Cuba’s Monetary Unification - a Turn for the Better or for the Worse?

Cuba's Monetary Unification: a Turn for the Better or for the Worse?

October 31, 2013

Haroldo Dilla Alfonso*



HAVANA TIMES —The announcement that the Cuban government plans on

eliminating Cuba's two-currency monetary system has awakened numerous

concerns among common citizens and analysts. This was to be expected,

for, even if we assume the simplest and most vulgar point of view on

Cuban reality, it is clear that this is a serious issue that is going to

change many of the rules of the game on the island's playing field.



We should not imagine that the world is going to change after the two

peso currencies are fused into one, but neither should we underestimate

the significance of the measure.



I think that one of the most interesting things we find in the First

Report of the Cuban Civil Society Consulting Group recently published by

Cubaencuentro – I haven't been able to find out who these people are –

is the statement that some believe Cuban society is changing for the

better and others for the worse. Ignoring such changes condemns us to

idly imagine a society which is disappearing more and more every day.



The two-currency system was an emergency measure implemented by Cuba's

political class during the worst moments of the stifling economic crisis

it brought about. It was also a monetary scheme suited to the economic

system Fidel Castro then envisaged: a dual economy with a dollarized,

dynamic sector, and a weak, Cuban-peso sector sustained by infusions

from the first via payment balances.



It was the system that the military conspired against with its company

streamlining campaign throughout the 90s and what former vice-president

Carlos Lage promoted with unbridled Fidelista fervor until his political

decapitation some years back.



The two-currency system has been maintained, and not without reason.

Future studies will reveal to what extent the existence of the two

currencies and parallel economies, and the diffuse border between the

two which always provided those who crossed it with differential

profits, has been a key factor in the original accumulation of Cuba's

emerging bourgeoisie, a class which today is nestled in the folds of the

country's political elite, the black market and foreign investment.



Currently, however, the two-currency system proves unworkable in terms

of affording Cuba the quota of technical rationality and transparency

its system requires.



If the so-called "updating process" aspires to a minimum of coherence

and is at all serious in its efforts at restoring capitalism (be it the

Chinese, Russian or Antarctic variety), then, it has no choice but to

re-establish the one-currency system.



I don't know how it's going to do it, something which should not be

surprising (as I am not an economist). However it is likely Cuban

government officials also don't have a clear idea of how to go about it.

To date, very little has been explained, and there isn't even a rough

chronogram, which suggests the whole process will advance as slowly as

all of Raul's reforms.



A single currency is not going to give people greater access to the

market; it is only going to eliminate all legal barriers blocking such

access. That could well give rise to frustrations similar to those

experienced by Cubans upon realizing that having a passport doesn't

automatically get anyone on a plane.



This monetary unification, to be sure, is going to have an

unquestionable impact on Cuban society, for, what we are talking about

are the direct effects on the prices of merchandise sold in Cuban pesos,

which, in turn, conditions the prices of other things, including labor

power.



We can also predict that, in the short term, money laundering operations

will emerge (be it in the form of bank deposits or real estate

purchases) in response to subtle government threats regarding settling

scores with those who have accumulated ill-gotten money.



If that were the case, we would be seeing a number of collateral

phenomena involving the black market, concealed practices and repression

which have already become part of Cuban culture.



In short, this is an issue to follow, as the Cuban president likes to

say, patiently but surely. So, let us take a seat, put away some bills

as numismatic memorabilia and reflect on what is to happen in a society

where, for the longest time, something new is always going on…for better

or for worse.

—–

(*) A Havana Times translaton of the original published in Spanish by

Cubaencuentro.



Source: "Cuba's Monetary Unification: a Turn for the Better or for the

Worse? - Havana Times.org" - http://www.havanatimes.org/?p=99723