The Electronic Re-dollarization

By Mario Valdés Navia

After years of turning a deaf ear to the suggestions of economists and many others who requested measures to retain the millions of dollars lost to the flight of capital abroad by way of purchases by private individuals, the government has issued a financial and commercial response.

This sort of electronic re-dollarization will have a favorable influence on the situation of consumers, but it leaves many unanswered questions about its effective linkage with other indispensable transformations which are still pending. The problem is that these are much more important in order to channel the productive economy and achieve sustained growth of the GDP than opening a new market area.

The first surprising thing is that, after five years of waiting for the necessary monetary and exchange unification, a third participant is allowed into the national market: the previously snubbed US dollar. It’s also true that it was never really banished, since the CUC is nothing more than its overvalued stand-in. However, after so many years of gleeful minting, I very much doubt that anyone knows for certain how much dollar is left in a CUC.

It’s true that we the consumers can catch a break with these measures. If in both the dollar and CUC markets the prices are indeed relieved from the enormous tax now called collection contribution, and they are made to correspond with similar prices in our region −not with those in New York or London−, then everyone’s income will have a relative increase. Only the so-called mules[1] will be affected, but only partially.

The emphasis made on the fact that the specialized dollar shops –which I propose to call TEDs (Spanish acronym)– will sell the vaguely defined high- and mid-range products, leaves a wide segment of the market open for the mules. Time will tell for how long. The true thing is that similar prices, good brands and proper warranty services offer unobjectionable advantages in the case of the new TEDs for independent businesses and traders.

However, I’m not at all sure about the stated objective that these measures should succeed in reactivating the national industry. Firstly, because if the paltry earnings of these 70 initial TEDs are used for investment in a productive sector that’s nearly in ruins, it would be like giving a glass of water to a boatful of castaways. And there would be no resources to expand the chain to the rest of the country or increase the volume of its sales.

Secondly, if the banks loan these new funds in dollars to the government to carry out investments in production… God help us! Many will become concerned, perhaps for the first time in their lives, about the good functioning of the country’s investment plan, and they will pray that the banks won’t default on payments resulting in an immobilization of deposits, or worse, in an indefinite suspension of payments to savers.

Nevertheless, the latter scenario need not be like that, since the dollars will enter and will only be withdrawn by means of the magnetic card. In my understanding, cash withdrawals from these accounts will be carried out in CUCs, in the official exchange rate. That’s why I refer to an electronic re-dollarization, and I believe there’s more. I suspect that they’re working against the clock for a Cuban cryptocurrency, which would be another way to siphon stray currency into government coffers in exchange for electrons.

In general, I celebrate the measure and I believe it will result in an improvement and a rearrangement of the Cuban market. A market which will have to grow increasingly segmented and differentiated if it wants to modernize and adjust to the Cuban socio-economic reality of today.

I’m only worried that we continue to beat around the bush while the trunk of the economy remains untouched, and asphyxiated by the narrow models of the bureaucratic economic mechanism. There’s neither an Asian-style opening to socialist market relations, nor an empowerment of workers’ groups by means of socialist self-management. It looks like, for the State, the motto continues to be: ‘Nobody touches anything, only I can touch!’.

Contact the author at: mariojuanvaldes@gmail.com

[1] Mules: people who earn a living by purchasing large quantities of all sorts of products abroad and then reselling them in Cuba at exorbitant prices, though always lower than the ones assigned by the State in currency collection shops. (Note by the editor).

(Translated from the original)