{"id":268191,"date":"2023-04-16T06:24:43","date_gmt":"2023-04-16T10:24:43","guid":{"rendered":"https:\/\/oncubanews.com\/en\/?p=268191"},"modified":"2023-04-16T06:24:43","modified_gmt":"2023-04-16T10:24:43","slug":"dollar-yes-dollar-no-dollar-yes","status":"publish","type":"post","link":"https:\/\/oncubanews.com\/en\/cuba\/dollar-yes-dollar-no-dollar-yes\/","title":{"rendered":"Dollar yes, dollar no, dollar yes: In the end, what is convenient?"},"content":{"rendered":"

The use of the United States dollar in the Cuban economy has an interesting path: it was allowed for a while, then it stopped working; after a period, it is accepted again, then it is prohibited and so on\u2026. As the saying goes: \u201cone step forward and one backwards.\u201d<\/span><\/p>\n

A life saver in the 1990s<\/b><\/p>\n

It should be remembered that the dollarization process of the Cuban economy since its inception in 1993 served as a stabilization mechanism in the face of the impact of the external shock that caused the disappearance of ties with the former European socialist countries and the mainly USSR.<\/span><\/p>\n

Since that year, the use of the dollar throughout the Cuban economy contributed directly to the consolidation of recovery trends in some areas, since it fostered a new source of income for the country, only surpassed by tourism at that time.<\/span><\/p>\n

For example, the sales of the so-called Currency Recovery Stores (TRD) in dollars in 1993 represented 13.2% of the total exports of goods and services in Cuba, but in 2001 these already amounted to 23.2%. That is to say, it had a decisive participation for the State to fulfill its commitments in foreign currency.<\/span><\/p>\n

The main component of the circulation of dollars in Cuba were family remittances, mostly from the United States. That allowed the growth of the retail market that operated in currencies that, according to estimates, were more than 3 billion dollars at its peak.<\/span><\/p>\n

Dollarization: the positive side<\/b><\/p>\n

The increase in transactions in dollars allowed the resuscitation of the productions of several national industries, light, food, packaging, among others. Thus, the sales of domestic products in these stores increased from 170 million dollars in 1996 to more than 576.5 million in 2000, which made it possible for the presence of national products to go from 29% to 51.2% of total store sales. For this reason, it was considered that dollarization had had a positive balance in the national economic performance.<\/span><\/p>\n

But in 1995 a simile of the dollar began to be issued, which was the convertible peso (CUC), and this created certain conditions in the monetary order to start the de-dollarization process; that is, the beginning of the creation of conditions to replace the free circulation of the dollar.<\/span><\/p>\n

The de-dollarization that was proposed at the end maintained a monetary system characterized by duality. In this sense, the possibilities of being able to implement the full convertibility of the Cuban peso evidently required much more time, since the structural restrictions were maintained, that is, the structural imbalances of the Cuban economy.<\/span><\/p>\n

\"Photo:
Photo: Granma\/Archive.<\/figcaption><\/figure>\n

And the CUC arrived<\/b><\/p>\n

In 2004, Resolution 65 of the Central Bank of Cuba was approved, through which the mandatory use of the convertible peso was introduced in the transactions of Cuban enterprises. And on December 29, 2004, Resolution 92 was approved, which establishes even more rigid regulations in the management of foreign currency income by enterprises.<\/span><\/p>\n

Subsequently, through Resolution 80 of 2004, the Central Bank of Cuba prohibited accepting the USD for cash payments, and it was replaced as of November 8 by the CUC, with which it had lived until then. The possession of dollars remained legal on the island.<\/span><\/p>\n

The measure was a widespread application that affected shops, hotels and restaurants. The only exception was the tourist destinations, where the acceptance of euros was to be maintained, restricted to places where it was previously accepted, such as in Varadero. With this decision the cycle of measures aimed at promoting the de-dollarization of the Cuban economy was completed.<\/span><\/p>\n

On October 25, 2004, the ban on the circulation of the USD on the island was officially announced. As of November 8, 2004, only \u201cconvertible pesos,\u201d which equaled the value of the dollar, could be used.<\/span><\/p>\n

CUC without backing: a big problem<\/b><\/p>\n

The elimination of the circulation of the dollar at that time left open essential questions, such as the fact that a dual monetary and economic system was maintained, and that the exchange rate of 1 for 1 was an overvaluation of the exchange rate. In addition, there was the anchor of the convertible peso to the dollar. But in the end, the conditions that were set for the issuance and circulation of the CUC were not respected, which was to maintain its value against the withdrawing USD.<\/span><\/p>\n

It is not correct to say that dollarization ceased to exist when the CUC began to circulate, because initially it had its backing in dollars. What should not have happened was the issuance policy irresponsibly adopted by the Cuban government, since many times more CUCs were issued than the real backing in dollars.<\/span><\/p>\n

Its nominal value exceeded, according to specialists, more than four times its effective backing in foreign currency. This led to a shortage of supplies in CUC stores. Without foreign currency to back them, there were no imports because the debts to the suppliers of the stores were not paid.<\/span><\/p>\n

\"Photo:
Photo: Otmaro Rodr\u00edguez\/OnCuba Archive.<\/figcaption><\/figure>\n

And the MLC arrived<\/b><\/p>\n

On February 6, 2020, in an <\/span>official appearance by the Minister of the Economy<\/span><\/a> in relation to the newly opened stores selling in freely convertible currency (MLC), he stated the following: \u201cIt is a measure that benefits all the people, independently that the fact that not all the people can have access to the freely convertible currency and buy these products in stores, but these currencies captured by the country, due to its socioeconomic system, are reverted to the benefit of the population.\u2026 It is a measure that does not affect anyone and benefits everyone.\u201d<\/span><\/p>\n

The MLC was the denomination that the Cuban government established to treat as \u201cfreely convertible currency\u201d; what pundits began to call the \u201cbank dollar.\u201d<\/span><\/p>\n

The <\/span>sale<\/span><\/a> of \u201cmedium and high\u201d range food and toiletries products in freely convertible currency expanded as of July 20, 2020 in certain establishments and shopping centers belonging to Tiendas Caribe and Corporaci\u00f3n Cimex stores.<\/span><\/p>\n

At the <\/span>Mesa Redonda TV program on July 16 of 2020<\/span><\/a>, Ana Mar\u00eda Ortega, general director of Tiendas Caribe, stated that of the more than 4,800 existing points of sale, only 72 would offer this service in MLC, implemented as part of the <\/span>new measures<\/span><\/a> to cope with the crisis.<\/span><\/p>\n

Where could funds be obtained for these accounts?<\/span><\/p>\n

Individuals\u2019 bank accounts in USD could receive funds through:<\/span><\/p>\n