What Lies Ahead for Cuba's Freely Convertible Currency (MLC)?

The independent outlet elTOQUE has raised a significant question regarding Cuba's domestic economy: What is the immediate future of the Freely Convertible Currency (MLC)? Through its Cuba Money and Finance Observatory (OMFi), the outlet has scrutinized economic indicators, signals, and increasing rumors about a potential shift or elimination of this controversial virtual currency.

Since late 2024, whispers about the possible elimination of the MLC have been gaining traction among Cubans. Although officials have claimed that retail and other services in this currency will continue, the increasing number of stores operating solely in U.S. dollars has triggered alarm. elTOQUE notes this shift has induced "a certain panic among many people who have seen depreciation in their accounts of what is also known as the bank dollar."

The Decline of MLC: Insights from the Informal Market

According to OMFi reports, while partial dollarization has benefited specific sectors, it has also exacerbated inequality. "Partial dollarization provides liquidity and financial stability to certain sectors and markets but also leads to segmentation and greater inequality," the analysis states. This trend has heightened demand for strong currencies like the dollar and euro, contributing to the MLC's diminishing value.

"The reduced interest in holding or purchasing MLC and Cuban pesos is causing a decrease in their demand on the informal exchange market, which influences their continued depreciation," warns OMFi. Even those paid in MLC have been negatively affected. The Observatory reveals that in March 2025, the MLC lost 3.5% of its value compared to the Cuban peso and 7.6% against the U.S. dollar.

Behavioral Shifts: From Saving to Selling

This economic landscape has prompted a shift in the public's financial behavior. elTOQUE reports that after a period characterized by heavy MLC purchases to capitalize on price advantages for products like cigarettes, now "the number of people looking to offload or sell MLC at current market prices has increased." The depreciation of this currency has turned what was once a valuable asset into a less reliable resource, particularly as access to dollar-based stores has expanded for those receiving remittances or holding foreign currency.

Predictions for April 2025

elTOQUE, through OMFi, has crafted specific forecasts for currency behavior in the informal market for April. The dollar and euro are expected to appreciate between 2.5% and 4.8%, while the MLC might continue its decline to levels of 262 – 255 CUP per 1 MLC. In contrast, the dollar may settle between 364 and 372 CUP, and the euro between 370 and 377 CUP. These predictions highlight the mounting pressure on the MLC, whose purchasing power is eroding against inflation and the market's preference for hard currencies.

Transformation or Elimination?

Despite rumors and depreciation, elTOQUE's analysis tempers the notion of an immediate disappearance of the MLC. "The presence of MLC stores - some even with increased national product supply in recent days - suggests that, for now, the MLC will not vanish," the report states. However, OMFi's recommendation is clear: "maintain savings in foreign currencies" as a key strategy to safeguard money's value amidst the continuous rise in goods and services costs.

External Factors and Internal Uncertainties

elTOQUE's analysis extends beyond internal dynamics. It warns that international factors, such as a potential trade war driven by the Trump Administration, could add extra pressure on Cuba's economy, although "in the current domestic crisis, other factors like sanctions, internal inefficiencies, and the dysfunctional state model will remain more decisive." Internal inflation, though lower year-over-year, remains high. The analysis notes this has led to reduced purchasing power for wages and pensions, pushing more families into poverty. Simultaneously, the majority of dollar-based offerings—accessible only to those receiving remittances or holding foreign currency—leave many Cubans out of the formal consumption system.

Forecasts Tied to Political Shifts

Finally, OMFi emphasizes that its forecasting models are contingent on potential changes in Cuban government economic policy and the evolution of U.S. sanctions. "The forecasts are subject to the implementation of new measures and regulations associated with the transformations the Cuban government seeks to apply," the report cautions. A shift in sanctions policy or new reforms in the monetary system could introduce even more volatility in the coming months.

The economic landscape described by elTOQUE and OMFi reveals that the MLC, far from vanishing immediately, continues on a slow path of depreciation and loss of significance. Its future will hinge on both internal decisions and external pressures. Meanwhile, Cubans continue to navigate an increasingly dollarized system where inequality and uncertainty govern daily life.