President Díaz-Canel stressed that the end of the double currency will not be “the magic solution to all problems.”
By:
EFE
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Cuba will begin its process of monetary and exchange unification on January 1 with the release of the convertible peso (CUC) – parity with the dollar -, which will leave the Cuban peso (CUP) as the only official currency of the country, with a single official conversion rate of 24 pesos per dollar.
The long-awaited announcement that puts an end to months of speculation about the “zero day” when the CUC would disappear and about the new CUP exchange rate, was made on state television by the country’s president, Miguel Díaz-Canel, accompanied by the ex-president and leader of the Communist Party of Cuba, Raúl Castro.
“We reiterate the importance and importance of this task that will put the country in better conditions to carry out the transformations demanded by the updating of our economic and social model on the basis of guaranteeing all Cubans the greatest equality of rights and opportunities”, Diaz-Canel said.
A pending task
Monetary unification, which has taken seven years to complete, is one of the main pending tasks within the economic reforms promoted by Raúl Castro for a decade.
Officially renamed as “ordering task”, it consists of the disappearance of the CUC, created in 1994, and the establishment of a single exchange rate, which in the state sector until now is parity between CUP, CUC and dollar (1: 1: 1 ), while for the general public it is 25 CUP for each CUC or dollar.
This multiplicity of exchange rates has for years distorted the accounting of state companies, where the CUP and the CUC are merged as one in the books of accounts, which makes it difficult, among other things, to determine the real state of the centralized Cuban economy.
Starting last October, the Cuban government began to frequently report on the unification and the package of joint measures, which increased speculation and caused hundreds of Cubans to go to banks and exchange houses to get rid of the CUC, which was devalued in the informal market.
From the beginning the authorities anticipated that from “day zero” there will be a period of six months during which people can change the CUC in stores and banks.
The announcement of a single rate of 24 Cuban pesos per dollar destroys the forecasts of a severe official devaluation of the national currency, an issue that worried the population, fearful that their savings in CUP would lose value.
This regulation will also be accompanied by a salary and pension reform and the withdrawal of subsidies, although centralized prices will be maintained for a reduced group of basic products and services, including fuel, electricity or infant milk.
No magic solutions and risks
In his appearance, Díaz-Canel stressed that the end of the double currency will not be “the magic solution to all the problems” of the battered Cuban economy, but “will allow for a more solid advance”, in a context marked by the economic crisis international, covid-19 and the effects of the embargo.
“The task is not without risks. One of the main ones is that there is higher inflation than designed, due to the supply deficit. Abusive and speculative prices will not be allowed. They will face socially with containment measures and severe sanctions for noncompliants ”, assured the President.
The elimination of the double currency comes at a time of strong economic tension for the country, which has seen its already precarious financial situation exacerbated by the stoppage of tourism, the crisis in its ally Venezuela and the delay in updating its obsolete centralized system.
Shortages and uncertainty have driven prices up on the black market, while the government has waged an all-out war against speculation and hoarders.
One of the latest strategies has been the partial dollarization of its economy, a solution that has raised controversy among the vast majority of the population, without access to remittances from abroad.
At the end of his speech, Díaz-Canel remarked that they would be “receptive to the criteria of the population” and reiterated that “the conditions are created to ensure that no one will be left homeless” on the island.
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