Cuba's Currency Market Overhaul: An Elusive Promise

The Cuban economy, beleaguered by a myriad of simultaneous crises, remains stagnant in making decisive strides toward one of its most frequently reiterated economic commitments: restructuring the currency market. Initially slated for an imminent rollout in 2025, the introduction of a floating exchange rate now appears to be in limbo, ensnared in a web of political promises, structural realities, and mounting social pressure.

Official Optimism Turns to Caution

During the IX Congress of the National Association of Economists and Accountants of Cuba (ANEC) held last week, Cuba's Minister of Economy and Planning, Joaquín Alonso Vázquez, suggested that the timeline for change will be extended. Although Prime Minister Manuel Marrero had announced a profound overhaul of the currency market by December 2024 with the implementation of a "floating rate," Alonso Vázquez recently adopted a more cautious tone.

"Alternatives are being analyzed," stated Alonso Vázquez, emphasizing that "the government must minimize risks," without providing further specifics. He acknowledged that there are already "defined actions for each stage," but warned that "the risk is high."

He stressed that any measure in this area must ensure that the exchange rate does not skyrocket, which is particularly challenging in a context of currency shortages and low product availability. These statements uncovered a critical issue: without boosting production and supply, any change in the currency system is doomed to fail. The ongoing currency crisis is directly tied to the "lack of production and supply of goods in the country," he noted.

Three Exchange Rates and a Monetary Maze

Currently, Cuba's economy operates with at least three official and parallel exchange rates: one for legal entities (usually state enterprises), another for individual transactions, and a third informal rate where most of the actual currency exchanges occur. Rather than promoting efficiency, this multiplicity of rates creates dangerous fragmentation.

"The dollar has become a mechanism of interconnection, leading to a partial dollarization of the economy," admitted the minister. He added that "to correct these currency distortions, it is necessary to link the rates through foreign currencies," which he used to justify the growing dollarization.

"We have no choice but to move toward a partial dollarization, though the ultimate goal remains dedollarization. This we reiterate," he emphasized. The impact of this "distortion" is tangible: state companies like ETECSA or Legal Consultancy charge services in foreign currency at a rate of 1 USD = 24 CUP.

Meanwhile, in banks and Currency Exchange Houses (CADECA), the state buys foreign currency from the population at 120 CUP per dollar. In the informal market, where most real transactions take place, the dollar is currently sold for an average of 378 CUP, according to the most recent rate published by elTOQUE. This disparity particularly affects public sector employees and individuals without access to remittances, deepening economic inequality.

The coexistence of these rates has turned Cuba's monetary system into an almost impenetrable labyrinth.

Floating Exchange Rate: A Mirage?

The promise of a floating exchange rate for 2025 was one of the key announcements at the end of 2024. According to the information released at the time, this would function through CADECA and banks, with its value updated daily. However, several economists questioned the novelty—and potential contradiction—of implementing this model under the country's current conditions.

Economist Pavel Vidal, speaking to the independent outlet elTOQUE in December, warned that this would be the first time Cuba, with a historically centralized economy, attempts a daily currency float. Nonetheless, fundamental questions arose: How can a rate "float" if the only authorized actor in the currency market is the state itself?

For many analysts, the proposal is more about a "price mechanism with some variability, but administered by the government," as revealed by the same outlet in another analysis published this week. The goal would not be the free formation of prices, but to compete with the informal market and attract foreign currency currently circulating outside the institutional system.

Expert Voices and Non-State Alternatives

Economist Miguel Alejandro Hayes has been unequivocal: "the floating rate announced by Cuba will not replace the informal currency market." In the same vein, Mauricio de Miranda, also cited by elTOQUE, pointed out that "a currency market does not have to be exclusively state-run." In fact, in many countries, private exchange houses operate under regulation, pay taxes, and contribute to the formal economic ecosystem.

For De Miranda, incorporating the private sector into currency markets could be a viable solution if clear rules are established and institutional functioning is guaranteed. "The main obstacle," he asserts, "is the state's own vision. The Cuban government's economic policy, for decades, has prioritized absolute control and monopoly over all economic aspects."

He concludes: "As long as that vision does not change, any currency adjustment risks being a mere mirage amidst the crisis."

Promises Stuck in Limbo

The long-awaited reorganization of Cuba's currency market, far from being imminent, faces numerous structural, ideological, and technical challenges. While authorities continue to insist that "actions are defined," the population remains trapped in a monetary system that penalizes work in pesos and rewards access to foreign currency.

The issue is not just the exchange rate but an entire economic model that has yet to reconcile state control with efficiency, centralism with diversity, and planning with market reality. Until this dilemma is resolved, the promised floating rate seems destined to remain a mere illusion.