The Cuban economist Pedro Monreal has voiced strong criticism against Cuba's dollarization policy, challenging the regime's assertion that it aims to correct economic distortions when, in fact, it is intensifying them. In an extensive thread on his X account, Monreal scrutinized the recent Mesa Redonda dedicated to this topic, which he believes exemplifies the "four horsemen of the Apocalypse" in Cuba's official communication: lack of self-criticism, distortion, opacity, and arrogance.
Monreal highlighted that the absence of self-criticism is evident in the use of euphemisms like "economic situation" and "projections to correct distortions and reinvigorate the economy" to describe a structural crisis and a series of poorly connected measures. He was particularly struck by the apparent misunderstanding or deliberate deceit from a high-ranking official, referring to Mildrey Granadillo de la Torre, First Deputy Minister of Economy and Planning. Monreal observed, "Of course, the partial dollarization isn't what they said. They just made up that 'definition'."
According to Monreal, the move towards dollarization is driven by economic and political uncertainties. In Cuba, foreign currencies are essentially replacing the fundamental functions that the Cuban peso fails to fulfill effectively. "It's fundamentally about replacing with foreign currencies, not about 'capturing' them," he clarified.
The recent dollarization measures have caused an increase in demand for foreign currency in the informal market since December. The opening of stores operating in USD and the sale of cars in foreign currencies have led to a greater demand for dollars among the population, while the Moneda Libremente Convertible (MLC) is showing a downward trend.
Monreal elaborated that partial dollarization complicates macroeconomic management by increasing the risk of a liquidity crisis, as the Central Bank cannot function as a lender of last resort for foreign currencies. "Another distortion is the emphasis on 'capturing' foreign currency, when the crucial aspect is to 'generate' it. They are two distinct concepts. Dollarizing to 'capture' remittances doesn't address a fundamental component of the structural crisis: a failed model of international specialization," he emphasized.
He also stressed the significance of remittances in transforming—not just energizing—the productive structure, provided they are directed towards investment. Monreal criticized the government for not disclosing the destination of remittances in Cuba.
"A supposed government program to 'move towards a dedollarization of the economy' is vaguely announced, but without explanation. The known fact is that dollarization is expanding. The path to dedollarization is not clear," he remarked.
Monreal urged authorities to assess why the Cuban peso is less effective than the dollar in fulfilling domestic monetary functions. He accused state officials of arrogance for recycling old promises that failed without explaining their failures, recalling episodes with the CUC and the Cuban bank 'corralitos'.
"In summary, the Cuban government exaggerates the supposed benefits and significance of 'partial dollarization' without apparent connection to a structural reform of the economy, while boasting of a dedollarization program that remains unexplained," he concluded.
Late last year, Monreal criticized the regime's announcement of a supposed "new exchange regime," arguing that there was no basis for it to be considered as such. He stated that the proposed change does not represent a significant transformation of the current exchange system, essentially maintaining a fixed rate with variations in its secondary component for the "population and non-state sector."
The academic criticized Cuba's economic performance in 2024 and cast doubt on the progress in reinvigorating the economy and the macroeconomic stabilization announced by the government. Monreal argued that the country faces severe "stagflation," characterized by economic stagnation combined with high inflation, worsening household living standards.
He contended that the government distorts its narrative, as it cannot talk about an "economic reinvigoration" when the economy has declined in four of the last six years. Additionally, the GDP at constant prices in 2024 was lower than in 2019, exacerbated by the impact of a dysfunctional electricity system.
Understanding Cuba's Economic Challenges
What is the main criticism of Cuba's dollarization policy?
The main criticism is that dollarization is purportedly meant to correct economic distortions, but it actually magnifies them by replacing the Cuban peso's functions with foreign currency.
How does partial dollarization affect Cuba's macroeconomic management?
Partial dollarization complicates macroeconomic management by increasing the risk of a liquidity crisis since the Central Bank cannot act as a lender of last resort for foreign currencies.
Why are remittances important for Cuba's economy?
Remittances are crucial for modifying the productive structure, particularly when directed towards investment, rather than just energizing the economy.