The US dollar (USD) is trading at 490 Cuban pesos (CUP) on the informal market this Monday, January 19, while the Central Bank of Cuba (BCC) maintains its official rate at 419 CUP.
This 71-peso disparity per dollar represents the widest gap since the introduction of the "exchange rate segments" system in December. It highlights the Cuban regime's monetary policy's complete loss of control over the real value of the Cuban peso.
The euro (EUR) follows a similar pattern, being exchanged at 525 CUP on the streets as opposed to the BCC's official rate of 485.87 CUP. This nearly 40-peso difference also sets a new record, emphasizing the gulf between the regime's economic rhetoric and the actual market behavior.
Illusion of a Floating Market
When the Central Bank introduced its "floating rate" on December 18, it promised to mirror market supply and demand conditions. Yet, a month later, the evidence suggests that this floatation is merely symbolic: the official dollar rate has increased by just 9 pesos over 32 days, while the informal rate has surged by 50 pesos in the same period.
The outcome is a system that isn't floating but rather sinking into distrust. As a result, an increasing number of Cubans disregard the official figures and rely on informal market references, where the dollar and euro are the only truly convertible currencies.
The Central Bank's Charade
Economists consulted by CiberCuba agree that the Central Bank "adjusts" its rates based on political, not economic, considerations. "The BCC is caught between two fears: the fear of acknowledging the true devaluation of the peso and the fear of losing credibility," explained a specialist from Havana.
According to the expert, the BCC's daily increases of one or two pesos are "cosmetic corrections" without backing from actual currency supply. The Central Bank is "floating" in slow motion while the informal market surpasses it by 71 pesos per dollar—a gap that no monetary policy model can sustain without collapsing.
Two Exchange Rates, Two Cubas
The exchange rate gap encapsulates the state of the Cuban economy better than any speech could. On one side, a Central Bank that "manages" unrealistic figures from an office; on the other, a street where supply and demand dictate the true price of money.
The regime may continue issuing statements about CUP stability, but Cubans are aware: the only value that matters is the dollar's street price. With a 71-peso difference, the so-called "floating rate" is nothing more than another lie sinking as the market swims freely.
Understanding Cuba's Currency Discrepancy
Why is there such a large gap between the official and informal exchange rates in Cuba?
The significant gap is due to the Cuban regime's loss of control over monetary policy, resulting in a misalignment between official rates and actual market conditions. The informal market reflects true supply and demand, unlike the politically adjusted official rates.
What impact does the exchange rate gap have on the Cuban economy?
The exchange rate gap undermines confidence in official monetary policies and drives individuals to rely on the informal market for currency transactions, further destabilizing the economy and exacerbating currency valuation issues.
How does the Central Bank's "floating rate" affect Cuban citizens?
The "floating rate" has little effect on everyday life as it is largely symbolic and does not reflect real market conditions. Many Cubans disregard it, favoring the informal market where transactions reflect true currency value.