May 23, 2024

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Long lines form and frustration grows as Cuba runs out of cash

Long lines form and frustration grows as Cuba runs out of cash

HAVANA (AP) — Alejandro Fonseca stood in line for several hours outside a bank in Havana hoping to withdraw Cuban pesos from an ATM, but when his turn approached, the money ran out. He angrily jumped on his electric tricycle and traveled several kilometers to another branch where he finally managed to withdraw some money after wasting the entire morning.

“The money you earn through work shouldn't be so difficult to come by,” the 23-year-old told The Associated Press in a recent interview.

Fonseca is one of a growing number of frustrated Cubans who have to face another obstacle while moving across the island. The monetary system is already complex – 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 purchasing food and other necessities.

Experts say there are several reasons behind this shortage, all of which are linked in one way or another to Cuba's deep economic crisis. One of the worst in decades.

Omar Everlini Pérez, a Cuban economist and university professor, says the main reasons are the government's growing fiscal deficit, the lack of banknotes worth more than 1,000 Cuban pesos (about $3 on the parallel market), stubbornly high inflation, and the lack of banknotes. Denominations of more than 1,000 Cuban pesos (about $3 in the parallel market), stubbornly high inflation, and no banknotes of denominations of more than 1,000 Cuban pesos (about $3 in the parallel market), stubbornly high inflation, and no banknotes of Denominations of more than 1,000 Cuban pesos (about $3 in the parallel market), stubbornly high inflation, and no banknotes In denominations of more than 1,000 Cuban pesos (about $3 in the parallel market), stubbornly high inflation, and no Cuban banknotes In denominations larger than 1,000 Cuban pesos (about $3 in the parallel market), the main reason behind this is the government's growing fiscal deficit. Return of cash to banks.

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“Yes, there is money, but not in the banks,” Perez said, adding that most of the cash is not held by salaried workers, but by entrepreneurs and owners of small and medium-sized businesses who are more likely to raise the money. cash from business transactions but are reluctant to return the money to the banks.

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

Most Entrepreneurs and small business owners In Cuba, they are forced to import almost everything they sell or pay in foreign currency for the supplies needed to run their businesses. As a result, many end up hoarding Cuban pesos to later convert them into foreign currency on the informal market.

Converting those Cuban pesos into other currencies is another challenge, as there are many highly volatile exchange rates on the island.

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

Perez points out that in 2018, 50% of the money in circulation was in the hands of the Cuban people and the other half in Cuban banks. But in 2022, the most recent year for which information is available, 70% of cash was in people's wallets.

Cuban monetary authorities did not immediately respond to the AP's email request for comment.

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The cash shortage comes as Cubans face a complex monetary system in which several currencies are in circulation, including the virtual currency, MLC, created in 2019.

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

Making matters worse is stubbornly high inflation, which means that more and more physical bills are needed to purchase products.

According to official figures, inflation reached 77% in 2021, then fell to 31% in 2023. But for the average Cuban citizen, the official figures hardly reflect the reality of their lives, because market inflation can reach three figures in the informal sector. market. For example, a carton of eggs that sold for 300 Cuban pesos in 2019, these days sells for about 3,100 pesos.

All this while the monthly salary of Cuban state employees ranges between 5,000 and 7,000 Cuban pesos (between $14 and $20 in the parallel market).

“Living in an economy that, in addition to having many currencies, has many exchange rates and a three-digit inflation rate, is very complicated,” said Pavel Vidal, a Cuba expert and professor at Javeriana University in Cali, Colombia.

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

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