The Cuban Minister of Economy Declares War on the Informal Exchange Market. Who Will Win?

14ymedio, Elías Amor Bravo, Valencia, 4 August 2022 — Finally, what was promised has been fulfilled. On July 21, Minister of Economy and Planning Alejandro Gil announced in the National Assembly a set of measures that, in his opinion, “within socialism will serve to strengthen the economy.” And yesterday, on State television’s Roundtable program, together with the president of the Central Bank of Cuba, he confirmed one of the measures that had aroused the most interest, the implementation of an exchange market for the purchase and sale of foreign currency to the population with an “economically grounded exchange rate and where we can work with all currencies, including dollars in cash.”

In the words of the minister, “it’s expected that one of the main benefits will be the possibility for Cubans and travelers to be able to exchange currencies at a more attractive exchange rate and not have to go to an illegal market.” The minister has declared war on the informal exchange market. Who will win?

There’s no doubt that there is interest in knowing how this new foreign exchange market is going to be launched, with what exchange rate, and what effects the measure will have on the battered Cuban economy.

After explaining the differences between the secondary currency allocation scheme (implemented last May for food and manufacturing) and the foreign exchange market that is now intended to be launched, the minister gave the scoop of the night, announcing that today, August 4, mark this date, the foreign exchange market will begin to operate, at the official exchange rate of 1:120 in the upper band of the informal market. A devaluation of the peso with the dollar of 400%.

At the moment, the state exchange market starts with the purchase of foreign currency by the State, including the cash dollar. Later, the sale of foreign currency will begin, but it won’t be immediate. The minister acknowledged that work is still being done to create the conditions to do so later at points of the Cadeca exchanges, banks and airports.

Gil believes that the purchase of foreign currency at a higher exchange rate will mean an incentive to sell foreign currency to the State, in what can be understood as the regime’s decision to liquidate the informal market that has been operating since last year. It won’t be easy, and he will soon discover that in an economy there is room for everyone, and that those who focus their activity on meeting the needs of others manage to survive, even in difficult and dark times.

So the communist regime wants to do this immediately with the exchange business of the informal market, and for this, it has decided to...

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