A year after a plan to rescue the Cuban economy from a crisis that overwhelms the island with inflation, dollarization and a growing illegal currency market, the government recognized this Wednesday that the expected results were not obtained, which is why it now promised flexibility of exchange rates based on supply and demand.
The Prime Minister of Cuba, Manuel Marrero, indicated that foreign currency exchange rates may fluctuate, an unusual mechanism in the Caribbean nation, since until now it has been the state that determines a fixed rate.
“The bank is going to come out with an up-to-date rate, it is going to carry out its operations and it is going to encourage people to feel attracted with more confidence to sell their currencies to the banking system because it is competitive,” said Marrero, but without setting dates for this scheme, nor offer details of the flexibility.
This Wednesday, Marrero took stock of the island’s performance in 2024 during the year-end plenary session of the National Assembly of People’s Power, the unicameral Parliament, which opened its sessions – until Friday – with the presence of President Miguel Díaz. Canel and the historical leader Raúl Castro.
“We are dissatisfied that the necessary progress has not been made, especially in those issues that our population demands,” Marrero told the deputies.
In December 2023, after a year in which the Gross Domestic Product (GDP) had decreased between 1% and 2%, the authorities approved a “Plan to Correct Distortions and Reboot the Economy”, but throughout these 12 months The shortage continued and prices in private stores — where the products can be obtained — also grew, without salaries keeping up.
This scenario was recognized by Marrero.
In addition, there were national power outages and daily scheduled blackouts, transportation shortages, long lines to get gasoline, problems with water pumping or garbage collection.
The deterioration of the standard of living caused strong immigration in the last three years. Some 600,000 Cubans were intercepted by US authorities at their borders.
On the island, a carton of eggs with 30 units can be purchased for about 3,400 Cuban pesos – about nine dollars at the informal exchange rate – equivalent to half a doctor’s salary or double some pensions.
Although the official rate is 24 Cuban pesos per dollar in business or government accounting, and 120 pesos per dollar in specialized agencies for citizens, they practically do not sell them because people prefer to buy them on the street, where a dollar is exchange for 325 pesos.
Even though they are offered in Cuban pesos or cards issued on the island, the products in private stores or liberated state stores – which are not part of the supply booklet that the government gives to each citizen – end up being quoted in dollars.
The Cuban model defended by the authorities has been continuously based in recent decades on strong centralization and a monopolistic role of the State in almost all sectors. In the last ten years, a timid opening reform to the private sector began, which is why supply and demand tends to be stigmatized in the Caribbean nation.
The crisis began to hit the island in 2020, a combination of the paralysis of the COVID-19 pandemic, a failed monetary and exchange unification reform and, above all, the increase in United States sanctions pushing for a change of political paradigm.
The losses caused by the North American measures in one year reached 5,000 million dollars, according to official sources, a very significant figure for the island.
In 2020, GDP fell 11%, and in 2021 it barely grew 1.3% and increased another 2% in 2022.
Many of the island’s economic indicators were on the decline in 2024, as emerged this week during the previous work of the commissions of deputies. For example, the strategic tourism sector received only 2.2 million visitors in 2024 out of the 3 million expected and far from the 4.3 million in 2019, it was reported.
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