Cubans give muted welcome to end of 'convertible peso' dual currency system

Cubans give muted welcome to end of 'convertible peso' dual currency system

By Orlando Matos, Mary Murray and Alastair Jamieson, NBC News



HAVANA - Cubans gave a cautious welcome Tuesday to plans to phase out

the country's confounding dual currency system as part of reforms aimed

at fixing the island's economy.

The beginning of the end of the twin system of domestic pesos (CUP) and

"convertible" tourist pesos (CUC) - which are 25 times more valuable and

are tied to the U.S. dollar - was announced in a government advisory,

published in the official Granma newspaper.

"If this changes the economy then it is welcome," said Antonio Martinez

, 32, a farmers' market trader in Havana.

Silvia Rodriguez, 34, a cafeteria cashier, said: "I do not care about if

it's the peso or whatever. What interests me is if everything improves –

my financial situation, that of my people, and that there be free

movement of money."

The dual currency system has existed since 1994, after the collapse of

the Soviet Union ended lucrative trade deals – forcing Cuba to open its

economy to tourism while trying to preserve its centrally-planned ethos.

Workers are paid in domestic pesos, forcing professionals such as

doctors and teachers to moonlight as cab drivers or private tutors to

supplement their state salaries.

Tourist pesos are used for foreign trade, including imported electrical

goods, and upscale restaurants. Neither currency is legal tender outside

Cuba.

Many imported goods can only be bought in CUCs, creating a social divide

between ordinary Cubans and those with access to the much more valuable

currency.

Raul Castro has denounced the setup as a hindrance to the country's

development since he took over from his brother in 2008. However, any

changes bring the risk of high inflation.

"Cuba has been under pressure to reform for years, and this is a major

change," said Vicki Huddleston, a former U.S. diplomat who served as

Principal Officer of the U.S. Interests Section in Havana for three

years. "It will bring Cuba closer to the rest of the hemisphere in terms

of being able to operate as a market basis, and of course its entire

history is based on it not operating on a market basis.

"In essence it means devaluation, affecting the value of pensions and

remittances from overseas. It will be a difficult change to manage."

The announcement said the government would give notice of any

devaluation of the CUC, giving people time to convert their stockpiles.

It says the first step will be to retool the country's computerized

accounting system and records-keeping. Some four million state workers

on the island – total population just over 11 million - will continue to

be paid in Cuban domestic pesos.

Edilia Nava, 61, an accountant in Havana, said the changes were

"necessary" and that some businesses have already begun to prepare for

changes to the value of the tourist peso (CUC). "However, it appears

that [shops that use the CUC] aren't going away, so we'll have to see

how prices settle, and what the impact is on people."

Juan Molina, 45, a gas station attendant, said: "It is about time this

rumor finally became true. I like the idea that our ordinary national

currency will be used everywhere and that we will not have to change it

into CUC to buy things. I support the change, but we must check that

prices do not rise while wages remain as low as they are."

Madelaine, 27, a primary school teacher who didn't want to give her last

name because she is a government employee, said: "I think it is good

that the Cuban peso be the one that matters, although for me what is

important is that my salary have real value, and that it allows me to

live, which until now it does not. Let's see."

The government has already begun pricing more goods and services in

pesos and collecting taxes in pesos, Reuters reported.

Since 1968, when Fidel Castro nationalized all industries, Cuba's

centralized government has dominated all commerce on the island, big and

small – from the corner bakery, repair shops and shoemakers to the

nickel mines, electric generation and steel works.

Cuba provides free healthcare and education, but its economy is hampered

inefficiencies and a longstanding U.S. trade embargo. Average state

salaries are the equivalent of $20 a month.



Reuters contributed to this report. Orlando Matos reported from Havana.

Mary Murray and Alastair Jamieson reported from New York.



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