Foreigners Pay for Beer in Dollars, Benefits Allegedly for the People: Cuba's Economic Strategy

Joaquín Alonso Vázquez, Cuba's Minister of Economy and Planning, recently defended a novel framework for currency management and allocation on state television, illustrated through a practical example.

During the state-sponsored Roundtable, Alonso Vázquez detailed a scenario where a foreign visitor wishes to purchase a beer at a private establishment but lacks Cuban pesos. He explained that while the foreigner can pay in dollars, these funds must ultimately be deposited into banks, converted into pesos, and used to bolster the state's budget. This, according to him, ensures that "these resources are also redirected to the broader population."

"A foreigner arrives wanting a beer but has no pesos. They have two options: exchange dollars at the market for pesos or, more conveniently, the economic entity accepts dollars at the exchange rate set by the Central Bank of Cuba and receives the dollars in cash," he described.

He elaborated, "However, that entity isn't part of the economy's partial dollarization and lacks a foreign currency account. Hence, the dollars are taken to the bank and credited in pesos at the applicable exchange rate for that economic segment."

The minister acknowledged that, given current circumstances, entities might prefer the informal market rate. However, he labeled this market as "fictitious," claiming it fosters illegality and price inflation. The new regulations, he asserted, aim to "normalize," "stabilize," and adjust the currency market.

Alonso Vázquez stressed that the system's purpose isn't to "dollarize the economy" but to delineate who can transact in foreign currency, regulate legitimate access to it, and enhance governmental control over these flows.

This system was enacted through Decree-Law 113 by the Council of State and is governed by resolutions from the Ministry of Economy and the Central Bank of Cuba (BCC).

Limited Access to Foreign Currency Transactions

Alonso Vázquez clarified that the regulations specify which entities are permitted to transact in foreign currencies. Those without authorization are barred from such operations.

For those needing foreign currency for travel, the minister explained that they must convert their money at the market.

He contended that the system is designed to facilitate a "feasible and viable revival" of the economy—both production and services. However, he emphasized that acquiring the necessary foreign currency requires exporting, forming economic linkages, trading in the Mariel Special Development Zone, and creating a financial network to mobilize existing reserves.

Authorized sources of foreign currency include exports, electronic commerce with external payments, credits and financing, pre-financing, donations, international organization funding, transactions in the ZED Mariel, electronic payments among entities, sales to foreign currency traders, centralized allocations, and other sources defined by the competent authority, leaving room for future opportunities.

He noted that the system "does not discriminate based on ownership type" and encompasses state entities, small and medium-sized enterprises, cooperatives, self-employed individuals, farmers, artists, as well as foreign or mixed legal entities and local or cooperative projects, all within the established regulatory framework.

Finally, Alonso Vázquez asserted that the policy is a "sovereign" decision aimed at solving economic issues, organizing foreign currency access, and "disciplining" economic actors. He emphasized that essential services for the population "remain in Cuban pesos," with the ultimate goal being the complete "de-dollarization" of the economy.