During a session at the National Assembly, leader Miguel Díaz-Canel strongly defended the partial dollarization of Cuba's economy as a necessary measure in response to the country's severe economic turmoil. "To navigate this crisis, we had no choice but to partially dollarize the economy," he stated on Friday, using a euphemism during his speech at the closing of the National Assembly's session.
He also acknowledged that this decision has further exacerbated social inequalities across the island. "This undeniably benefits those with certain capital resources or who receive remittances, leading to an undesirable widening of social inequality gaps," the regime's leader added.
Díaz-Canel painted a bleak picture of the Cuban people's living conditions, which have deteriorated further under his administration, without accepting any accountability. "The heavy reliance on imports and the cross-cutting effects of the unstable national power grid cause a significant slowdown or halt in economic activities, resulting in a deficit in goods and services available to the population and a contraction in exports," he explained.
He continued, "As a consequence, the importation of essential food items and fuels necessary for electricity generation and economic operations is restricted." Additionally, he mentioned the "limited availability of medicines and the reduction in services such as transportation, solid waste collection, and water supply, among others, which shape the harsh reality our people face daily."
To address inequality, Díaz-Canel suggested, "We must enhance the effectiveness of the state's redistributive social function," yet did not specify how his administration plans to succeed where it has previously failed.
Partial Dollarization and Its Implications
In February, the regime's decision to partially dollarize the economy ignited a heated debate over its political and economic repercussions. While authorities argue that the move is essential to improve foreign currency availability and curb illegal circulation, critics like economist Pedro Monreal believe it serves more as a political control strategy rather than an economic necessity.
Since the official announcement at the National Assembly of the People's Power (ANPP), Prime Minister Manuel Marrero Cruz justified the partial dollarization by pointing out that "foreign currencies are circulating illegally within society" and that the decision aims to allow the government to control these currencies for the public good.
However, Monreal contended that this policy is not an unavoidable necessity but a choice made by the government to reinforce the state's economic power and exclude other market participants. Faced with a desperate need for foreign currency, the government has implemented several emergency measures, such as the increasing number of stores operating exclusively in dollars and the steep hike in telecommunications service fees.
Understanding Cuba's Economic Dollarization
Why did Cuba decide to partially dollarize its economy?
Cuba's government claims the partial dollarization is necessary to address severe economic challenges by improving foreign currency availability and controlling its illegal circulation within the society.
What are the consequences of partial dollarization in Cuba?
Partial dollarization has resulted in increased social inequalities, as it favors those with access to foreign currency through resources or remittances, widening the gap in social disparities.
What criticisms have been raised against Cuba's dollarization strategy?
Critics argue that the partial dollarization is more about consolidating the government's control over the economy rather than addressing economic needs, as it excludes other market participants and strengthens state power.