Cuban peso hits a record low against the US dollar in informal markets

HAVANA (AP) — The Cuban peso hit an all-time low Wednesday against the U.S. dollar in Cuba’s widely used informal market, reflecting a deepening crisis as the Trump administration’s restrictions on oil imports further choke the island’s economy.

The currency hit 500 pesos to the dollar in informal channels, according to the independent news website El Toque, which provides regular updates on Cuba’s peso. That compares with about 400 last summer.

The informal rate — often negotiated on WhatsApp groups and between neighbors who bring cash from the U.S. or Europe — is used far more than the official exchange rates. Despite the government’s attempts to exert strict economic control, experts have long used the informal exchange rate as a gauge of the health of the Cuban economy.

As the country has spiraled deeper into an economic and energy crisis over the past five years, caused in large part by decades of U.S. sanctions on Cuba, the peso has dropped with it. At the same time, the Caribbean nation’s economy has become increasingly dollarized.

“It’s not good news, obviously,” said Cuban economist Ricardo Torres of American University in Washington. “Many things are already being sold directly in dollars even though most Cubans do not have stable income in dollars.”

The Cuban peso’s plunge in the informal market deals a blow to residents already struggling to scrape by. The average state salary is around 7,000 Cuban pesos — now about $14 on the informal market — and a carton of eggs costs 3,000 Cuban pesos.

Cuba has three official exchange rates in a complex system that many residents struggle to understand, ranging from 24 pesos to the dollar for certain business transactions to a new 455 pesos rate implemented in December in an effort to compete with the informal rate.

Yet, most people still use the informal market.

The peso began to dip further after a U.S. military operation on Jan. 3 in Venezuela deposed former President Nicolás Maduro, and U.S. President Donald Trump announced that no more Venezuelan oil would go to Cuba, cutting the country off from its key ally. The day of the operation, the Cuban peso was at around 438 pesos to the dollar.

Then at the end of January Trump threatened to slap tariffs on any nation providing Cuba with fuel, prompting Mexico to cut off shipments to the island, though Mexico has continued to deliver other aid to Cuba.

What came next was a gradual descent into turmoil in just a span of days.

Last week, Cuba’s government announced it would only sell limited amounts of gasoline in dollars and other foreign currency. Cuba announced it no longer had enough oil to refuel airplanes, prompting flight cancellations from across the world and cutting the island off from its key economic engine: tourism.

Public transport in Havana has largely been slashed. Endemic blackouts have become longer and grown more frequent. Banks have cut operating hours. Cultural events have been cancelled and many classes have gone remote.

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