The government of Cuba has announced the date - 1 January 2021 - for its planned reform to unify the country's multiple-exchange-rate system into a single devalued exchange rate. The so-called convertible peso (CUC), which has been fixed one-to-one against the US dollar for three decades - and with which expatriates will be most familiar - will be scrapped, leaving the Cuban peso (CUP) as the sole currency. Its exchange rate will be fixed at USD 1 / CUP 24.
The devaluation is likely to send inflation soaring, possibly into triple figures, and could promote increased dollarisation of the economy. As the new exchange rate will not be allowed to fluctuate according to market sentiment or economic conditions, there is a strong possibility it will become overvalued, perhaps prompting development of a black market for hard currencies offering fairer value. However, the authorities have been able to suppress such illicit markets in the past.
The reform is seen as a necessary measure to stabilise the Cuban economy long term, but could bring serious short-term hardships, especially for the poor.
If you need guidance on remunerating international staff in Cuba or anywhere else, please do get in touch.