mid last March the economist called Cuba the “most miserable” country in the worldaccording to the Hanke Annual Misery Index (HAMI) 2021, following a package of measures applied on the island known as the “Ordering Task”.
“Cuba, which has fallen dramatically compared to last year’s HAMI, now holds the inglorious title of the most miserable country of 2021. As you can see, Cuba’s HAMI score has been fueled by soaring inflation of 1,221.8%. This level of inflation was not surprising given the 95% devaluation of the Cuban peso in 2021,” the expert explained in a National Review article.
“Currency devaluations lead to higher inflation rates. In fact, after a devaluation, inflation will rise and with it the cost of producing goods and services, including exports, in the country that has devalued its currency. Inflation will steal any possible short-term competitive advantage that might initially accompany devaluation. This is exactly what happened in Cuba,” Hanke added.
The index of “miserable” countries is the sum of year-end unemployment, inflation and bank lending rates minus the annual percentage change in real GDP per capita.
What happened in 2022?
In June 2021 the The Cuban government stopped accepting dollar cash deposits at its banks As a result, he argued, it was not possible to deposit this money in international banks due to US sanctions. But since last August 4, 2022 The regime devalued the Cuban peso against the dollar and began buying foreign currency from individuals in its banks, including US dollars in cashalthough he has not restored the FX market as there will be no immediate sale as reported.
The state’s purchase of foreign currency from the population began at a price well in excess of the current official exchange rate of $1 to 24 Cuban Pesos (CUP) that applies to businesses. The government set the purchase price for individuals at 120 pesos per dollar, similar to the informal market’s record levels in recent weeks.
However, by applying “every bank’s trading margin,” the purchase price will remain at 110.40 pesos for every US dollar, Prime Minister of the Central Bank of Cuba Marta Sabina Wilson González told the Mesa Redonda program official television.
According to Alejandro Gil, Cuba’s Minister of Economy and Planning, the government’s goal is “to achieve an economy that operates in Cuban pesos.” He also recognized that achieving lasting exchange rate stability will require “increasing and diversifying the production of goods and services, increasing supply and exports, and business efficiency. The contradictions that exist there are expressed in the monetary environment.”
Criticism from Cuban and foreign economists has surfaced in response to these latest actions by the ruling party. dr Mauricio de Miranda Parrondo, full professor at the Pontificia Universidad Javeriana de Cali (Colombia), pointed this out “the ability of the Cuban authorities to persist in the error”.
Mauricio de Miranda questioned the retention of the previous official course for companies. “If you’re buying dollars at 110 (which isn’t 120 because of ‘margin’), why keep an unrealistic rate of 24 x 1? Proud? Irresponsibility? All together?”, to express On twitter.
“When the anger and glory of the second official exchange rate of 1:120 is over, we must focus on the country’s agricultural crisis. Unless that is resolved, this new artifact of monetary circulation will be of little value.” warned on Twitter the Cuban economist Pedro Monreal, adviser to UNESCO.