Thursday, July 25, 2024

Cash shortages in Cuba lead to long lines and increased frustration

HAVANA (AP) — Alejandro Fonseca stood in line for hours outside a bank in Havana hoping to withdraw Cuban pesos from an ATM, but when it was almost his turn, the money ran out.

He angrily got on his electric tricycle and traveled several kilometers to another branch where he managed to withdraw some money after wasting the entire morning.

“It shouldn't be too hard to earn hard-earned money,” Fonseca, 23, told The Associated Press in a recent interview.

Fonseca is one of many frustrated Cubans An already complicated monetary system – Lack of cash.

Long lines outside banks and ATMs in the capital, Havana, and beyond begin to form early in the day as people seek cash for routine transactions such as buying food and other essentials.

Experts say there are several reasons behind the shortage, all of which are related to Cuba's deep economic crisis. One of the worst in decades.

Cuban economist and university professor Omar Everleny Pérez says the government's growing fiscal deficit and the lack of banknotes worth 1,000 Cuban pesos (about $3 on the parallel market) are the main culprits. Money to banks.

“There is money, yes, but not in the banks,” Perez said, adding that most of the money is collected not by salaried workers, but by entrepreneurs and small- and medium-sized business owners. Money from business transactions but reluctant to return money to banks.

Perez says this is because they don't trust local banks or because they need Cuban pesos to convert into foreign currency.

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Most of them Entrepreneurs and small business owners Everything they sell or pay for in foreign currency must be imported in Cuba. As a result, many hoard Cuban pesos to later convert into foreign currency on the informal market.

Converting those Cuban pesos to other currencies is another challenge, as the island has multiple, highly volatile exchange rates.

For example, the official rate used by government industries and agencies is 24 pesos to the US dollar, and 120 pesos to the dollar for individuals. However, the dollar can fetch up to 350 Cuban pesos in the informal market.

Perez notes that in 2018, 50% of the money in circulation was in the hands of Cubans and the other half in banks on the Caribbean island. But in 2022, the latest year for which data is available, 70% of money was in the wallets of individuals.

Cuban currency officials did not immediately respond to an email request for comment from the AP.

The cash shortage comes as Cubans grapple with a complex monetary system in which multiple currencies circulate, including MLC, a virtual currency created in 2019.

Then, in 2023, the government announced a series of measures aimed at promoting a “cashless society” – making it mandatory to use credit cards for certain transactions, including buying food, fuel and other basic goods – but many businesses refuse to accept them. .

Making matters worse is stubbornly high inflation, which means more physical bills are needed to buy things.

According to official figures, inflation was 77% in 2021 and then declined to 31% in 2023. But for the average Cuban, official statistics rarely reflect the reality of their lives, as market inflation and informal inflation can reach triple digits. market. For example, a carton of eggs that sold for 300 Cuban pesos in 2019 sells for around 3,100 pesos these days.

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Monthly salaries for Cuban civil servants range from 5,000 to 7,000 Cuban pesos (between $14 and $20 on the parallel market).

“Living in an economy with multiple currencies, multiple exchange rates and triple-digit inflation is very complicated,” said Pavel Vidal, a Cuba expert and professor at the University of Javeriana in Colombia.

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Andrea Rodriguez on X: www.twitter.com/ARodriguezAP

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Follow AP's coverage of Latin America and the Caribbean at https://apnews.com/hub/latin-america

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