The Economy of Cuba
The Dual Currency and the 2021 Monetary Reform
For decades, Cuba had two currencies, the peso for locals and the convertible peso for tourists, and it abolished the dual system in 2021, triggering inflation.
A complex system unwound.
Two currencies
The convertible peso (CUC) was worth about a dollar, and the peso (CUP) much less.
Distortion
Firms used different exchange rates, hiding losses.
Unification
In January 2021, the CUC was abolished and the peso devalued.
Result
Prices soared and a black market for dollars grew.
Two rates
A state firm could report profits at one exchange rate and losses at another.
Assuming currency unification alone fixes distortions
Supply constraints remained.
Key takeaways
- Cuba had two currencies.
- They were unified in 2021.
- Inflation rose.
- A parallel market emerged.
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