The Beginning of the End of Cuba’s Dual Currency? (I)
Dmitri Prieto
HAVANA TIMES — A few days ago I was surprised by a sign posted in a chopin (a hard-currency store) in my neighborhood. It was located right next to the register (as well as next to the store entrance, as I realized later).
It’s a truism that two currencies circulate in Cuba.
Perhaps the most pathetic corollary of this fact is that the dual currency — more than representing inequality with regard to the access to foreign currency (generated from remittances, tourism, the mixed sector, work contracts and travel abroad) — conceals rampant income inequality.
While it’s possible to purchase convertible pesos with national currency pesos, the true complication is being able to get enough money (either in convertible pesos or “national” pesos) to meet one’s personal or family needs (whether basic or not).
The poster in question announced that people holding RED system magnetic debit cards could use these in that chopin to pay for purchases in local currency, of course at the officially established exchange rate.
The RED system operates for three Cuban banks (Banco Popular de Ahorro, Credito y Comercio, and Banco Metropolitano), which issue debit cards for accounts into which the wages of Cuban workers in some sectors are deposited (with these salaries being paid in local currency, of course).
There still aren’t many ATMs in Cuba, and very few stores have terminals where you can use those debit cards in local currency* (actually, I don’t recall having seen any).
So I was surprised by that poster in the store. In addition to expanding the use of these cards, it threatens to break one of our “psychological barriers,” one that is even more rooted in the Cuban system today.
This barrier is the tacit acknowledgment that there exists the possibility of buying goods in a chopin with the “money from one’s wages” (of course, only if you have a RED card).
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* Magnetic cards are not always viewed as “conveniences,” because the vast majority of products and services are paid for in cash, and these debit card holders often have to wait in long lines to withdraw their money.
‘Moses’ writes he purposefully stated the “US is indeed trying to put pressure on the Cuban [government] through the embargo. This is US policy.”
We need to write no further about US perfidy. Does anyone, anywhere, welcome US interference in internal policy in their country? I think not. The arrogance of Americans in thinking they can control the world seems to have no bounds. They were able to get away with it when the world perceived they were the good guys. It seems they are unaware that has changed. ‘Moses’ myopia in regard to the reality outside the US dysfunctional bubble is on display and he obviously hasn’t a clue, or pretends he doesn’t.
My experience with Americans, a view shared by most who I talk to from both the left and right of the political spectrum, is they live in a fantasy world of their own making, created by the elites and pressure groups in their country who employ the trillion-dollar marketing industry to create the ‘reality’ they want.
‘Moses’ would have us believe failing “sales abroad are only tangentially related to pressures from the embargo”. But he wrote earlier the US is trying to put pressure on Cuba with the embargo. Is it then insanely maintaining a failed policy for 50 years? He may live in a fantasy world but even fantasies have a plot line.
‘Moses’ posits there is “a mindset that everything that is bad [in] Cuba is a result of the embargo.” If there is, then eliminating an ineffectual failed policy, in place for 50 years, would take care of that wouldn’t it? Logic is not a hallmark of fantasies, it seems.
‘Moses’ writes that “In no other country on the planet are citizens paid in one currency and forced to buy most of the products they need to live in another currency,” missing that I wrote that China also had two currencies at one time.
It was a temporary measure as is Cuba’s. Dual currencies address economic problems and will never be popular. Keep in mind that ‘Moses’ is admitting the tightening of the US embargo was the immediate impetus for establishing the CUC system so the US is complicit in creating the dual monetary system. ‘Moses’ continues to poke a stick in the CUC sore that his country is responsible for creating.
‘Moses’ demonstrates his own lack of travel experience and challenged thinking when he claims it’s obvious I’ve never been to Cuba when I wrote that Cuba, in common with all tourist destination countries, had a de facto dual currency system – the US dollar and the local currency. Cuba simply formalized it by fixing the exchange rate, thus eliminating black market exchanges. The CUC was the mechanism for doing this.
‘Moses’ compares Jamaica to Cuba, ignoring a glaring difference. The US has never instituted or ‘tightened’ an economic embargo against Jamaica. We could either suggest it does so, in order to make a valid comparison, or more logically, wait for the US to end its insane Cuban embargo.
In common with people who perpetrate horrendous crimes, ‘Moses’ writes that he is “illuminating the truth”, even if it makes him “less than a nice guy.” We have just seen a vivid example of this thinking, spoken by a mass murderer at his trial in Norway.
I’m not suggesting in any way that as an individual ‘Moses’ falls in this category, but people who propagandize on behalf of a country whose policies are responsible for crimes that make the Norway murderer look like a rank amateur, excusing what they are doing by stating they are “illuminating the truth”, is the basis for most crimes against humanity that have been perpetrated throughout human history.
The lesson seems to be quite obvious, at least outside the capitalist bubble of magical thinking. Eliminate the embargo and the CUC will disappear. Even ‘Moses’ has admitted this, unknowingly of course.
Moses put “This is US policy” as if it were the most natural and reasonable thing in the world. This policy burned people to death with napalm and screwed my country for 20 years. Yeah, thanks.
There was nothing inadvertent in my commentary. The US is indeed trying to put pressure on the Cuban dictator through the embargo. This is US policy. Tightening the embargo triggered a dramatic, albeit ineffective, response from Fidel. With regards to exports, Cuba’s failings in sugar, fruit and seafood sales abroad are only tangentially related to pressures from the embargo. That is, unless you are of the mindset that everything that is bad is Cuba is a result of the embargo. Hot island days and high humidity are all related to the Helms-Burton law if you believe some Cubans and thier syncophants. Lawrence states the Cuba’s dual currency is similar to other tourist-dependent countries. It is so obvious that Lawrence has never been to Cuba. In no other country on the planet are citizens paid in one currency (CUP) and forced to buy most of the products they need to live in another currency(CUC). Yes, Jamaica, for example, does have a national currency(JMD) and the US dollar is used throughout the island as well. But no where on the island of Jamaica is the JMD refused. This only happens in Cuba. If illuminating the truth, however unpleasant, makes me less than a nice guy according to Lawrence, then so be it. I look forward to Part II.
I noticed the same thing ‘Luis” did, that ‘Moses’ inadvertently reveals the role the US has played in Cuba’s two-currency system and in its economic problems. In addition to the one ‘Luis’ cites – the tightening of the US embargo was the immediate impetus for establishing the CUC system, ‘Moses’ also writes, “Cuba is nowheresville in the export market”. Do you think this might have something to do with the embargo?
It takes a great deal of ‘chutzpah’ – Yiddish for audacity – to denigrate Cuba for something your country is responsible for.
There’s a great deal more to the dual currency system than what ‘Moses’ would have us know but then he is not writing for understanding, only propagandizing for the country that demonizes Cuba and is responsible for much of its difficulties, just to put things in perspective.
Cuba, in common with all tourist destination countries, has had a dual currency system since it opened up to tourism – the national peso and the US dollar. From a tourist’s point of view, the dual currency is preferable to the black market that thrives in any country where visitors have more money than the country’s residents and you have to negotiate with street hustlers in a buyer beware environment.
A fixed dual currency, however, quantifies economic disparities and becomes a focal point for dissatisfaction that folks like ‘Moses’ try to magnify, similar to poking an open sore with a stick. Nice guy, eh?
China had two currencies at one time and it finally managed to converge their values but it took time and the ratio between the two was considerably smaller than Cuba’s. Raúl has committed to doing away with the present duality but Cuban dissent will have to keep up the pressure. Hopefully they will have a better chance of achieving change than we have in capitalist countries with zilch chances and no sign of anything happening in the future.
It will be interesting reading the next part of Dimitri’s essay. He provides little understanding of the complexities involved in the dual currency issue but unlike ‘Moses’ who seeks to foment unrest amongst Cubans, acting as a provocateur for a foreign, hostile government, Dimitri has a legitimate role to play – to keep up pressure on his government.
From Moses observations one can come to two major reasons for the CUC and its complications:
1) The US tightening of the embargo
2) The international monetary system
The causes of #1 are self-explanatory
The causes of #2 are the floating standard of the dollar and its origin from public titles from the FED. For further information I highly suggest the short documentary “Money as Debt”.
John, I will let you in on a little secret: Do you know why Fidel has for so long decried the fact that the US dollar is no longer based on the gold standard and is instead free-floating? I mean, really, why should he care right? Here why (I’ll keep it simple for you): The CUC is directly related to the USD. A one for one conversion minus the 10% penalty Fidel imposed. As the dollar falls in value against the Chinese Yuan or the Brazilian Real for example, guess what happens to the CUC? You guessed it, it falls too, only faster and deeper since it is a derivative currency. That is too say, during economic downturns there is always a flight to safe currencies and away from derivatives. The USD so far is still the safest. If the dollar was tied to gold, the bottom for the dollar would thus be the bottom for the CUC. For the US economy a weaker dollar is good for increasing US export trade. Since Cuba is nowheresville in the export market and, in fact, a net importer, a falling dollar only makes it harder for Cuba to buy food and foreign-made goods. They use US dollars and Euros to buy their imported stuff. As a resut, they can only put in circulation that amount of CUC that is backed by the dollars they own or have access to. To print more CUC than that is inflationary. Is the CUC necessary? Well, put it this way: if Cuba cancelled the CUC tomorrow and based all transactions in Moneda Nacional (CUP), it would be like raising the nominal price of everything worth anything in Cuba by a factor of 25. The sticker shock alone would send Cubans even further back in the Stone Age. Imagine what would happen in the US if the highest denominated money was the nickel! That would be life under the CUP. It’s doable but who wants to do all that math and use all those zeros. Life with two currencies is no picnic either. Either way pretty much sucks.
the cuban government had difficulty paying the bills with USD. THE CUBAN GOVERNMENT HAS NOT BEEN THE ONLY ONE PRESSURED IN THIS WAY. CERTAINLY, CUCs cause inequality. does anyone with knowledge of banking and finance have an opinion about CUCs? are CUCs really necessary?
The dual currency mess in Cuba is yet another one of Fidel’s hairbrained ideas. At the onset of the Special Period in 1993, after the collapse of the Soviet Union, Fidel authorized the circulation of US dollars in the economy to help prop up the system. Prior to this date, it was illegal to use and even possess USD. Yes, people went to jail for having USD! Allowing the circulation of USD in the Cuban economy had the negative impact of setting up two economic classes of Cubans. Those who had access to US dollars, like taxi drivers, hotel and restaurant employees along with Cubans who received money from abroad. It also left most Cubans without access to USD far worse off. Then in 2004, in response to the US tightening of the embargo Cubans were required to “convert” their USD into a new currency (CUC). Okay, so let’s see how that worked out? Today, those Cubans with access to CUC live inarguably better than those Cubans without access. Nice plan
Thanks for the article, Dmitri.
Cuban state monopoly socialism, in spite of its many accomplishments, teaches us how NOT to run a post-capitalist financial system.