Cuba Devaluates Currency by 8 percent

By Circles Robinson

HAVANA TIMES, March 14 — Cuba’s Central Bank has devaluated the island’s hard currency, the Cuban Covertible Peso or CUC, by 8 percent as of Monday against all foreign currencies.

The measure pegs the CUC at 1 X 1 with the US Dollar although the 10% surcharge for exchanging US dollars in cash remains in place due to the effects of the half century economic blockade maintained by Washington.

The surcharge is not applied to non-cash transactions.

The exchange rate between  the CUC and the regular Cuban Peso, the currency in which most Cubans are paid their salaries, remains at 24 x 1.

Central Bank President Ernesto Medina Villaveirán said the measure is an incentive for the country’s exports as well as a motivation to substitute imports with national production.

The following is the complete announcement issued by the Central Bank of Cuba as published in the official media:

Agreement No.30/11 of the Central Bank of Cuba’s Monetary Policy Committee

In 2005, taking into account the international economic and financial context, as well as a combination of factors of a more specific nature which were having a positive influence on the performance of the country’s economic activity, the decision was adopted to revaluate the official exchange rate of the convertible peso (CUC) by 8% in relation to the U.S. dollar (USD) and other foreign currencies. It is worth recalling that, since 1994, when the convertible peso became a national currency, to April 8, 2005, the exchange rate of the convertible peso in relation to the U.S. dollar remained invariably at 1 CUC to 1USD.

The very dynamics of our economy in subsequent years, aggravated by the damage and losses provoked by the hurricanes of 2008, as well as the effects of the international economic crisis, characterized by much volatility on the monetary markets, obliged us to reconsider the convenience of maintaining a convertible peso exchange rate in relation to the U.S. dollar and other currencies which is not in line with the country’s economic needs in present conditions.

An analysis of all these factors has resulted in the conclusion by the Monetary Policy Committee of the Central Bank of Cuba that it is opportune to devalue the Cuban convertible peso exchange rate with the dollar and other foreign currencies by 8%; in other words, to reestablish parity between the convertible peso and the U.S. dollar.

This decision signifies a discreet step directed at fostering an improvement in the country’s hard currency balance, given that it would constitute a stimulus to export activity and to the process of replacing imports. This, linked to more effective planning, procedures used for the allocation of hard currencies, greater rationality in managing the issuing of monies, and increased productivity and efficiency in the national economy, will help to establish more favorable conditions in our external financial relations.

As was announced in the 7th Legislature of the National Assembly of People’s Power 6th Ordinary Period of Sessions, the limitations that we were obliged to impose on payments from Cuban banks to foreign suppliers at the end of 2008 continued to decrease during 2010 and, at the same time, there have been significant progress in debt renegotiations with our principal creditors.

Taking the above into account, as of March 14, 2011 the official exchange rate of the convertible peso in relation to the U.S. dollar will remain set at 1×1 throughout national territory, both for exchange operations in the business sector and those made by the population at CADECAS [national currency exchanges].

It should be noted that the commercial fees currently charged in exchange operations will be maintained. The objective of these is to cover the costs of the financial institutions providing these services.

In the same way, the 10% tax imposed on persons wishing to buy convertible pesos with U.S. dollars in cash will remain in place as compensation for the costs and risks caused by the manipulation of the latter as a consequence of the irrational and unjust economic, financial and commercial blockade imposed on Cuba by the United States government for more than 50 years.

This decision does not affect the current exchange rate of the Cuban peso in relation to the convertible peso in CADECA outlets, which remains set at 24 Cuban pesos for operations covering the sale by the population of convertible pesos, and 25 Cuban pesos for operations covering the purchase by the population of convertible pesos. Nor does it modify the official exchange rate of the Cuban peso against the convertible peso utilized in state sector accounting, which establishes that one Cuban peso is equal to one convertible peso.

Ernesto Medina Villaveirán
Minister-President
Central Bank of Cuba

*Translation by Granma International