Cuba Faces Economic Challenges Amid Currency Devaluation and Tourism Decline

Cuba's Central Bank launched a new floating exchange rate of 410 pesos per dollar on December 18, 2023, amid ongoing economic challenges. This new rate is added to existing rates of 24 pesos for state enterprises and 120 pesos for the tourism industry.

Central Bank President Juana Lilia Delgado Portal stated that the measure aims to address distortions caused by multiple exchange rates and to improve banking transparency. Despite these intentions, the country faces the worst economic crisis in decades, with the peso losing value and inflation soaring since the failed Tarea Ordenamiento reforms in January 2021.

The new floating rate will be based on real transactions, but questions remain about the actual availability of dollars given Cuba's low exports and declining tourism. The government acknowledges the informal market's persistence and the challenges of stabilizing the economy.

Additionally, on the same day as the exchange rate announcement, the independent outlet El Toque reported that its website was blocked following a cyberattack, further highlighting the government's struggle with economic transparency and information dissemination.

Authorities claim that the new exchange rate scheme is a responsible strategy, but without structural reforms and increased production, the long-term sustainability of any rate remains uncertain. Overall, the new exchange-rate architecture may impose order on a fractured system but fails to address the fundamental issues of the Cuban peso's credibility and the economy's exhaustion.