Exchange Rate Discrepancies: Why Cuban Central Bank's Rate Isn't What Customers See

The Cuban Central Bank (BCC) sets an official exchange rate as a benchmark for the currency market, yet banks, CADECA, and other financial entities establish their buying and selling rates by applying a commercial margin.

This leads to noticeable discrepancies for the public, fueling complaints on social media about the gap between what the BCC announces and what's actually offered over the counter. Just this past Saturday, the U.S. dollar showed an eight-peso discrepancy between the BCC's rate (408 CUP) and CADECA's rate (416 CUP).

Iann Pedro Carbonell Karel, the Director of Macroeconomic Policies at the BCC, explained on television this discrepancy during a discussion with regime spokesperson Lázaro Manuel Alonso, regarding the implementation of new currency market measures in Cuba.

According to Carbonell, as the monetary authority, the BCC issues a "reference" rate to guide financial institutions in setting their rates.

Why Banks and CADECA Have Different Rates

Carbonell justified the commercial margins as a "universal practice" used to cover operational costs, operational risks, and exchange rate risks, especially in a system where the rate can fluctuate. Additionally, costs related to cash handling and transportation were mentioned.

In simpler terms, while the BCC rate serves as a guiding rate, it doesn't necessarily match the figures customers will encounter at CADECA or banks, as these operators set their own buying and selling rates based on the reference plus the commercial margin.

Carbonell detailed that in segment 3—which most directly affects individuals and various management forms—the market operates under a managed float regime, allowing daily rate variations that are displayed in office "boards."

He also highlighted that the daily rate formation is influenced by actual purchase and sale operations conducted in the country: if supply exceeds demand, the rate may decrease; if demand exceeds supply, the rate tends to increase.

Public Outcry Over Rate Discrepancies

On social media, a frequent criticism—summarizing the sentiment of many users—is that the Central Bank sets a floating rate, but other institutions set whatever rate they please, with daily examples of several peso differences between them.

This perception aligns with what was explained on TV: the BCC rate is referential, and operators apply margins to establish their final rates.

Regarding concerns about whether exchanges are delivered in cash or by transfer, Carbonell stated that the principle of the currency market is that customers receive what they request: if they come with foreign currency in cash and want CUP in cash, they should receive CUP in cash; if they prefer a bank account for security, they can choose it.

The Regime's New Exchange Rates

With the Central Bank's announcement, Cuba now has three official exchange rates:

• The 1x24 rate, maintained for government operations: electricity, oil, basic goods, transportation... everything the State deems "strategic."
• The 1x120 rate, for state or mixed enterprises that generate foreign currency, like exporters or tourism-related businesses—supposedly to "stimulate competitiveness."
• The new "floating" rate, updated daily based on "supply and demand," as claimed by the Central Bank, applied to individuals, the private sector, and any Cuban wishing to buy or sell foreign currency at CADECA or banks.

The Illusion of a "Floating" Market

The Central Bank wants to create the impression that this new exchange rate will move freely, like in other countries, based on how many dollars enter or leave the market.

However, the issue is that there is no free market in Cuba, as everything is controlled by the State. The government decides:

• How many dollars to sell;
• To whom they are sold;
• At what price;
• And when they are circulated.

Economist Mauricio de Miranda Parrondo put it bluntly: "The minister of the Central Bank tries to dictate to the market what rate to operate at. That's not how the economy works."

In a real market—like in Mexico, Colombia, or the Dominican Republic—banks freely buy and sell foreign currency, and the Central Bank only publishes an average rate at the end of the day.

In Cuba, it's the opposite: first, the Central Bank announces the figure, and then it forces the market to conform.