Cuba's two-currency system adds up to a social divide

COLUMN ONE
Cuba's two-currency system adds up to a social divide
Javier Galeano / Associated Press
By Carol J. Williams, Los Angeles Times Staff Writer
May 8, 2008

Those who earn the old peso are seeing its purchasing power decline. To
them, powdered milk and sweet potatoes are luxuries.

HAVANA -- Pushed to the fringes by a money-driven social divide, Rosa is
what Cubans call a "marginal" person.

She's lived all of her 72 years in a shabby enclave of Marianao, a
neighborhood where crude wooden cottages, their rotting boards held
together with coats of paint, descend into a gully strewn with refuse
and sewage.

Her two-room shack was an early gift of the revolution, back when the
idealistic brigades of social levelers were at work lifting the poor and
teaching the long-neglected how to read and write and care for their
children. Rosa's sturdy metal-framed eyeglasses, a more recent state
handout, magnify tired gray eyes that turn to Cuba's three state-run
channels for diversion now, having lost the desire to read because of a
dearth of books and practice.

Widowed 22 years and left with only a tethered mongrel named Mochito for
company, Rosa is among the considerable ranks of Cubans in the country's
population of 11.2 million who find themselves lost in poverty as the
flow of money from trade, tourism and the black market has broken its
once-egalitarian foundation.

The problems faced by Rosa and others like her, complicated by factors
such as the country's loss of Soviet aid years ago, appear to be getting
worse. Cuba's system of two currencies may be at least partly to blame.

Cuba uses the dominant convertible peso known as the CUC -- introduced
four years ago to replace the U.S. dollar, which had been circulating
for more than a decade -- and the Cuban peso known as moneda nacional.

Those with jobs in hotels, airlines and shops and on the thriving black
market earn CUCs, referred to as "the dollar" and worth about 25 times
the peso. The peso is the currency given to all state workers and
pensioners, which must be converted to CUCs to purchase most goods. The
Cuban government retains the peso because it lacks sufficient foreign
reserves to back and circulate only CUCs.

The U.S. dollar, which circulated in Cuba from the mid-1990s to late
2004, was removed by then-President Fidel Castro and now is subject to a
10% tax whenever it is converted to CUCs -- in effect a devaluation by
the state. The tax is felt most by tourists and the estimated 10% of
Cuban households receiving money from relatives abroad.

Those like Rosa, who have neither foreign benefactors nor the vigor to
run their own dollar-earning schemes, watch the buying power of their
moneda nacional recede each month as more goods become available only
for "dollars."

Rosa survives on her late husband's 164-peso monthly pension, about $7,
and the ever-shrinking basket of staples issued by the state each month.

"The rice is gone in 10 days, and then only if I'm careful," laments the
widow, stout from a diet of bread rolls and rice. "What I have after the
electricity is paid I spend on food, nothing else."

Like many Cubans, Rosa won't tell a foreigner her full name for fear of
official retribution, although it's difficult to imagine how her
circumstances could worsen.

Dressed in a faded blue floral dress worn thin as a hankie, beige socks
and flip-flops advertising Cuba, she spends her days washing the
concrete-slab floor of her hovel and cooking rice for her two daily meals.

For the first four days of each month, she boils a single cup of coffee
at midday from the quarter-pound packet that is her most treasured item
in the ration basket. She quickly uses the two cups of beans, the small
bottle of cooking oil and the single chicken leg.

Once the ration of rice runs out, she must convert her pesos to CUCs to
buy food for the rest of the month. She subsists mostly on rice simmered
in bouillon, along with the single white bread roll she can collect each
morning from the state bakery at the top of her alley.

Her joy, she says, is having a few precious minutes with one of her
eight grandchildren on the rare occasion when her daughter or one of her
two sons can take time from their own daily scramble for sustenance to
visit. Another reprieve is sweet potatoes, to break the monotony of her
meals, an indulgence she affords herself once a week if nothing has come
up to divert her meager funds.

She takes her rice from a chipped earthenware bowl as she sits on a
lumpy, sheet-covered sofa, the black-and-white TV in the corner switched
to one of the three state channels. She pays little attention to which
one it is tuned to; often all carry the same official speech or cultural
program.

A two-burner gas hot plate on the dented metal counter is the only
appliance in the kitchen. A small fridge, dotted with plastic
beer-bottle magnets, stands kitty-cornered in the sitting room,
unplugged to save on the power bill as there is seldom anything
perishable in it. A towel draped across the top displays a collection of
white ceramic figurines and a candle. A scrawny calico cat she never
bothered to name probes the scrubbed floor in fruitless pursuit of a
dropped morsel.

Scavenging her sustenance is both an ordeal and an occupation for Rosa.
For all but the few grains and tubers that can be bought with the old
pesos, she must change her monthly pension for CUCs.

The nearest market is about a mile away, a trying journey for a woman
with diabetes, hypertension and depression. Rice was only 12 cents a
pound recently, but she goes through half that much a day after the
ration runs out, and it costs her nearly a quarter of her monthly
pension. Vegetables and fruits are only a few pesos a pound or apiece,
but they consume most of the rest of her money.

Powdered milk is an unimaginable luxury at more than $7 for enough to
make a gallon, and even the least desirable cuts of meat thick with
flies on the butcher block cost nearly $2 a pound. The single serving of
chicken and six eggs provided in the ration are usually her only protein.

The closest clinic that will treat her is three miles away, a difficult
distance considering that public transportation does not reach her at
the bottom of her steep, rutted road.

"The buses don't come down here," she says of the narrow, descending
alley that drops off on one side into a culvert.

Medical care in Cuba is free, but Rosa pays with her time, waiting
outside all day until the public service doctor can see her. The pills
to combat depression cost about 50 cents each, and a vial of 15 would
use up her entire monthly income. She rarely buys them, preferring to
spend the money on food.

She walks to the market and the clinic when she needs to, saving the
one-peso fare for the food budget.

With other wooden and stucco hovels like hers lining the alley, no
vehicle wider than the Russian-made Lada owned by her neighbor's nephew
can make it within 200 yards of her porch, which consists of a concrete
slab surrounded by a rusted chain-link fence and is padlocked against
nocturnal dangers.

Across from Rosa's house of whitewashed wooden slats and closed louvers,
three men are perched on concrete stumps that once supported fencing.
Each sips from his own bottle of cheap rum, warily watching the
unaccustomed visit by two strangers with the Lada driver.

Unlike younger Cubans or those with marketable skills like hairdressers
and seamstresses, Rosa has no means of boosting her income.

Her oldest son, Carlos, 51 and disabled, often spreads a few humble
wares for sale on a tea towel on Rosa's porch: lollipops, bouillon
cubes, gum balls and, from his mother's ration basket, cigarettes, which
are given only to those older than 60. He sometimes takes in 25 or 30
pesos, which he can convert to a single CUC to buy his own family supper.

"He can't help me much. We all have the same conditions," says Rosa,
explaining with a mother's protectiveness why Carlos keeps her cigarette
proceeds.

The government of Raul Castro, the 76-year-old younger brother of the
ailing Fidel Castro, has acknowledged since Raul was named president in
February that the two-currency economy has produced social strains and a
class divide. He has pledged to restore equality by reunifying Cuba's
monetary system.

Many foreign economists, however, deem that impossible unless everyone
is forced back to the dysfunctional system in which prices are
arbitrarily fixed by the state and goods disappear from stores when
their production cost exceeds what they can sell for.

Havana shops today are full of luxuries Cubans hardly knew about when
Soviet subsidies and communist-bloc trade reliably provided the basic
necessities. Microwave ovens, cellphones, Chinese-made appliances and
European foods now perch alluringly on store shelves, albeit at prices
only the minority of Cubans flush with CUCs can afford.

Rosa laughs at the absurdity of owning anything more than the few
comforts already in her home: the TV, the refrigerator and a telephone.
She prefers the old days, without the tease of goods she cannot afford.

"It was better before," Rosa says.

carol.williams@latimes.com

http://www.latimes.com/news/printedition/front/la-fg-peso8-2008may08,0,7159782,full.story