With the unification of its currencies, Cuba generates the first devaluation of the Revolution

The Cuban government has announced one of the most serious and complex stages of its slow process of “adaptation” or economic opening. From January 1, the two currencies in circulation on the island for a quarter of a century, the Cuban peso and the convertible CUC, equivalent to one dollar, will be unified, configuring the first devaluation in the history of the Revolution.

This system has been in place since the collapse of the Soviet Union, Havana’s greatest ally, but its existence has become a problem, conspiring against productivity and complicating the already difficult Cuban economy. But removing it is a deeply orthodox solution with important social consequences.

The announcement was made by President Miguel Diaz-Canel in a speech to the country in which he introduced himself accompanied by former President Raúl Castro, current Secretary General of the Communist Party, a presence at the event intended to show the importance of this change.

The regime postponed this unification due to the impact of the devaluation and adjustment involving. Cubans will now have a single payment method at an exchange rate of 24 Cuban pesos per dollar. In other words, the currency is unified by its highest value, which means an equivalent blow for the pockets.

A clear fact of this cost is that the value of the 80 gram bread that each Cuban receives daily for the ration card will multiply its cost by 20. Even if it will remain cheap, it is a telling indicator of the decline that will be experienced. other economy prices.

Inflation blow

To compensate for this blow, the government announced increases of 450% of wages and 500% of pensions, a scale which gives an idea of ​​the depth and the effects of this transformation. We will see if this correction is sufficient. Too gas, electricity, water and tax rates will be increased. Along the same lines, the goods the government provides to the population, along with bread like rice, sugar, and essential eggs, will also increase their prices.

“We reaffirm the importance and importance of this task, which will put the country in better conditions to carry out the transformations required by the updating of our economic and social model on the basis of the guarantee to all Cubans of greater equality of opportunity, rights and social justice, ” said Díaz-Canel in his speech.

The reorganization process comes at a time of serious crisis for Cuba, struck by the paralysis caused by the pandemic in key sectors such as tourism and increased sanctions by the outgoing government of President Donald Trump. Additionally, the island has been under a blockade by the United States for decades that makes all of its supplies more expensive and can only be lifted with a law in Congress.

The Cuban peso is the one people receive mainly in the form of wages and the same that they use to pay for food and services. However, in some stores where basic necessities or cleaning supplies are offered, payment has been made with CUC. Overwhelmed by the lack of cash, the government recently opened other businesses that allow payment in dollars by credit card.

The end of the legal circulation of the two currencies could cause other difficulties since the government had set different exchange amounts for state companies, which will now have to be assumed at 24 Cuban pesos per dollar.

“There are times of great monetary and financial instability … there will be a lot of confusion at the start and a lot of speculation,” Pavel Vidal, Cuban economist and professor at the Pontificia Universidad Javeriana in Cali, told AP. in Colombia.

Joe Biden and the Thaw

The measure is known as there are a few weeks left before Democrat Joe Biden takes office in the United States. The coincidence is interesting because of the thaw with the island operated by the former government of Barack Obama, whose president-elect was vice-president.

This historic resumption of diplomatic relations was promoted by Raúl Castro, an admirer of Doi Moi, the successful opening of Vietnam. I was looking to try and repeat this experience locally open the country to investment income, especially in the tourist area and some structures. The port of Mariel is being modernized and is on the way to becoming a special economic zone to accommodate businesses from all over the world. And become the main axis of the movement of containers.

This process had in monetary unification one of its necessary objectives to facilitate investments. The regime’s alliance with the Vatican and Pope Francis, one of the central mediators of the Obama-agreed thaw, wanted the much-respected Church on the island to operate to channel the social frustration the measure would cause.

Democratic sources have clarified that Biden will not rebuild the binational relationship to the level Obama had reached. But if resume flights and shipments, remittances and tourist traffic. This measure announced by the Cuban regime is a nod to the new American administration. It is not known if this is an agreed wink or an early sign of coincidences.