Cuban Central Bank urges stronger peso, fewer subsidies
Posted on Fri, May. 09, 2008
Cuba's Central Bank is urging the government to gradually unify the
island's two parallel currencies and cut back on ''indiscriminate''
subsidies, according to an internal report obtained by The Associated
Press on Friday.
The document, which was distributed to Communist Party members, says a
single, strong peso would boost productivity and morale in Cuba. The
island now has two separate currencies: one for locals, and one designed
principally for foreigners.
Party members were instructed to discuss the bank's recommendations
between April and June. One of those members provided a copy of the
document to a local journalist.
The report, a rare glimpse into the back rooms of one of the world's
last communist economies, says Cuba would be more efficient if its
currencies were streamlined. But it warns that the transition should be
gradual, with incremental revaluations to narrow the gap between the two
pesos over time.
Rumors have circulated that Raúl Castro, who replaced his brother as
president in February, is planning to strengthen the ordinary peso,
which is now worth about 21 per U.S. dollar. The convertible peso is
currently worth slightly more than a dollar.
The government controls more than 90 percent of Cuba's economy, paying
the typical Cuban state worker a regular peso salary worth about $19.50
a month. It also operates upscale grocery and department stores catering
to tourists and foreigners that charge in convertible pesos.
But because many products are not sold in regular pesos, Cubans who are
paid in that currency must buy items such toilet paper and cooking oil
at the more expensive convertible-peso stores.
As a result, many blame their low buying power on the double currency
system, fueling support for a single currency ''as a magic and
definitive solution,'' the Central Bank document said.
But to suddenly boost the peso against its convertible counterpart, the
report warned, would drive Cubans to buy expensive, imported goods at
drastically reduced prices — leaving state stores with little income to
restock shelves and sparking shortages.
About 60 percent of Cubans have access to at least some convertible
pesos, either by exchanging foreign currency from relatives in the U.S.,
or by working for foreign firms or in jobs that let them collect tips
from tourists, government figures show.
The Central Bank's report also suggests that the government reduce
''indiscriminate'' subsidies to cut state expenses and ease the burden
of strengthening the currency.
All Cubans receive the same subsidized services: free health care and
education, an inexpensive selection of basic foods, utilities and public
transportation. Few pay for housing.
The 700,000-member Communist Party plans its first party congress since
1997 in the second half of this year.