the General Directorate of Economic Policies at the BCC, said that the monetary duality causes underlying problems that must be solved soon. In that regard, Carbonell mentioned the monetary and exchange duality, which establishes different exchange rates among the national currencies, and between them and foreign currencies, thus generating distortions in the entrepreneurial sector and in the way people interact.
BCC expert Karina Cruz noted that an ideal environment for the country’s monetary reordering is the stability of the national currency, under the premise of guaranteeing money-issuing processes in tune with the evolution of the real or the productive economy.
Therefore, she noted that a favourable scenario for the Cuban pesos to comply with its functions and to preserve the macroeconomic balances would imply an exchange rate close to the demand and supply of hard currencies; the existence of clear rules for monetary issuing, and the discipline between revenues and expenditures of the Government (control of the public debt), among other variables.