{"id":210761,"date":"2019-12-13T18:38:42","date_gmt":"2019-12-13T23:38:42","guid":{"rendered":"https:\/\/oncubanews.com\/en\/?p=210761"},"modified":"2019-12-13T18:38:42","modified_gmt":"2019-12-13T23:38:42","slug":"quo-vadis-the-currency-collection-stores-in-cuba-and-the-patching-up-of-the-economy","status":"publish","type":"post","link":"https:\/\/oncubanews.com\/en\/opinion\/quo-vadis-the-currency-collection-stores-in-cuba-and-the-patching-up-of-the-economy\/","title":{"rendered":"Quo Vadis? The currency collection stores in Cuba and the patching up of the economy"},"content":{"rendered":"

We already saw how the need arose<\/span><\/a> to implement a partial dollarization of the economy. First, to have the necessary fresh foreign currencies to restock the currency collection stores (TRDs) without waiting for the country’s central liquidity (CL) allocations, nor the fear that CUCs are being collected without full backing in foreign currencies while not having to spend freely convertible currencies for the purchase of products to be sold.<\/span><\/p>\n

The measure also came as a result of the manifest evidence\u2015already pointed out by many economists\u2015<\/span>of the exodus of capital to other countries<\/span><\/a>, increased since the approval of changes in the migration and travel policy. To counteract this practice of exporting capital and importing merchandise that would later be marketed by individuals, as well as the power of the State to obtain benefits, it was also necessary <\/span>to review the pricing policy for this type of sales using debit cards in dollars<\/span><\/a>, applying lower coefficients for purchase prices to form the final sales prices.<\/span><\/p>\n

Otherwise, you could not compete with the prices of individuals, even with all the disadvantages they have to develop this activity compared to the state business apparatus. The measure has been justified as a way to obtain resources to finance or strengthen the national industry.<\/span><\/p>\n

Let’s take a quick look at this goal, not clear enough.<\/span><\/p>\n

First, this assertion comes to reaffirm the above: the CUCs obtained by the national industry, through its sales to the TRDs, or that could be contributed by the national banks or by the Ministry of Economy and Planning, are not backed by foreign exchange. They have become, like the CUP, a currency that is not totally desired or devalued. There are considerable savings in CUC, but if it is not accompanied by CL (control of the liquidity capacity of the country) it does not serve to strengthen the industry with new investments, and even to import raw materials to keep it running at the levels of previous years.<\/span><\/p>\n

Therefore, if the currency market is now in shock, people flock to try to buy those foreign currencies, either through official or alternative channels. If the CADECA exchange houses suspend the sale of foreign currency to the population (as is already known, it is only authorized in international airports and with the pass on board), it is not because these measures have been stipulated for the sale of products through debit cards in dollars and supposedly the population is massively acquiring them to buy products in these stores, but because it is clear\u2015and this is how people interpret it\u2015that the CUCs have been losing the backing they previously had in foreign currencies, and that this new measure is the first in a series of decisions that could lead to the CUC\u2019s gradual devaluation or its disappearance.<\/span><\/p>\n

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Photo: Rafael Alejandro \/ FB.<\/figcaption><\/figure>\n

Many argue that what is happening in the foreign exchange market is \u201cbecause of\u201d the new measure to sell in dollars. But the CUC has actually been losing its value since long before: since its issuance without absolute backing or the indiscriminate use of the foreign currencies captured by the State when the latter are withdrawn from the monetary circulation. The new measure only formalizes the loss of value of the CUC or is the start of its devaluation. Yes: there is a new dollarization of the economy, no matter if it is partial and without the use of cash. It has been imposed by reality, because the national currency created at the time for the foreign exchange market (the CUC) has stopped playing its role.<\/span><\/p>\n

We share the opinion of Pedro Monreal in <\/span>Remesas para la inversi\u00f3n industrial: \u00bfes necesaria una \u2018carambola\u2019 comercial?<\/span><\/a>, in which data is provided on the Cuban industry\u2019s contribution to the GDP. In the absence of official data, investment needs are estimated to be a volume of sales and profits in dollar stores: \u201cthe foreign currencies that could be collected through sales to support the industries,\u201d concludes the author, \u201cwould certainly play a positive role, but very distant from the amounts required to \u2018boost\u2019 the national industry.\u201d<\/span><\/p>\n

But there is also an additional problem to that of the volume of profits to be collected in USD and the needs of the industry: how and for what purposes to channel the foreign currencies.<\/span><\/p>\n

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Photo: AP.<\/figcaption><\/figure>\n

The first products marketed in the new sales channel have been those that had been most imported and sold by individuals, especially in values: electric motorcycles, refrigerators, freezers, air conditioners, splits, washing machines with dryers, flat screen TVs and spare parts for cars. But not of any quality, but of the highest gamut, as explained in the Mesa Redonda <\/em>TV program.<\/span><\/p>\n

In concrete, not a small refrigerator, but those with two doors or larger; neither small screen televisions, but with much larger screens and better technology (LED). The other product gamut would continue to be marketed in CUC. Although in Cuba there are industries that produce electric motorcycles, refrigerators and air conditioners\u2015to name just three examples\u2015it was expected that so far these industries were able to produce goods for a market with lower purchasing power.<\/span><\/p>\n

Then, three possibilities arise:<\/span><\/p>\n