Cuba’s U.S. cash deposit rule punishes regular folks looking to buy food, basic items
IT’S ABSURD TO IMPOSE MORE COSTS ON A POPULATION THAT’S ALREADY SUFFERING WITH NO FOOD, NO WORK AND NO HOPE OF IMPROVEMENT ON THE HORIZON. Emilio Morales, president of the Miami-based Havana Consulting Group
The Cuban central bank’s decision to temporarily stop accepting cash deposits in U.S. dollars at its banks will make life more expensive for people who receive hard currency through remittances, as they will need to convert the greenback into other currencies, losing a percentage in foreign-exchange and transaction fees.
The monetary authority announced last week that it would temporarily stop accepting cash deposits in dollars, saying that tighter U.S. sanctions are making it difficult to use the currency abroad. The bank is giving Cubans until June 20 to deposit U.S. dollars into their accounts, with the measures taking effect the following day. The bank didn’t say how long the suspension will last.
Bank transfers will still be accepted, and account holders will be able to withdraw funds from their dollar accounts, the bank said. Deposits in other currencies such as the euro, Japanese yen, Canadian dollars and British pounds, among others, will also be accepted.
“We are not penalizing the use of dollars in our economy; what we are doing is just restricting deposits in cash temporarily because it’s very hard for us to make use of those dollars abroad,” Francisco Mayobre Lence, first vice president of Cuba’s central bank, explained on the Mesa Redonda state news show. He also said that due to the sanctions, Cuba must spend money in foreigntransaction fees to convert its cash dollars into other
currencies to be used in international markets.
But as many Cubans rely on dollars they receive through remittances or from visiting family members to buy basic necessities at dollar stores on the island, the central bank is effectively transferring foreign-exchange costs to the population, said Emilio Morales, president of the Havana Consulting Group, a Miami-based firm that analyzes the Cuban economy.
“It’s absurd to impose more costs on a population that’s already suffering with no food, no work and no hope of improvement on the horizon,” Morales said. “This is criminal.”
Cubans increasingly have to live off the remittances sent by their relatives because they can’t make ends meet, but still need to buy food and basic goods that are often only available at hard currency stores. The U.S. embargo and growing inefficiencies in the local economy have emptied shelves at local stores, and long lines to buy food are now commonplace. The
so-called dollar stores are better stocked than establishments that accept only pesos.
With the new measures, Cubans who receive dollarlinked remittances but need cash to use on the island will need to pay commissions and unfavorable exchange rates to convert dollars into euros and other currencies to buy food, medicine and other basic items.
Cuba’s economic situation is by some measures even worse than it was in the early 1990s, during the so-called Special Period after the fall of the Soviet Union. The island is in the throes of its worst economic contraction as the COVID-19 pandemic crushed the tourism industry and Trump-era sanctions significantly reduced access to vital economic lifelines like remittances and foreign investment. The Cuban economy shrank by 11% last year. The government said Cuba’s inclusion earlier this year on the U.S. list of countries accused of sponsoring terrorism only made matters worse.
The suspension of cash deposits comes on the heels of a painful currency reform that unified Cuba’s dual currency system, a measure meant to make the economy easier to navigate for much-needed foreign investors but that has led to punishing inflation for average Cubans.
In January, the government eliminated an artificial hard currency called the CUC, or the Cuban convertible peso, and set the official exchange rate at 24 pesos to the dollar — a devaluation of 2,400%.
The changes set off a spike in inflation, with some prices rising as much as 500%, for instance, in the case of electricity.
Salaries for state employees and pensioners and the minimum salary were raised to make up for the changes, but the price of food, medicine and other goods rose at a much higher pace. And the pay for some of the workforce and in the informal economy hasn’t increased.
The measure may also be an attempt to control the
U.S. dollar’s appreciation in Cuba’s black market, where the greenback has soared in recent months to about 70 Cuban pesos, about triple the official exchange. Demand for dollars rose significantly since the import-dependent country started opening more stores that sell in hard currency last year.
For tourists traveling to Cuba, the new measure means they should keep their U.S. dollars at home as banks on the island won’t be allowed to exchange them into pesos starting June 21, the central bank’s Lence said.
“Starting on June 21, people who are traveling from other countries to Cuba with cash will need to bring currencies other than the U.S. dollar to cover their expenses and operations inside the country,” he said on Mesa Redonda. “We are talking about cash. Tourists will be able to use international cards that are accepted in Cuba with no problems.”
Prepaid travel cards and local cards known as MLC cards, which can be loaded with dollars and other currencies from outside Cuba, will also continue to be accepted, Lence added, underscoring that the only operation that will be suspended for an indefinite time will be cash deposits in dollars.
Cubans who plan to travel abroad and want to withdraw U.S. dollars from their accounts to take on the trip may also need to accept cash in different currencies and pay additional transaction fees if the bank doesn’t have enough dollars available, said the central bank’s vice president Yamile Berra Cires.
“If you have an account in dollars in Cuba and are planing on traveling abroad, you can go to the bank and ask to withdraw a certain amount of money. The bank will provide whatever currency it has available at that moment,” she said during the round table discussion show. “It’s important to make it clear that the bank can say it doesn’t have dollars that day, and tell you to return some other day.”
Small businesses and individuals catering to tourists will also be forced to stop accepting dollars after June 21, unless they decide to keep their cash under their mattresses, Morales said.
“Measures like that make it really difficult for people to make a living; it’s yet another layer of state control strangling Cubans’ entrepreneurial spirit,” he said.