Exchange rate inefficiency, manipulation of expectations and the fragility of the informal exchange rate in Cuba

Foreign exchange markets are spaces particularly vulnerable to information failures, irrational expectations and speculation. Although it is often assumed that the exchange rate reflects a rational equilibrium between supply and demand, empirical evidence accumulated over decades demonstrates that even the most liquid international markets are far from efficient.

Much more fragile and susceptible to distortion are informal markets, where the absence of regulation and dependence on weak signals turn price formation into a process that is manipulable, persistent and with profound effects on the population.

1- When the informal market substitutes the formal one, inefficiency multiplies

In economies where the formal market disappears, is restricted or operates at artificial rates, a parallel market inevitably arises which operates without regulation, without verifiable volumes, without transparency and without an institutional operator to guarantee stability. Various studies on informal markets in Latin America, Africa and Eurasia concur that these spaces are profoundly volatile, highly fragmented and extremely sensitive to manipulation.

The lack of reliable information turns any signal into a potential trigger for disproportionate movements. In systems with limited supply and widespread demand, that signal can come from a tiny group of actors or even from a single person with the capacity to influence the dominant narrative.

Additionally, it has been demonstrated that parallel currency markets can operate for long periods without converging towards real fundamentals, driven by informational shocks, uncertainty and self-reinforcing expectations. The smaller the volume of real transactions, the more weight the signals that guide collective perceptions have.

2- Manipulating expectations in informal markets is simple

In environments where no verifiable data or institutional mechanisms to contrast information exist, expectations are formed from narratives. Behavioural economists have demonstrated that, under conditions of deep uncertainty, agents react more to repeated stories than to real fundamentals.

In an informal market, manipulation does not require large financial operations. It only requires altering the informational signal that guides the public’s perception. Prices can move without a single dollar circulating. Whoever controls the signal controls the market.

3- The Cuban exchange market: fragile, distorted and prone to manipulation

In Cuba, the absence of a formal market with sufficient liquidity has forced the population to be guided by «alternative» signals, such as the rate published by the digital portal El Toque. However, its methodology presents structural flaws:

– The data does not come from real transactions, but from spontaneous advertisements.
– The sample is small, highly biased and vulnerable to manipulation.
– There is no identity verification or price authentication.
– There is no way to distinguish real operations from deliberate disinformation strategies.
– An inappropriate method for eliminating outliers is used for data with heavy tails. In practice, this filtering tends to eliminate values that contradict the dominant trend, which makes it easy for an interested actor to repeatedly publish signals in the same direction, until the median is displaced.
– The rate functions as a self-fulfilling prophecy. Once published, many sellers adjust prices without questioning the validity of the signal.

El Toque has an evident political agenda and has received funding from organisations linked to the United States Government, which introduces an additional bias in its actions within the Cuban informational ecosystem. In such environments, distortions do not disappear by themselves: they can be prolonged for years, because nothing within the market itself forces a correction.

The impact on the population ends up being profound, because for long periods millions of people adjust prices, wages and consumption decisions taking a distorted exchange rate as a reference. This amplifies inflation, reduces purchasing power and aggravates day-to-day economic instability.

4- Impact on the population and inflation

Although El Toque is not the cause of the Cuban economic crisis, it does contribute to intensifying it. By becoming a national reference, its rate is immediately transferred to the prices of imported goods, private services, food and essential products. This generates an inflationary effect that propagates throughout the entire country, even in provinces where the conditions of foreign currency supply and demand are completely different. The single signal produces homogeneous inflationary pressure, amplifying distortions and affecting the population’s purchasing power.

5- The Cuban crisis is structural and multidimensional

The country’s economic situation is not reduced to the exchange rate, and it is worth emphasising this because no official media suggests otherwise. However, a portion of those who react against any questioning of El Toque insist on presenting these criticisms as if the portal were being blamed for all the country’s problems.

That interpretation is false and serves only to divert the conversation: denouncing informational manipulation does not imply denying the deep causes of the crisis, but rather pointing out an additional factor that aggravates it. The Cuban economy carries accumulated imbalances over time that affect areas such as production, energy supply, internal logistics, the functioning of the financial system and access to foreign currency.

While there are internal errors that contribute to these difficulties, the factor that most conditions the economic panorama is the prolonged impact of the US blockade, which restricts external income, raises financial costs, limits possibilities for international payment, hinders access to markets and pressures the country on all economic fronts. This adverse environment amplifies any internal disturbance and increases dependence on the informal market.

6- Do not wait passively: it is necessary to denounce manipulation

Exchange rate stabilisation requires an institutional solution, but also an immediate response from the citizenry, academia, responsible media and economic institutions. It is not enough to wait for the Central Bank to implement a formal market; the problem demands action before that happens.

Exposing the methodological weaknesses, political biases and opacity of the actors who influence the perception of the exchange rate has a direct effect on market dynamics. By doing so, the margin for manoeuvre for those seeking to manipulate the signal is reduced, public awareness of informational distortions is increased and the tendency for parallel prices to become an automatic and uncritical reference is limited.

Making the problem transparent also contributes to decoupling, at least partially, the behaviour of people and businesses from a signal that is not based on real transactions. The more the mechanisms of manipulation and informational arbitrage are known, the greater the population’s capacity to question, compare and not react automatically to a figure whose validity is uncertain. This reduces the inflationary impact that derives from the blind adoption of the informal exchange rate as a universal price guide.

While the Central Bank sets up a formal exchange market, there are measures that can help contain the problem. The first is to clarify how prices are actually formed and what information is reliable. It is also useful for concrete data about the economy to circulate and for specialists to publicly explain when a signal is solid and when it is simply noise.

None of this substitutes for a well-designed exchange rate policy, but it does help to lower the tension. It helps to limit the impact of rumours, stops the automatic reproduction of inflated prices and prevents people from making important decisions based on figures that do not reflect real transactions.

Public scrutiny, informed criticism and the exposure of defective methodologies do not solve the root of the problem, but they do reduce its severity while the definitive response arrives. Every step that weakens the influence of a manipulable signal is a step in favour of the immediate economic stability of the population.

The only real solution: a formal, floating, transparent exchange market backed by liquidity

Once an official exchange market is established by the Central Bank, actors with high purchasing power and clear agendas will attempt to destabilise the new rate. This behaviour is widely documented in vulnerable markets. For this reason, the official rate must be floating, transparent and sustained by real economic fundamentals: foreign currency inflows, balance of payments, internal productivity and available liquidity. Only a well-founded rate will be able to sustain itself over time, even under a hostile environment and under deliberate attempts at destabilisation.

The definitive solution is not in digital platforms or informal signals. The only way out is for the Central Bank to regulate a functional exchange market, based on real transactions and backed by sufficient liquidity.

This is the only path capable of disciplining the informal market, reducing its capacity to distort prices and protecting the population from external manipulations and from narratives that seek to erode the country’s stability.