Cubans give muted welcome to end of 'convertible peso' dual currency system

25.10.2013 15:42

HAVANA - Cubans gave a cautious
welcome Tuesday to plans to phase out
the country’s confounding dual
currency system as part of reforms
aimed at fixing the island’s economy.
The beginning of the end of the twin
system of domestic pesos (CUP) and
"convertible” tourist pesos (CUC) -
which are 25 times more valuable and
are tied to the U.S. dollar - was
announced in a government advisory,
published in the official Granma
"If this changes the economy then it is
welcome," said Antonio Martinez , 32,
a farmers’ market trader in Havana.
Silvia Rodriguez, 34, a cafeteria
cashier, said: "I do not care about if
it’s the peso or whatever. What
interests me is if everything improves –
my financial situation, that of my
people, and that there be free
movement of money."
The dual currency system has existed
since 1994, after the collapse of the
Soviet Union ended lucrative trade
deals – forcing Cuba to open its
economy to tourism while trying to
preserve its centrally-planned ethos.
Workers are paid in domestic pesos,
forcing professionals such as doctors
and teachers to moonlight as cab
drivers or private tutors to supplement
their state salaries.
Tourist pesos are used for foreign
trade, including imported electrical
goods, and upscale restaurants.
Neither currency is legal tender
outside Cuba.
Many imported goods can only be
bought in CUCs, creating a social
divide between ordinary Cubans and
those with access to the much more
valuable currency.
Raul Castro has denounced the setup
as a hindrance to the country's
development since he took over from
his brother in 2008. However, any
changes bring the risk of high
"Cuba has been under pressure to
reform for years, and this is a major
change,” said Vicki Huddleston, a
former U.S. diplomat who served as
Principal Officer of the U.S. Interests
Section in Havana for three years. “It
will bring Cuba closer to the rest of the
hemisphere in terms of being able to
operate as a market basis, and of
course its entire history is based on it
not operating on a market basis.
“In essence it means devaluation,
affecting the value of pensions and
remittances from overseas. It will be a
difficult change to manage.”
The announcement said the
government would give notice of any
devaluation of the CUC, giving people
time to convert their stockpiles.
Reuters / Desmond Boylan
A U.S.-made car, used as a private
collective taxi is driven beside a
billboard in Havana, September 30.
It says the first step will be to retool
the country's computerized accounting
system and records-keeping. Some
four million state workers on the island
– total population just over 11 million -
will continue to be paid in Cuban
domestic pesos.
Edilia Nava, 61, an accountant in
Havana, said the changes were
“necessary” and that some businesses
have already begun to prepare for
changes to the value of the tourist
peso (CUC). “However, it appears that
[shops that use the CUC] aren’t going
away, so we’ll have to see how prices
settle, and what the impact is on
Juan Molina, 45, a gas station
attendant, said: "It is about time this
rumor finally became true. I like the
idea that our ordinary national
currency will be used everywhere and
that we will not have to change it into
CUC to buy things. I support the
change, but we must check that prices
do not rise while wages remain as low
as they are.”
Madelaine, 27, a primary school
teacher who didn’t want to give her
last name because she is a government
employee, said: "I think it is good that
the Cuban peso be the one that
matters, although for me what is
important is that my salary have real
value, and that it allows me to live,
which until now it does not. Let’s see.”
The government has already begun
pricing more goods and services in
pesos and collecting taxes in pesos,
Reuters reported.
Since 1968, when Fidel Castro
nationalized all industries, Cuba’s
centralized government has dominated
all commerce on the island, big and
small – from the corner bakery, repair
shops and shoemakers to the nickel
mines, electric generation and steel
Cuba provides free healthcare and
education, but its economy is
hampered inefficiencies and a
longstanding U.S. trade embargo.
Average state salaries are the
equivalent of $20 a month.