HAVANA — Alejandro Fonseca stood in line for hours outside a Havana bank hoping to withdraw Cuban pesos from an ATM, but when it was almost his turn, the cash 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 all morning.
“It shouldn’t be that hard to get the money you earn by working,” the 23-year-old told The Associated Press in a recent interview.
Fonseca is one of a growing number of frustrated Cubans who must contend with yet another obstacle as they navigate the island’s already complicated monetary system — a lack of cash.
Long queues outside banks and ATMs in the capital Havana and beyond start forming early in the day as people seek cash for routine transactions like buying food and other essentials.
Experts say there are several reasons behind the shortage, all somehow related to Cuba’s deep economic crisis, one of the worst in decades.
Omar Everleny Pérez, a Cuban economist and university professor, says the main culprits are the government’s growing fiscal deficit, the non-existence of banknotes with a face value of more than 1,000 Cuban pesos (about $3 on the parallel market), stubbornly high inflation and the non-return of cash to the banks.
“There is money, yes, but not in the banks,” Pérez said, adding that most of the cash is not held by wage earners, but by entrepreneurs and owners of small and medium-sized businesses, who are more likely to collect cash from commercial transactions but are reluctant to return the money to the banks.
This, says Pérez, is either because they do not trust the local banks or simply because they need the Cuban pesos to convert to foreign currency.
Most entrepreneurs and small business owners in Cuba must import almost everything they sell or pay in foreign currency for the supplies needed to run their businesses. As a consequence, many end up hoarding Cuban pesos to later switch to foreign currency on the informal market.
Converting these Cuban pesos to other currencies presents another challenge as there are several highly fluctuating exchange rates on the island.
For example, the official rate used by government industries and agencies is 24 pesos to the US dollar, while the rate for individuals is 120 pesos to the dollar. However, the dollar can fetch up to 350 Cuban pesos on the informal market.
Pérez notes that in 2018, 50% of the cash in circulation was in the hands of the Cuban population and the other half in Cuban banks. But in 2022, the most recent year for which the information is available, 70% of cash was in individuals’ wallets.
Cuban monetary authorities did not immediately respond to the AP’s emailed request for comment.
The shortage of cash comes as Cubans struggle with a complex monetary system in which multiple currencies circulate, including a virtual currency, MLC, created in 2019.
Then, in 2023, the government announced several measures aimed at promoting a “cashless society”, making the use of credit cards mandatory to pay for some transactions – including the purchase of food, fuel and other basic goods – but many companies simply refuse to accept them.
Making matters worse is stubbornly high inflation, which means more and more physical bills are needed to buy products.
According to official figures, inflation was at 77% in 2021, then falling to 31% in 2023. But for the average Cuban, the official figures barely reflect the reality of their lives, as market inflation can reach triple digits in the informal market. For example, a carton of eggs, which sold for 300 Cuban pesos in 2019, these days sells for around 3,100 pesos.
All while the monthly salary of Cuban government workers is between 5,000 and 7,000 Cuban pesos (between $14 and $20 on the parallel market).
“Living in an economy that, in addition to having multiple currencies, has multiple exchange rates and triple-digit inflation is quite complicated,” said Pavel Vidal, a Cuba expert and professor at Colombia’s Javeriana University of Cali.
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Andrea Rodríguez on X: www.twitter.com/ARodriguezAP
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