Cuba cuts hard currency peso to par with dollar

Posted on Monday, 03.14.11

Cuba cuts hard currency peso to par with dollar
By PAUL HAVEN
Associated Press

HAVANA -- Cuba's central bank is devaluing the country's two types of
peso by about 8 percent in relation to the dollar and other foreign
currencies, hoping the move will spur exports and local production as
the government seeks to overhaul a moribund economy.

The announcement published in state newspapers on Monday says the
hard-currency peso used mostly by tourists and foreign companies on the
island will now be worth $1, down from $1.08. Each hard-currency peso is
still worth 24 of the standard pesos with which most Cubans are paid in
an unusual two-tiered currency system.

It was the first time the government has revalued the currency in six
years, when it increased the nominal value of its currency in relation
to the dollar. Monday's shift puts the exchange rate back to where it
was before.

The move could be a boon for the island's crucial tourism industry by
making trips more affordable, and it will also increase the peso value
of remittances sent from abroad, a key lifeline for many cash-strapped
Cubans working for salaries of about $20 a month.

Neither Cuba's dollar-pegged peso or its normal peso are traded on
international markets, so when the island's government purchases items
for import, it must do so in dollars, euros or other hard currency.
Monday's decision will make such imports more expensive, but the bank
said the government hoped to ease the effect by boosting productivity at
home.

Cuba has cut its food and other imports by more than 30 percent in
recent years.

The statement said that the country's economic woes, exacerbated by the
effects of three monster hurricanes that struck in 2008 and the global
financial crisis, had forced the bank to maintain an exchange rate that
"did not correspond to the country's current economic conditions."

The bank said that despite Cuba's economic woes, the government had
managed to resume payments to foreign companies that had seen their
payments blocked and accounts frozen the year before.

It also said the country had managed to renegotiate its foreign debt,
though it gave no details. Cuba does not release statistics on foreign debt.

Cuba is in the midst of a major overhaul of its economy.

The communist government has made it easier for tens of thousands of
Cubans to work for themselves in the private sector, albeit in a limited
number of jobs. It has also said it wants to eliminate half a million
public sector jobs, though President Raul Castro acknowledged recently
that the plan had been beset with problems and would be delayed
indefinitely.

One of the long-term goals is to eliminate the two-tiered currency system.

http://www.miamiherald.com/2011/03/14/2114398/cuba-cuts-hard-currency-peso-to.html