Cuba’s dollar divide
Associated Press : Tue Oct 15 2013, 03:00 hrs
Cuba is the only country in the world that mints two national
currencies, a bizarre system that even President Raul Castro
acknowledges is hamstringing the island’s socialist economy and must be
Exactly how to do that is the problem.
Months after Castro made currency unification a centrepiece of a
forceful address to Parliament, no details have been made public.
Since the system was created in 1994, most islanders have been paid in
national pesos worth 24 to the dollar in exchange houses, while tourists
and the Cubans who attend to them receive a much more valuable peso
pegged at 1-to-1 with the US greenback.
The imbalance means doctors and physicists can make more money driving
taxis or renting rooms than they can working in the professions for
which they spent years preparing. In his July speech, Castro denounced
the set-up as having a warping effect on the economy and society in general.
Shaking up the dual currency system risks spiking inflation and creating
new winners and losers. It would also force a change in accounting rules
that would eliminate a huge subsidy to state-run enterprises at a time
when cash is so short.
But there are signs of change. Pavel Vidal, a former Cuban Central Bank
economist now at Colombia’s Javeriana University, said a pilot programme
is being launched with select state businesses operating at a 10-to-1
The businesses are in key sectors such as sugar, hotels and
non-agricultural cooperatives. “I think it’s great because the
elimination of the double currency must be gradual,” Vidal said.
Even incremental change may be tough to pull off, and requires the
unravelling of Byzantine accounting practices that effectively allow
state companies to purchase dollars at a fraction of what ordinary
Cubans pay for them.
While the rate in exchange houses is 24 pesos to 1 convertible peso, or
CUC, the Cuban government treats them as equal in official accounts,
meaning state entities are getting them at a 1-to-1 subsidised rate.
Source: “Cuba’s dollar divide – Indian Express” –