Upon waking in 2025, the Cuban populace found much had remained unchanged, though their leaders guaranteed that change was on the horizon.
Contents
A New Economic Dawn
In a nation accustomed to rations and shortages, 2025 marks the beginning of an end to the historic ration book that has provided a modicum of sustenance to Cuban families. Quite curiously, this is also the year the telecommunications behemoth, ETECSA, will significantly escalate its service rates. However, the most noteworthy change is the formal reintroduction of the U.S. dollar into certain parts of the economy.
For those with a discerning eye, the buzzing new supermarket in Miramar is a hint of things to come. Managed by the MGM Muthu Hotels chain and the Gaviota Group, this market — located conveniently at 3rd and 70th street — notably bypasses the Freely Convertible Money (MLC) once heralded as the saviour of the Cuban economy. Instead, it reverts to the U.S. dollar alongside Visa and Mastercard options.
A Shift to Dollarization
The Cuban authorities had previously recognised their “war-time economy” and attempted numerous measures to escape it. Despite their efforts, President Miguel Díaz-Canel expressed his dissatisfaction with the sluggish progress towards resolving the economic turmoil. Consequently, the regime declared what was referred to as a “partial dollarization” of the economy.
Prime Minister Manuel Marrero Cruz explained this strategy aimed to enhance the management of foreign currency. Hereafter, the dollar will be utilised in retail and wholesale ventures, foreign trade services, and tourism sectors, among other areas. Such moves, claim the leaders, are in response to the informal market’s mishandling of the dollar, now under governmental control.
Gloomy Outlook: Challenges Aplenty
For economist Ricardo Torres of American University, Cuba’s perennial paucity of foreign currency exacerbates fiscal and monetary imbalances. This reality marginalises the Cuban peso’s relevance in an unstable economic landscape. Yet, Torres argues these recent reforms are not a panacea. The reliance on dollars supports those with access to them, while many remain excluded from benefits, unable to escape the daily struggles bred from food and medicine shortages.
Pavel Vidal, a seasoned economist formerly of Cuba’s Central Bank, opines that dollarization doesn’t guarantee broader economic recovery. Instead, it creates divisions between those with foreign currency and those without. Rather than addressing root causes, the government relies on the remittances of those who have left the island — a temporary balm on a lingering wound.
A Wider Perspective
From one perspective, dollarization hints at some stability, introducing a more robust currency into transactions. But, as Torres points out, doing this unevenly merely benefits western tourists and Cubans receiving remittances, leaving others struggling. History reminds us that the island’s on-again, off-again relationship with the U.S. dollar often coupled with political motives and sanctions. However, such experiences haven’t equipped Cuba for more efficient use of this foreign currency.
What might surprise you, dear reader, is that although Cuba has a longstanding infatuation with the U.S. dollar, it’s never shied from criticising it. The semi-presence of the dollar in its economy enlightens us to the peculiar dance between necessity and national pride, where the Cuban peso is seen as a bastion of sovereignty.
The Verdict
Economists urge for sweeping reforms to stabilise Cuba’s economy, yet the entrenched system displays resistance. Much remains in the hands of those eager for reform, and, unfortunately, this often means entrusting life’s essentials to family abroad. Meanwhile, within Cuba, divergent paths of opportunity widen, with limited progress for the many left behind.
Sources:
Translated by Avik Jain Chatlani.