Travelers to Cuba will now be able to exchange dollars at hotels, banks and currency exchange centers at an official rate of 120 Cuban pesos to the dollar, Cuban economic authorities announced last week. The new rate, which will apply to other foreign currencies as well, marks close to a 500 percent increase over the 24 to 1 rate the Cuban government had set during the pandemic.
The new rate matches the current black market exchange rate for dollars; Cuban officials acknowledged that the government sought to compete with the informal market to obtain much needed foreign currency. “Today there is a high level of foreign currency that is entering the country that is not being captured by the national financial system,” the Economy Minister, Alejandro Gil, said on August 3 during a television appearance with Central Bank President Marta Wilson Gonzalez, according to Reuters.
Speaking on the Cuban state news show, "Mesa Redonda" (Round Table), the Cuban officials said that the exchange rate would float, and that, for now, the government would only purchase dollars at that rate, but not sell them. When the government was ready to sell dollars, Gil said, there would be limits on quantities individuals could purchase.
Tens of thousands of Cuban families who receive remittances in the form of dollars will be beneficiaries of the new rate, although prices in the private commercial sector are likely to adjust upward as the new rate goes into effect last week.
The new exchange rate will also benefit tourists from the United States, Canada and Europe who will be less likely to trade large quantities of dollars or Euros for Cuban pesos on the street. Cuba has a 3 percent exchange fee for foreign currencies, but in the past imposed an additional tax on dollars. That surcharge was eliminated in July 2020 during the pandemic.
For roughly 16 years Cuba worked on a dual-currency system, one for citizens, one for tourists. The old tourist currency was known as the Cuban Convertible Peso, or CUC, and it was worth 25 times as much as the Cuban peso, known as a CUP. The system added confusion and also made it easy for unwitting tourists to get scammed into trading their foreign currency for the less-valuable CUP. Cuba unified the currencies in January 2021.
Hit by harsh economic sanctions levied during the Trump administration, the total loss of tourism revenues during the pandemic, and now escalating import costs due to the Russian invasion of Ukraine, the Cuban government is struggling to resolve an ongoing economic crisis which has led to widespread shortages of food, medicines, fuel and electricity. In late July, Cuban authorities announced a schedule of weekly electrical blackouts for Havana. On August 5, an oil-storage facility at the port of Matanzas exploded and caught fire after it was struck by lightning, further disrupting Cuba’s petroleum supply.
The Cuban economy declined 10.9 percent in 2020, according to Reuters, but began a slow recovery in 2021 with GDP growth of 1.3 percent. Stronger growth is predicted for this year.