Sources of Supply and Demand in Cuba's Informal Foreign Exchange Market

ABSTRACT

Cuba's informal currency market has undergone a considerable growth in recent years, reaching a greater complexity in its organization and operation. The goal of this article is to contribute to a better understanding of the behavior of this kind of market, by describing its sources of supply and demand. Although these sources have undergone some changes depending on the situation, they have remained relatively stable, with the portfolio motive and informal imports being the main sources of demand, and informal remittances and tourism the fundamental sources of supply. In the last two years, the expansion of dollarization, the notable reduction of the good supply in pesos, the intensification of the blockade, the effects of COVID-19 and the fall in tourism, have led to transformations in this market and in the incentives, acquiring the portfolio motive and informal remittances a major role.