The Cuban government announces an ‘exchange scheme’ to sell foreign currency… to whom?

The Minister of Economy and Planning of Cuba, Alejandro Gil Fernándezannounced the implementation of a new experiment for “gradually establish a selective exchange scheme for the sale of foreign currency to national state and non-state suppliers, agreeing with them production levels and prices for their commercialization in Cuban pesos“, published the official portal Cubadebate.

Gill admitted that “there is a missing piece in the design”, the sale of foreign currency to the populationand that “there is a gap between the official and the informal exchange rate of 1×125”, but left ordinary Cubans out of the new equation presented to the National Assembly of People’s Power.

“It is not true, nor can we draw the conclusion a priori that the informal exchange rate is the equilibrium exchange rate of the economy. This is a very finite market in terms of transactions. This market does not have as its supply the main income of the country that they come from nickel and tourism, nor does it have as a demand the main (imports) of the country, fuel, food, etc. It is a very restricted market to draw the conclusion that this is the exchange rate that gives balance to the economy of the country. country,” he said.

According to the minister, they also do not have to “go out and sell foreign currency at 125 pesos. That is not the exchange rate that balances the economy”.

“We have to manage somewhere in the middle. In a selective and gradual way we have to take the steps to generate a secondary scheme“, he insisted.

We don’t call it the foreign exchange market. This is a secondary currency allocation scheme in which it can be sold to state and non-state economic actors at an exchange rate higher than 24, but lower than the informal one, which will allow us to support productions that will later be sold to the population in national currency“, said the defender of the stores in Freely Convertible Currency (MLC).

According to Gil, this process will start with products of high demand in the country and it will allow progress to, later, “restore the sale of foreign currency to the population.”

However, he clarified that the latter “is not today, nor tomorrow.” As it has justified with the questioned stores in hard currency, the Government will concentrate “on delivering products and how to guarantee the country’s sustainability.”

This secondary scheme, “which will be implemented selectively and gradually, will be conducted administratively to the extent that we can expand the entry of more economic actors. Going down that path, increasing the offer in national currency, the collection of liquidity, and advancing in the monetary balance of the countryGil Fernandez said.

He described the measures as “bold, innovative” and aimed at “objectively facing the complexities.” He placed the hope of recovery in the new “strategy”, although he attributed the speed to “external factors”.

Inflation in Cuba, marked by the need for MLC or foreign exchange to get everything from plane tickets and household appliances to basic necessities such as foodwas aggravated by the economic reforms applied at the beginning of 2021, which notably limited the purchasing power of Cubans.

Another measure that affected the value of the Cuban peso was the ban on the sale of dollars at airports.the only place where the State offered this service for official exchange (1×24) until the middle of last year for those traveling abroad.

At the beginning of this year the Bloomberg companyspecialized in financial matters, rated the Cuban peso as the most depreciated currency in the world in the period between January 1, 2021 and January 5, 2022.

The period analyzed by Bloomberg is precisely that of application in Cuba of the Ordering Taskone of whose purposes, according to the authorities, would be to revalue the role of the Cuban peso.

However, the maelstrom of economic measures that involved monetary and exchange rate unification, the increase in the wage bill, the fiscal deficit, and planned inflation, among others, were an announced economic failure that instead of improving the lives of Cubans has plunged them into worse privations.

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