Cuba announces move toward currency unification

Posted on Tuesday, 10.22.13



Cuba announces move toward currency unification

BY ANNE-MARIE GARCIA

ASSOCIATED PRESS



HAVANA -- Cuba's government announced Tuesday that it will take the

first small, symbolic step toward eliminating a two-currency system that

has become an uncomfortable manifestation of economic inequality on the

island.



President Raul Castro said this year that the communist government must

scrap the system, in which businesses driven by trade with foreigners

use a currency known as convertible pesos that is pegged to the U.S.

dollar. Most of the rest of Cuba's heavily subsidized communist economy,

meanwhile, uses ordinary pesos worth about 5 cents each that cannot be

directly converted into foreign currencies.



The system was designed to allow Cuba to receive hard currency needed

for international trade from the outside world while insulating the rest

of the communist economy from market influences.



Currently, Cubans who work in businesses that trade with foreigners

generally receive higher earnings paid in convertible pesos and use that

currency to acquire goods from stores and other establishments that only

accept that money.



Those goods are more difficult to buy for many government employees who

earn lower salaries in less valuable regular pesos, although a growing

proportion of them have been receiving additional performance incentives

in convertible pesos.



The government did not specify which currency it planned to get rid of.



But the official newspaper Granma said that the government's first step

would be to allow several businesses that currently accept only

convertible pesos, known by their Spanish acronym as CUC, to do business

in ordinary Cuban pesos, or CUP.



The official exchange rate of 24 ordinary pesos to the dollar will

remain in effect, Granma said, meaning the goods themselves will remain

out of reach for Cubans without access to the foreigner exchange-driven

economy, which includes millions of dollars a year in remittances from

relatives in the United States and other countries.



"Experimentally, in select locations, cash payments in CUP will be

allowed to take place," the paper wrote.



The double monetary system was established in 1994 amid an economic

crisis sparked by the fall of the Soviet Union, which heavily subsidized

Cuba for decades.



Cuba has said virtually nothing about how it will adjust the two

currencies' exchange rates to prevent economic shocks. Granma assured

readers that "the confidence of people who have maintained their savings

in Cuban banks, in CUC, in other international currencies and CUP, will

remain intact" and government subsidies of basic goods and services

including food staples would continue.



Employees of a Havana bank that deals mostly with convertible pesos told

The Associated Press Tuesday that they had recently received training in

how to conduct more transactions with ordinary pesos, although they had

not been told when they would put that training into effect.



Cubans on the streets of the capital said they welcomed the government

announcement but saw it as a slow and incremental move toward broader

change.



"For the moment I don't see any great changes. It'll take a while for us

to end up with a single currency," said state worker Manolo Rivera, 49.

"They are taking a first step toward establishing and formalizing it."



Correspondents Andrea Rodriguez and Michael Weissenstein contributed to

this report.



Source: "HAVANA: Cuba announces move toward currency unification - Cuba

- MiamiHerald.com" -

http://www.miamiherald.com/2013/10/22/3704186/cuba-announces-start-of-currency.html