Conservative Mentalities and Cuba’s Exchange Rates

Conservative Mentalities and Cuba’s Exchange Rates
July 15, 2014
Dmitri Prieto

HAVANA TIMES — Many years ago, the US dollar – then on a par and freely
exchangeable with the Cuban Convertible Peso (CUC) – was valued at 20
Cuban pesos (CUP).
At the time, Cuban quarters (25 CUC cents) were, by simple arithmetic,
equivalent to 5 Cuban pesos (CUP) each. By the same logic, nickels (or 5
CUC cents) were each valued at 1 Cuban peso, and dimes at two. Fifty CUC
cents were exactly 10 CUP.
With time, the value of the CUC went up (or that of the CUP went down).
Today, some private cab drivers – those in the town of Guanabo, for
instance – maintain the original exchange rate of 1 CUC to 25 CUP,
presumably because this makes it easier for them to deal out change to
passengers. In these cabs, when you pay with a 50 CUP bill, you almost
always get your 25 CUP change in CUC (in bill or coin form).
Cuban exchange locales (known as “CADECAS”), however, purchase CUCs at
24 Cuban pesos, and many privately-operated establishments exchange it
at 23 CUP (sometimes posting up a sign announcing this).
Yesterday, I went to the market to buy an avocado that cost 8 CUP. I
didn’t have Cuban pesos on me and I paid the vendor with a 3 CUC bill.
The vendor didn’t have Cuban Convertible Pesos and gave me back 61 CUP
(using the 1 CUC – 23 CUP exchange rate).
Had he valued the CUC at 25 CUP, he would have given me 67 CUP in change.
Following a rather twisted arithmetic logic, the 6-CUP difference means
that I bought that avocado at 14 CUP. If the average price of a
mid-sized to large avocado (I am unsure as to the exactness of this
figure, but let us assume it is accurate) is 10 CUP, thanks to this less
favorable CUC exchange rate, a cheap avocado (8 CUP) was suddenly made
expensive (14 CUP).
Things become even more complicated when we start to deal with
fractional figures.
For some strange reason, even though the CUC quarter is mathematically
equivalent to 6 CUP (as per the 1 CUC – 24 CUP rate), it is still valued
at 5 Cuban pesos by the vast majority of private vendors. That means you
will never get any change back if you buy something worth 5 CUP with
that “dollar quarter.”
If you pay with a 50 “dollar cent” (CUC) coin, the vendor treats it as
10 CUP.
In a similarly conservative fashion, vendors maintain the old
equivalences of 5 CUC cents = 1 CUP and 10 CUC cents = 2 CUP, even when
one pays with many of these coins, enough to make the difference in
value considerable.
Thus, 20 CUC nickels aren’t often equivalent to 23, 24 or 25 CUP, but
only 20. The same holds for CUC dimes.
It is easier to convince one’s counterpart that one is giving them the
equivalent of 1 CUC (23, 24 or 25 CUP, depending on the exchange rate)
if one pays with 4 CUC quarters.
A bit complicated, isn’t it?
A certain Frenchman once said that people’s mentalities tend to be
conservative.
I say that whoever laughs last laughs loudest.

Source: Conservative Mentalities and Cuba’s Exchange Rates - Havana
Times.org - http://www.havanatimes.org/?p=104887