Long Lines Form and Frustration Grows Because Cuba is Short of Money

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HAVANA (AP) — Alejandro Fonseca stood in line at a Havana bank for several hours, hoping to withdraw Cuban pesos from an ATM, but when it was almost his turn, he ran out of cash. Furious, he jumped on his electric tricycle and rode several kilometers to another branch, where he finally managed to withdraw some money after wasting the entire morning.

“It shouldn’t be so difficult to get the money you make from work,” the 23-year-old said in a recent interview with The Associated Press.

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Fonseca is one of a growing number of frustrated Cubans facing another hurdle as they navigate the island’s already complicated currency system – a cash shortage.

Early in the day, long lines form outside banks and ATMs in the capital Havana and beyond as people seek cash for routine transactions such as buying groceries and other essentials.

Experts say there are several reasons for the shortage, all somehow related to Cuba’s deep economic crisis, one of the worst in decades.

Omar Everleny Perez, a Cuban economist and university professor, says the main causes are the government’s growing budget deficit, the lack 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-existence of banknotes. Returning cash to banks.

“There is money, yes, but not in the banks,” Perez said, adding that most of the cash is held not by employees but by entrepreneurs and owners of small and medium-sized businesses who are more willing to collect cash from trade transactions, but are reluctant to return the money to the banks.

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According to Perez, this is either because they don’t trust local banks or simply because they need the Cuban pesos to exchange for foreign currency.

Most entrepreneurs and small business owners in Cuba must import almost everything they sell or pay in foreign currency for the supplies they need to run their businesses. As a result, many hoard Cuban pesos to later exchange for foreign currency on the informal market.

Converting these Cuban pesos into other currencies presents another challenge, as there are multiple, highly fluctuating exchange rates on the island.

For example, the official rate used by government companies and agencies is 24 pesos per US dollar, while the rate for private individuals is 120 pesos per dollar. However, the dollar can fetch up to 350 Cuban pesos in the informal market.

Perez points out that in 2018, 50% of the cash in circulation was in the hands of the Cuban population and the other half was in Cuban banks. But in 2022, the most recent year for which information is available, 70% of the cash was in the wallets of individuals.

Cuban monetary authorities did not immediately respond to AP’s emailed request for comment.

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The cash shortage 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 to promote a “cashless society” and made the use of credit cards mandatory to pay for some transactions – including purchases of food, fuel and other essential goods – but many businesses simply refused to do so to accept .

Making matters worse, inflation is stubbornly high and more and more physical bills are required to purchase products.

According to official figures, inflation was 77% in 2021 and then fell to 31% in 2023. But for the average Cuban, the official numbers hardly reflect the reality of their lives, as market inflation can reach triple digits in the informal market. For example, a carton of eggs that sold for 300 Cuban pesos in 2019 sells for about 3,100 pesos today.

The monthly salary for Cuban state employees is between 5,000 and 7,000 Cuban pesos (between 14 and 20 US dollars on the parallel market).

“Living in an economy that has multiple currencies, multiple exchange rates and triple-digit inflation is quite complicated,” said Pavel Vidal, a Cuba expert and professor at Colombia’s Javeriana University in Cali.

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Andrea Rodriguez on X: www.twitter.com/ARodriguezAP

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Follow AP’s coverage of Latin America and the Caribbean at https://apnews.com/hub/latin-america

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