Economist explains what is happening (VIDEO)

Economist explains what is happening (VIDEO)
Economist explains what is happening (VIDEO)

In the last week the US dollar and the euro have been losing value in the island’s informal market but economist Pavel Vidal, former employee of the Central Bank of Cuba, assures that this will not directly impact people’s lives.

It is nothing more than “a stop along the way but things remain the same,” comments the expert and clarifies that he does not believe that these variations “are going to significantly appreciate the Cuban peso or change its trend.”

“It will not influence whether there is less inflation or whether the private sector has less costs,” he says.

After a few days of stabilization at maximum exchange rates of 395 pesos per dollar and 402.5 per euro, according to the calculation of the independent media elTOQUE, both currencies woke up this Thursday at 360 and 370 pesos, respectively.

Vidal, a university professor in Colombia, clarifies that since 2022, similar processes have occurred six times. “One looks back and the trend of the Cuban peso is towards depreciation. There is a chronic deficit of dollars in the market and the government is issuing pesos to finance public spending. That means that the predominant trend is depreciation, but sometimes these temporary corrections are given.

For the economist, these changes are almost never motivated by “real factors.” In most cases, he indicates, it is the product of “some news that generates a different expectation” and modifies what is called “market sentiment.”

But it is nothing more than “a very short-term movement associated with a change in expectations.” This time “Western Union’s announcement that it would resume remittance services to Cuba” could have been influential.

Given the criticism of those who determine the movements in exchange rates in the Cuban informal market, Vidal considers that they are nothing more than “illusions.”

“It is a decentralized market, in which thousands of people participate in WhatsApp, Telegram and Facebook groups. It is competitive, no one can control it, everyone participates as a “price taker.” But there is no type of oligopoly and, much less, a monopoly”.

Only the government, he explains, “can change this situation” through fiscal and monetary policies, but by not having applied the necessary reforms “it has done almost nothing to stop inflation.”

“The fundamental thing is to reduce the fiscal deficit. Since 2015 it has been growing because the government spends more than it earns… Then, with the effects of the pandemic and the failure of the ordering task, it went off all scales and they have been financing it with the issuance of money,” clarifies the economist.

“Sometimes they do not even have the capacity to print everything that is needed. And there is the gap, the main imbalance that generates inflation. There are many factors, but by far this is the factor that depreciates the market exchange rate the most. informal. This imbalance in the government’s finances, which is financed with Cuban pesos,” he concludes.

 
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