Cuba to eliminate currency pegged to dollar

Posted on Friday, 12.20.13



Cuba to eliminate currency pegged to dollar

BY ANDREA RODRIGUEZ

ASSOCIATED PRESS



HAVANA -- Cuba will eliminate a currency pegged to the dollar as part of

a move to end its unique double-currency system, which had become a

symbol of economic inequality to many islanders, Cuba's top economic

official said Friday.



Tourists currently use a convertible peso roughly equal to a U.S. dollar

while most Cubans are paid in ordinary pesos worth about four cents.

Many goods are easier to find in government stores that exclusively

accept convertible pesos, a mechanism designed to keep the flow of the

special currency under government control.



The dual system has created special privileges for Cubans who work in

tourism, and resentment among those who don't.



The government of President Raul Castro pledged in October to gradually

unify the two currencies in order to prevent shocks like spikes in

inflation. Many Cuban economists said the process would take years.



On Friday, Vice President Marino Murillo told parliament that the peso

pegged to the dollar, known as the CUC, would eventually disappear, the

first time the government has explicitly said that. He promised that

savings in the convertible pesos would retain their value until the

change took place.



"People who have the convertible Cuban peso (CUC), whether in the banks

or kept at home, will not lose any financial capacity when the dual

monetary system is eliminated," said Murillo.



He did not say when the change would go into effect.



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.



It 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.



In October, the official newspaper Granma said that the government's

first step would be to allow several businesses that currently accept

only convertible pesos, or CUCs, to do business in ordinary Cuban pesos,

or CUPs.



The official exchange rate 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.



Source: "HAVANA: Cuba to eliminate currency pegged to dollar - Latest

News - MiamiHerald.com" -

http://www.miamiherald.com/2013/12/20/3830373/cuba-to-eliminate-currency-for.html#storylink=misearch