Embracing the Future: Bancarization and its Implications in Cuba
A Move Towards a Cashless Future
The Central Bank of Cuba (BCC) has initiated a process known as “bancarization,” aimed at reducing the use of cash in the country. Bancarization is a global trend that seeks to boost the use of financial services by the general populace, fostering long-term relationships and contributing to individual and national economic development. This process signifies the progressive development of a country’s financial system.
As a part of this financial culture, bancarization helps establish strategies for citizens to interact with markets and payment systems. It brings all transactions under a formal system, enabling the identification of their origin and destination. This formalization allows the state to exercise its powers of supervision against financial crimes like tax evasion and money laundering.
Interplay of Bancarization and Inflation
However, several economic aspects have unintentionally intertwined with this proposal, causing confusion among people. Persistent inflation is one such aspect that has continued to rise, much to everyone’s displeasure. Financial speculation has served as a catalyst that regulates the commodity-price relationship.
One of the significant origins of this rise in the informal exchange rate, which seems to lack an economic cause to justify it, is pure speculation. The demand, which should not have increased significantly compared to the first quarter of the year, is usually related to this speculation. On the other hand, the need to resort to imports from new economic players behaves similarly. However, their interest in importing and trading, rather than producing goods, could affect the national economy in the long term.
Factors Influencing Exchange Rates
The fluctuations in exchange rates are always due to internal and external political-economic factors, where supply and demand, regulated by price, play their part. Currently, the supply of freely convertible currency in the Cuban market has decreased. The reasons for this include fewer exports, almost non-existent tourism at this stage, low hotel occupancy rate (below 35%), and decreased remittances compared to previous years.
In summary, the already accumulated shortage of supply and production of goods, services, raw materials, and materials is coupled with a lack of monetary supply in the market. This contributes to inflation and makes the bancarization process seem like a risk.
Transitioning to Electronic Transactions
However, it’s important to remember that not all economic transactions will suddenly be done electronically, as cash transactions will still be allowed. The move towards bancarization doesn’t entirely eliminate the use of cash; instead, it encourages the populace to gradually shift towards digital transactions where possible. This allows for a smoother transition and less resistance from the citizens, ensuring a steady progress towards a more digitized economy.
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