Hard currencies and the monetary overhaul in Cuba

As the beginning of the monetary overhaul in Cuba approaches, on January 1, many wonder how the exchange of hard currencies will take place and what the situation of bank accounts in freely convertible currencies (MLC, in Spanish) will be, among other questions.

The so-called Overhaul Task, promoted by the Cuban Government, implies unifying all kinds of exchange rates, the withdrawal of the Cuban convertible peso (CUC) from circulation, and a general wage and price reform that will include the elimination of excessive subsidies and undue gratuities.

In that context, the Central Bank of Cuba (BCC) explained that there will be a single exchange rate for the entire economy that will be equivalent to 24 Cuban pesos (CUP) for 1 dollar (USD).

That exchange rate will be taken as a benchmark by banks and Casas de Cambio S.A. (CADECA) to establish their own rates on the basis of the established commercial margins.

Regarding the MLC saving accounts, the BCC said that they will not be modified, and will continue to operate as they had done so far.

The BCC explained that it is possible to buy MLC with CUP in banks, but it made it clear that banks currently lack enough resources to make that transaction, due to country's restrictions on external liquidity, so those operations will be carried out only if the bank has hard currencies available.

In that regard, CADECA President Joaquin Alonso Vazquez told Prensa Latina that 'we have not been banned from selling hard currencies to the population, but that will depend on the amount received by Casas de Cambio. Cuba does not issue MLC, we depend on what arrives in the country,' he pointed out.

'Today we do not sell foreign currencies in any Casa de Cambio in the cities, only at airports and only to passengers who leave Cuba, with a maximum limit of 300 CUC, because there is no more availability at present,' Alonso underlined.

He explained that as soon as tourism is reactivated and operations to buy MLC grow, conditions will exist again to sell foreign currencies, depending on the reanimation of the national economy.

In addition, bank branches and CADECA will exchange the rest of foreign currencies to Cuban pesos at the exchange rate in force on that day.

On the other hand, the BCC informed on its website that starting on January 1, 2021, the product associated to AIS CUC cards will be modified and they will be nominated in CUP, based on the exchange rate of 1 CUC for 24 CUP.

In the case of AIS USD cards issued by Fincimex, it added, they will continue to operate as they do at present.