Cuba’s Cash Crisis: Better Money in Hand Than on a Card
HAVANA TIMES – The five-day “bank freeze” that Banco Metropolitano (Banmet) attempted to impose on savers in Havana—justifying it by claiming that power outages prevented cash withdrawals—lasted only five days. Strangely enough, the blackouts did not seem to affect other banking services, such as opening accounts or issuing loans and cashier’s checks, which, according to an official Banmet statement issued on June 26, would continue without interruption.
“This is a full-fledged banking freeze. If the problem were really the electricity, the bank wouldn’t be able to carry out any operations. But they only suspended cash withdrawals—and that money doesn’t belong to the bank, it belongs to us,” journalist Ernesto Ustariz wrote on his Facebook profile. As might be expected, his concerns never appeared in Tribuna de La Habana, the newspaper where he works, which, true to its role as the “Official Organ of the Provincial Committee of the Communist Party” in the capital, avoided questioning the measure.
Only the unanimous outrage of Banmet customers, who flooded social media with complaints, succeeded in forcing the institution to reverse course. On July 1, it resumed scheduling appointments for cash withdrawals. In the brief announcement acknowledging the reversal, the electricity crisis was mentioned only in passing—an inadvertent admission that it had merely been a pretext.
In fact, while the moratorium remained in effect, the country’s electricity situation had not changed significantly. Even the reconnection of the Antonio Guiteras power plant—the country’s largest generating unit—on June 28 had no noticeable impact on the blackout schedule. As in the preceding weeks, Havana continued to endure daily outages lasting between 12 and 18 hours, while the provinces suffered blackouts of 20 to 30 consecutive hours.
Digital Inflation
Throughout history, the most common image associated with inflation has been people carrying around huge amounts of cash just to get through daily life. Only a few years ago, shopping in Venezuela required thick bundles of bolívars. In Somaliland, an unrecognized state in Africa, the currency has become so devalued that people think of its value by weighing bags of the currency rather than by counting individual bills.
These are extreme situations that many Cubans would actually envy. For Omar Urquiza, having all of his money in cash—even if it meant handling enormous sums—would be a blessing. A 71-year-old retiree from Camagüey, he has been unable to collect his pension since January because of the lack of cash at banks in Nuevitas, the municipality where he lives.
He recounted his experience during a call to a news program on Radio Cadena Agramonte, Camagüey’s provincial radio station.
“I depend on help from my children and on whatever money I can earn doing odd jobs, like cleaning yards or running errands. It’s very sad not to be able to withdraw the ‘few pesos’ I earned after working almost my entire life. I’ve lost count of how many times I’ve been unable to buy something simply because I didn’t have cash, even though I have the money on my bank card.”
Many other elderly people, he noted, have neither family support nor the health to continue working. For some, even traveling to the bank is an enormous burden because of health problems or the distance from the neighborhoods where they live.
“We urgently need to find solutions to this problem, which has only grown worse over time,” Manuel Fernandez, president of the Municipal Assembly of People’s Power (mayor) of Nuevitas, acknowledged on the same radio program.
“We are coordinating with the new economic actors [private businesses] so that some of our retirees can collect their pensions through them. We have also worked with the bank so that elderly people receive priority on the days pension payments are made.”
Even so, he admitted that the amount of cash available is insufficient to cover everyone’s pension payments.
Unlike Havana—the only province where Banco Metropolitano operates and where cash withdrawals are still possible generally capped at between 5,000 and 10,000 pesos, (the equivalent of roughly US $8 to US $16, per person per day)—cash withdrawals in the rest of the country have long since ceased to function normally.
Barbara Salcedo, a seamstress at a shirt factory in the city of Camagüey, believes that “the situation has gotten worse with every passing month.”
At this time last year, banks allowed withdrawals of up to 2,000 pesos a day per person. Then the limit was lowered to 1,000, and a few months ago it was reduced again to just 500 pesos [less than one US dollar]. The worst came in April, when they suspended cash withdrawals altogether. The justification is that the available cash is now reserved for retirees and the ‘vulnerable’ [people living in extreme poverty, the disabled, and others].”
Unable to convert the salary she receives by bank transfer from her state job into cash, Bárbara now depends entirely on the sewing jobs she takes on at home.
“Fixing shirts and dresses earns me much more than I make at the factory. We’ve barely been working there for months because of the blackouts and the lack of raw materials. I haven’t quit because I’m almost at retirement age, and I don’t want to lose my pension,” she confessed.
Anyone unfamiliar with the Cuban context might wonder why people on the island are so desperate to obtain cash.
The answer could not be simpler: because virtually all private businesses—and many state-run ones—refuse to accept bank transfers. The main reason is straightforward. Money held in bank accounts is of little use when it comes to buying supplies, foreign currency, or carrying out many other basic business transactions.
“Right now I have more than one million pesos sitting on a bank card, and I’m going crazy trying to convert it into cash because without cash I can’t buy from any supplier. But the money changers no longer accept commissions of 10 or even 15 percent. Just yesterday one told me he wouldn’t touch digital pesos for less than a 20 percent commission. At what prices am I supposed to sell my products if I have to cover my costs, taxes, and those commissions? The best part is that the State washes its hands of the problem while encouraging people to turn against us, report us, and boycott us. I wonder what moral authority it has to do that when it’s the State itself that either hasn’t known how—or hasn’t wanted—to bring order to this whole situation. If tomorrow the State told me, ‘We’ll sell you everything you need through bank transfers,’ I’d be the first to accept only digital payments. But that’s not the reality we’re living in,” the owner of a restaurant-café in Camagüey told me.
The cash shortage gripping Cuba is the result of the relentless devaluation of the national currency and of the new forced banking policy imposed in August 2023 without regard for the country’s actual conditions.
Since the beginning of this year, the peso has lost nearly one-fifth of its value against the US dollar. If the comparison goes back to January 2021—when the government embarked on the failed economic reform known as the Ordering Task—the decline is even more dramatic.
Over the past five years, the exchange rate has gone from 24 pesos per US dollar to nearly 700 pesos per dollar. Aside from occasional periods of market stabilization, there is no sign that this trend will reverse.
As ever larger amounts of Cuban pesos became necessary to buy foreign currency—a large portion of the economy has been “dollarized” by the government—the shortage of banknotes became increasingly severe.
To confront the problem, the authorities launched the Banking program, which essentially sought to replace cash with digital money. It seemed to matter little that even a basic smartphone cost more than a year’s worth of minimum wages, or that blackouts in the interior of the country were already lasting more than 12 hours a day, severely disrupting digital payment platforms.
Three years later, it is difficult to imagine a worse situation.
“I propose that the National Bank of Cuba head the blacklist… it’s a chain reaction. If the bank doesn’t provide cash, private businesses can’t keep operating. It’s that simple,” Mailet Padilla, owner of a clothing and footwear store in Camagüey, replied sarcastically after a radio station director denounced a pizzeria for refusing to accept bank transfers.
The worst part is that, to a certain extent, both sides are right.
Customers should not be turned away because they choose one form of payment over another. Nor should businesses be unable to access the money they have deposited in banks.
Yet both absurdities have become routine in Cuba. And all indications are that they will remain so.