Es Complicado

Spend enough time in Cuba and you’ll notice a few phrases that often pop up in conversation: Es complicado (it’s complicated), Resolver (to resolve; to get by), and Asi es Cuba (that’s Cuba; just accept the idiosyncrasy for what it is). As much as their frequency may border on overuse, these phrases’ ubiquity serves as a constant reminder of the many daily frictions in Cuban life.

Take communications, for example. Nothing quite sums up es complicado as trying to access the internet. Much like any other good or service in this country, the government controls access. Students receive free internet at universities, but the average Cuban citizen needs to follow a few steps before being able to log on. First is the half-hour queue at the local telecommunications office where one can purchase a maximum of 3 internet access cards – good for one hour each. Whether using the state-provided WiFi in public parks or a personal router at home, everyone needs a card. No card, no internet. Fortunately for tourists, select hotels provide their guests with enough internet hours to last the duration of their stay. Sadly, this connection is fairly unreliable and has proven quite the challenge to posting as a traveling blogger.

With such restrictive measures placed around traditional internet access, it might come as a surprise that 3G cellular data is available in Cuba. Introduced in late 2018, 3G has served as an inflection point in Cubans’ access to the outside world and their overall level of connectivity. Many Cubans, however, cannot pay for a SIM card and can still be found at all hours of the day and night using the internet in public parks.

1 hour of internet = 1 CUC (I interpret the image as a critique of modern overconnectedness)

Another facet of life in Cuba is its currency system. Cuban citizens purchasing goods and services within domestic sectors use the Cuban Peso (currency code: CUP). Tourists, foreign investors, and those operating in the international sector use the Cuban Convertible Peso (CUC). That’s pronounced “kook” – a source of constant amusement when divvying up our dinner/bar bills. While officially 1 USD = 1 CUC = ~25 CUP, things are – of course – a bit more complicado.

The FX conversion process for foreigners isn’t exactly straightforward. A 10% “embargo tax” is added to all USD transactions so, also taking into account the bid-ask spread, 100 USD will get you roughly 86 CUC. Our group applied a little resolver to this situation and tried to bring as much non-USD currency as possible. All those spare Euro, Swiss Francs, and Canadian dollars we had lying around helped save 10% on conversion. Cuba’s a cash economy and, if you’re American, ATMs are of no use here due to OFAC restrictions. So plan ahead and convert with care if you expect to spend time on the island.

Pesos vs. Convertible Pesos
Note the reverse faces of the bills: locals see armed uprisings while foreigners see energy innovation

As mentioned, 1 CUC = ~25 CUP. Other than an enterprising taxi driver who chooses to give you change in CUP rather than CUC (as happened to someone in our party; in his defense, the bills look quite similar in the dark), the two currency systems did not interact very often. Until very recently, private companies operating under the CUC did not interact with state-run enterprises no the CUP. While this disconnect might not seem meaningful at first, it ultimately serves as an impediment to comprehensive analysis of the Cuban economy. Results are further obscured by official books and records that consolidate the Cuban economy at a 1:1 ratio for CUC:CUP. Cuba’s two currencies have a very clear disconnect between official records and reality, but the situation gets even murkier when one considers exchange from CUC to foreign currency.

Foreign investors in Cuban enterprises are not always free to convert their CUC profits back to the currency of their choosing – the Cuban government may limit the amount or timing of the conversions. While this is technically a restriction on access to and repatriation of profits, it can also be understood as an implied devaluation of the CUC. By running a dual currency system split along domestic / international economic lines and by limiting the convertibility of a “convertible” currency, it becomes very challenging to evaluate Cuba’s economy relative to the rest of the world. Due to this lack of meaningful data, Cuba ultimately has trouble planning for the future.

Whether it’s getting on Instagram or paying cash for a cortado, Cuban life can get complicado. Moreover, what may seem to be a minor issue from a tourist’s perspective often signals a broader issue with potentially major implications. We’re seeing good progress on the internet front with the introduction of 3G and – hopefully – 4G in the coming years. The currency system is a known issue that we can only hope will be rectified in the near future. As for now, we will continue to enjoy our brief respite from the demands of cell phone notifications (those of us who didn’t buy a SIM card, at least) and we will happily spend our CUCs on coffee and mojitos. Things might be complicado now, but we’re hopeful for what tomorrow holds.

Casey Buckley is a 2020 MBA Candidate at Columbia Business School

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