In financial economics, prices They can be understood from two perspectives: a deep or fundamental one that analyzes the real components of a product and values it according to the properties, patents, brands, location and other components of its value substrate, giving indications of what its long-term price is, and another more conjunctural understanding, closely related to the expectations generated by the product—be it a company, home, umbrella, bond or currency—and that mark the short-term fluctuations in its valuation.
The meteoric appreciation of dollar in the last two monthswithout a doubt, was fundamentally due to a speculative component anchored in expectations – the conviction that tomorrow will be more expensive than today – and not to a real variation in the fundamental values of the national economy.
A unofficial but growing dollarization in the face of the progressive uselessness of the Cuban pesoand the increasingly explicit symptoms of irreversible exhaustion of the system, coagulated temporarily in the certainty of a constant worsening with an imminent end – the feeling in Cuba is that this is ending – which accelerated the depreciation of a peso that depreciates at the same rate as the credibility of the Government that supports it.
The stampede towards the dollar as a way to find security in times of uncertainty led to a spiral in which each increase in the price of the dollar was interpreted as a sign that it was necessary to rush to buy more before it continued to rise, thus skyrocketing demand for that coin with the logical result of the accelerated depreciation of the peso, to the dismay of those who live on salaries and pensions, and panic of those who have businesses that depend on imports.
But like any price movement based on expectations, The dollar bull market lasted until a different idea became widespread, supporting a different interpretation of reality., which is what has materialized since last May 17, when the peso began to revalue strongly at the expense of the dollar. Now there is a speculative movement in the opposite direction.
There are three reasons behind the change in expectations.
First, an “integer effect”, the 400 peso border made many rethink their financial strategy, analyzing whether such a peak in value was justified and, above all, if it was sustainable. Whole numbers act as psychological barriers.
Second, the fierce campaign that the Government unleashed against The touch. A coordinated shoal of clarias paid and paid by State Security, plus thousands of collaborators with “oil” telephones (paid by the Government) for whose use they are required to engage in pro-Castro activity on the networks, managed to impose the idea that the thermometer (The touch) was the cause of the fever (inflation)
Third, the announcement of Western Union return. As the dollars sent in this way go directly to the pockets of GAESA, there may be an increase in the functionality of the MLC (digital dollar) that will be, once again, supported by real consumer supply in state stores and, therefore, the physical dollar loses appeal. Apart from that logical explanation, there is in the minds of many Cubans a direct association between Western Union and the dollar at 24 pesos. No matter how unjustified that notion is, the mere mention that this company would restore its services made many visualize the end of the dollar’s bullish cycle.
The same people who previously bought every dollar that appeared on this side of the Malecón wall are now desperately trying to sell them because the expectation has become widespread that tomorrow they will be cheaper. But the dollar in Cuba is not being sold because people do not want it because hope has revived in socialist Cuba. No way! They are sold to be repurchased later when they are cheaper, and thus take advantage of the bear market to end up having more dollars than before.
After all, Nothing has changed in the “cachicambeada” Cuban economy apart from the fact that there is less and less electricity, less food, less medicine, less dignity. In the long term the trend is what it is, the peso will be worth less and less and its purchasing power will continue to be destroyed, sometimes at a slow pace, sometimes at a redoubled pace, until Castroism has nothing left to destroy.
Therefore, the fall of the dollar that we are seeing – rather an adjustment – has in itself the seeds of the new rebound because, today as yesterday, lThe currency of the “enemy” is the one chosen by Cubans to protect themselves from their own governmentIt is also the most efficient mechanism to store value and transfer it over time, it is the way to import almost everything that is sold in Cuba, and of course, it is the true passport to escape from a sinking island. The dollar is our lifeline.
