Bankarization of Cuba: myths and realities about the shortage of banknotes

Bankarization of Cuba: myths and realities about the shortage of banknotes

Published on 06 Sep 2023

Protecting the environment or political play?

“If you use cash to pay the electric bill, you harm the environment. Let’s not sacrifice more trees to produce paper”, announced last Friday, August 18, the Empresa Eléctrica de La Habana on its Facebook profile.

That same day, the president of the Central Bank of Cuba, Joaquín Alonso, claimed that “the currency used in the manufacture of physical currency can be used for other priorities of the country”.

Said announcement was accompanied by the tags “#UnaColaParaQué?” (Waiting in line for what?), “#CeroEfectivo” (Zero cash) and “#TeLoPonemosFácil” (We make it easier).

In the midst of the severe economic crisis on the island, with an unprecedented inflation, a process of bankarization is added that leaves two thirds of the Cuban population, more than seven and a half million inhabitants, who do not receive remittances from abroad, in clear vulnerability.

What is happening?

Although the pro-government press would have kept a fierce silence, there was already a shortage of banknotes in the country, so the authorities bet on digital banking.

At the beginning of August 2023, the first signs of the so-called bancarization began: dozens of people denounced in the social networks the lack of cash in the ATMs, and many had to borrow money to buy food, since they could not withdraw their salaries.

In other cases, the ATMs issued bills with half of them blank, a printing error supposedly due to lack of ink.

Finally, on August 3 of this year BCC Resolution 11/2023 came into force, which establishes limits for cash collections and payments in local currency, as well as for deposits, withdrawals and holdings.

The official “justification”

At the end of last July, in a public report before deputies of the unicameral Cuban parliament, the president of the Central Bank of Cuba affirmed that in the last two years 1,000 million pesos had left the bank – through the extraction of salaries, withdrawals from accounts of economic actors to buy goods, etc. – which have not returned, for which reason bankarization was proposed to “make transparent the money that leaves and does not enter”, because “all the cash that is staying outside the bank is propitious for not very orthodox activities”.

The head of the Central Bank of Cuba added that fiscal policy cannot be seen separately from monetary and credit policy, and the first thing we have observed is that we have to make finances transparent and those are causes that generate the effects we see today linked to bankarization”.

The regime receives help from China in narrative on bankarization

To investigate the nature of the conversation around this process of bankarization, ProBox used keywords such as “Banco Central de Cuba” (Cuban Central Bank), “Bancarización Cuba” (Bankarization Cuba), “remesas en Cuba” (remittances in Cuba), “#CeroEfectivo Cuba” (Zero cash Cuba), “#TeLoPonemosFácil” (We make it easier), “peso cubano” (Cuban peso), “resolución 11/2023 Cuba”, among others, to collect data on how the topic was reflected on Instagram, Twitter and Facebook.

As part of this, 2,377 mentions were obtained in the three social media platforms; highlighting August 7 with 132 mentions, August 22 with 125 mentions and September 1 with 117 mentions, being the main peaks of conversation within the sample. Most of this was concentrated on Facebook and Twitter.

However, what happened on August 9 went outside the average. The recorded reach of the studied keywords on banking multiplied exponentially, going from an average of 1,670,000 accounts reached to approximately 100,920,619, 59.45% more accounts and users who accessed this content in one day.

One of the main reasons for the increased reach of this issue online was a post made by the China Xinhua News account on Facebook, a Spanish-language news account of the Xinhua Agency (the main propaganda dissemination organ of the Chinese Communist Party), which has more than 95 million “likes” on this social media platform and which promoted the narrative that bankarization on the island was “necessary”. By having such a large number of people following this page, the dissemination of its publications is much greater, so sharing a post about bankarization in Cuba increased the reach of the topic by exposing it to the users of this page and the people who visit this news portal.

What experts say

The implementation of the new measure caused Cuban economists, such as Pedro Monreal, to point out that the so-called “bancarization” was a step to open the doors to dollarization on the island. For economists this will widen economic apartheid, which represents a devastating blow to the local currency and a strengthening in the implementation of the currency in daily use.

“The Cuban peso (CUP) does not ensure three key functions of money (medium of exchange, hoarding and measurement) due to underlying macroeconomic conditions, with respect to which financial digitalization can do little,” the analyst said.

Today Cuba is facing volatility in exchange rates that have reached historic highs, bringing the Cuban peso to half its value compared to 2022. This in turn is framed in an acute economic crisis of shortages of all necessary items in society.

“In ‘bancarization’ and ‘zero cash’ there is a key question that so far is not part of the official discourse in Cuba: do citizens improve their situation when they participate in financial digitalization or do citizens use it because they are in a better situation?“, concluded Monreal.

For more information on socio-political manipulation on social media, you can follow us everywhere at @ProBoxVE.

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