Analysis. As a result of US sanctions, the dollar ‘has lost its use value’ on the island. Moving closer to Europe, Cuba is finding resistance from the content’s right-wing parties.

Cuba is deprecating the dollar for now in an attempt to strengthen EU ties

On Thursday, in a surprise move, the government of Cuba decided to “temporarily” suspend the acceptance of U.S. dollars in its banking system. “They have lost their use value,” said Marta Sabina Wilson González, director of the Central Bank of Cuba, because in the international financial circuit, the majority of banking institutions are no longer willing to accept dollars coming from the island. They are all in fear of the heavy extraterritorial punitive measures (fines of up to billions) imposed by former President Trump and maintained by the current Biden administration.

This policy was confirmed in recent days by U.S. Secretary of State Antony Blinken. The sanctions—a real economic-financial noose—against Venezuela and Cuba “will be maintained.” As a result, a few days ago, the funds allocated by Caracas to buy vaccines under the Covax UN program were blocked. Over the past two years, almost 300 international banking institutions have refused both to accept U.S. currency “contaminated” by the Central Bank of Cuba and to have any financial relations with Cuban institutions. The Biden administration’s decision to reaffirm Cuba’s inclusion on the black list of countries that are supposedly “uncooperative in the fight against terrorism” has placed further obstacles in the way of the island’s international financial transactions.

In Cuba, dollars coming from remittances from Cuban-Americans are now arriving as cash brought in illegally by the so-called mulas. The financial institution that used to convert them in Cuba, Fincimex, and the one that would use them abroad, Banco Financiero, have been subjected to “restrictive measures” by the United States. Western Union has also had to close up shop in Cuba. Therefore, U.S. currency is accumulating in the banks on the island that is de facto unusable abroad.

The new measure comes into force on June 21. It is an obvious political response to the stranglehold that the U.S. is tightening around the island. “They are dethroning ‘King Dollar’ to enthrone another,” probably the euro, says economist Pedro Monreal. The dollar continues to circulate on the island through internal transfers, especially through debit cards needed to make purchases in stores where they accept “freely convertible currency” (MLC).

Until Thursday, MLC meant U.S. dollars. Precisely for this reason, the need to have fula (the local slang for “dollars”) to buy daily necessities has caused a progressive increase in the price of the U.S. currency on the “informal market” compared to the Cuban currency, the Cuban Peso (CUP). The official exchange rate, decided by the monetary and exchange rate reform in place since January 1, is 24 CUP for 1 USD. But on the black market, it is now approaching 70 CUP. The new measure “will certainly not make the dollar go away,” Monreal warns, but will cause even more weakness of the Cuban currency.

The Cuban government is trying to give an advantage to those who operate with other currencies, especially the euro, given that the EU is the island’s main trading partner. The new reforms decided both on foreign investments and on the legalization of micro, small and medium enterprises (MPYMES), which will be able to operate together with the state-run ones, also go in this direction. In recent days, Vice Premier Ricardo Cabrisas went to France, where, according to an official announcement, he obtained the renegotiation of the agreement for the payment of debts with the Paris Club, after two years in which Cuba—due to both the pandemic and the worsening of the U.S. embargo—did not make the agreed-upon payments.

However, this policy of increasing economic and commercial relations with the Caribbean island is opposed by the European right wing, which for years has been trying to block the Cooperation Agreement and the existing political dialogue between the EU and Cuba. The issue they’re using as a lever is “the failure to respect human rights by the Cuban government.” This was again invoked on Thursday by the Spanish People’s Party and Vox, assisted mainly by the governments of Poland and Hungary (themselves under indictment by the EU Court of Justice for failure to respect the freedom of the media and the rights of women and migrants). They managed to pass a resolution in the European Parliament (with 386 votes in favor, 236 against and 59 abstentions) condemning “the existence of political prisoners, acts of repression and arbitrary detention of political dissidents” in Cuba.

This resolution, which jeopardizes the agreement between the EU and Cuba—defended by the head of EU diplomacy, Josep Borrell—was in turn condemned by the Cuban National Assembly, which accused the European Parliament of being “hostage to the small group of extreme right-wing MEPs obsessed with destroying the Cuban Revolution.” One of the issues that the European Parliament resolution condemns is the supposed “condition of modern slaves” of the doctors of Cuban brigades sent abroad—the same doctors who came to Italy to give assistance against COVID.

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