This Sunday, the three major currencies in Cuba's informal market experienced an increase compared to the previous day. Early morning reports indicated that the US dollar is now trading at 665 Cuban pesos, the euro at 765 CUP, and the MLC at 453 CUP.
On Saturday, the dollar closed at 663 CUP, the euro at 756 CUP, and the MLC at 433 CUP. This signifies a one-day gain of two pesos for the dollar, an increase of nine for the euro, and a 20-peso rise for the MLC.
Fluctuating Exchange Rates in Cuba
The exchange rate dynamics throughout the month have been unpredictable. The dollar reached a record high of 695 CUP on June 21, then plummeted to 605 CUP by the end of the month, a drop of 90 pesos in just nine days. Since then, it has gradually recovered, stabilizing within the 660-665 CUP range during the second half of July.
The euro followed a similar path: after hitting 790-800 CUP between June 19 and 24, it declined to around 700 CUP by month's end and has since rebounded to between 750-765 CUP in the first weeks of July.
MLC was the most volatile currency during this period. It started July near 500 CUP, fell to around 433 CUP from July 8 to 11, briefly recovered to approximately 487 CUP, and dropped again before its recent surge.
Economic Challenges for Cubans
The Observatory of Currencies and Finances (OMFi) from elTOQUE has warned that the recent currency drop at the end of June was temporary, pointing out that demand for dollars has intensified against supply. They predict the dollar will fluctuate between 620 and 730 CUP in July, with 700 CUP as a resistance level.
The gap between the official rate set by the Central Bank of Cuba (BCC), which pegs the dollar at 592 CUP, and Sunday's informal rate exceeds 12%, highlighting the severe exchange rate distortion affecting the Cuban economy.
The impact on the population is severe. The new minimum wage of 3,210 CUP, effective July 1, amounts to less than five dollars at the informal exchange rate, while the official average salary of 6,930 CUP translates to just 10.5 dollars monthly.
Future Prospects and Economic Predictions
Independent economists estimate that basic necessities cost around 96,060 pesos monthly, roughly 30 times the minimum wage. A carton of eggs costs between 3,000 and 4,000 pesos, nearly equivalent to the entire minimum wage.
Over the past six years, the Cuban peso has lost over 95% of its value against the dollar, going from 42 CUP in 2020 to 665 CUP this Sunday. The OMFi has stated that the "Cuban government is facing a credibility issue" and that internal reforms "will likely be insufficient without some form of negotiation with the United States."
In a pessimistic scenario, analysts project that the dollar could surpass 1,000 CUP before the end of 2026.
Understanding Cuba's Informal Currency Market
Why are the informal exchange rates in Cuba rising?
The informal exchange rates are rising due to increased demand for foreign currencies like the dollar and euro, amidst limited supply and economic instability.
What is the impact of currency devaluation on Cuban citizens?
Currency devaluation severely affects Cubans by reducing their purchasing power, making it difficult to afford basic necessities on their salaries.
How has the Cuban peso performed against the dollar over the past few years?
The Cuban peso has depreciated significantly, losing over 95% of its value against the dollar since 2020, when it was at 42 CUP, compared to 665 CUP today.