Cubans resist the bancarization of the island’s economy

“No way! You can’t give the bank anything”says Lisandra Pupo, a 30-year-old mechanical engineer who is skeptical about the bankarization of the economic operations announced by the Cuban Central Bankwhich tries to reduce the number of banknotes that circulate on the street.

The new regulations, which entered into force last Thursday, will oblige both citizens and companies to carry out, within a period of six months, most of their transactions through electronic channels.

But many Cubans understand that the provision will make it difficult to make their own money, due to the technological deficiencies on the island.

Pupo, like many Havanans, assures that he prefers to have his money in hand. He complains that many ATMs are useless and when they have cash they only allow 5,000 pesos (about US$28) to be withdrawn.

“That’s impossible. Now the ATM has no money or has no connection” and “in the times we are living in, 5,000 pesos are simply nothing”, he recounts as he leaves his job in Cerro, a populous municipality in Havana.

Since the government implemented a monetary reform in January 2021, it is increasingly common for Cubans to carry wads of bills in bags or backpacks to pay for a simple restaurant bill or a service in a mechanical workshop.

“Today there is a significant level of cash that is outside the banking system. That money does not circulate in the logical circuits of the economy and is only traded between natural persons.explained Joaquín Alonso, president of the Central Bank, on a state television program on Monday.

“It’s tiring!”

When the monetary reform was applied, the bank injected a good amount of working capital to “give purchasing power to the population”, given the expected increase in prices that accompanied an average wage increase of 450%.

The authorities acknowledge that they face significant challenges due to the lack of resources to install card payment terminals in all establishments in the country and to update the ATM network.

For the government, the transfer and custody of cash is onerous, in addition to the production of paper bills with security measures. “Making money costs foreign currency”Alonso argued.

Rossel Garcés, a 32-year-old printer who works for himself, believes that putting his money in the bank is a problem.

knowing “That I can only extract 5,000 pesos, that I waited in line for three hours, I’m going to go to another bank, I’m going to wait in another queue to extract 5,000 more. Am I going to take a week to extract 20,000 pesos?questions.

He also states that many people do not have smartphones to make transfers. “That’s already tiring!”he emphasizes.

“Shortages” and “inflation”

The independent Cuban economist Omar Everleny Pérez believes that “the high prices and the non-existence of high denomination bills” they did “this necessary bankarization”.

The government is concerned about the high level of money in circulation because it is “encouraging the inflationary spiral”explains the president of the Central Bank.

Year-on-year inflation reached 45.8% in May, while in 2022 it was 39%, according to official figures, but analysts have indicated that it has already reached triple digits.

The announcement also coincides with record prices of the dollar (240 pesos) and the euro (245) in the informal market, according to the independent portal El Toque, which publishes a daily blackboard. These parities govern the street economy on the island.

The burgeoning private SMEs, licensed just two years ago, also did not welcome the news because they will now have to carry out all their operations electronically.

These businesses require dollars to carry out their imports and it is difficult for them to acquire them in the official market.

“If yesterday it was extremely difficult for a MSME to produce, tomorrow it will be even more so”says Oniel Díaz, a private business consultant, in a post on his Facebook page.

SMEs will lose their import capacity In an environment of scarcity and inflation”Add.

The government recently admitted that 100% of the food basket is imported, in the midst of the worst economic crisis in three decades.

Complaints on the networks were also present. “They encourage private individuals to import with foreign currency and sell in national currency, without creating measures for private individuals to recover their USD (dollars) and reinvest!”, said a user of the social network X, formerly Twitter.

Source: AFP