The Dollar in Cuba

The value of the dollar in Cuba is becoming unstable. Once again, after a long period when the value of the dollar did not stop raising, it began to fall in Cuba again with respect to the Cuban peso. After reaching almost 400 pesos, today its value is almost only 370 pesos. But what is this phenomenon due to? Keep in mind that the Cuban peso was depreciating for a long time without stopping. from having a relationship with the dollar from 40 to 1 at the beginning of 2021 to 390 in May 2024.

Cuba has a large fiscal deficit that is financed mainly by monetary emission. This monetary issue makes the amount of Cuban pesos in circulation grow without stopping without any productive support, this generates great inflation within the country. This inflation and this increase in the amount of Cuban pesos in circulation, among other reasons, is what pressures the local currency to depreciate. This was happening non-stop from the end of 2020 until almost a month ago when surprisingly the Cuban peso began to gain value against the dollar. Many wondered what this was due to. The entry into the country of the Western Union played a fundamental role in this, facilitating the entry of remittances and thus increasing the supply of dollars in the foreign exchange market. In my opinion, this is the cause of the decrease in the value of the dollar in the Cuban foreign exchange market, the increase in the supply of dollars in Cuba. An increase that although it is still light if it has been enough for the Cuban peso to appreciate. In spite of this appreciation of the Cuban peso against the dollar, inflation is still intact. High prices have not decreased at all, the value of some products has risen in recent days.