The Consequences of Cuba’s Monetary Unification

Dariela Aquique

Supermarket for customers using regular pesos (CUP).
Supermarket for customers using regular pesos (CUP).

HAVANA TIMES — Several months ago, the Cuban government officially announced that the gradual process of reestablishing a single currency system in the country would begin. People have had many expectations and made numerous conjectures since.

The Cuban Convertible Peso (CUC) is currently valued at 25 and 24 Cuban Pesos (CUP), for exchanging from and to CUP, respectively. This has been rather bothersome for most citizens whose incomes are paid in CUP.

For a very long time, thousands of people in Cuba have been forced to exchange their incomes for hard currency to be able to purchase essential products such as soap, toothpaste, toilet paper, cooking oil, razors and other articles.

A few years ago, markets that sell some of these products in Cuban pesos were opened around the country, but the articles sold there are of lower quality than those sold at hard currency stores (even though the prices, calculated on the basis of the exchange rate, are equivalent).

I’ve always thought that the aim of this is to sell us the idea that there are markets with differentiated prices aimed at sectors with different incomes or financial possibilities. This is downright false, because the prices are the same, the only thing that changes is the currency. There is no such differentiation.

The only noticeable difference is the décor of the establishments. Stores that sell products or offer services in CUC are almost always comfortable and glamorous. Those that sell products in CUP, on the other hand, leave a lot to be desired.

The existence of the two currencies created stark differences, between those that could frequent or buy things at such and such a place and those who could not.

Once there’s only one currency in the country again, the CUP, I wonder whether there will be investments in the restoration, redesign and refurbishing of many establishments, such as restaurants, pharmacies, cafeterias, stores and others.

Will prices actually be differentiated according to the quality of these establishments? Will we begin to see many places fall prey to deterioration, administrative neglect or, worse, mistreatment and vandalism by certain customers, who will then be able to frequent and purchase things at these places?

The reestablishment of a single currency system does not only demand a monetary study for the fixing of prices or the changing of the exchange rate, it also entails a number of social questions that will have to be addressed.

Dariela Aquique

Dariela Aquique: I remember my years as a high school student, especially that teacher who would interrupt the reading of works and who with surprising histrionics spoke of the real possibilities of knowing more about the truth of a country through its writers than through historical chronicles. From there came my passion for writing and literature. I had excellent teachers (sure, those were not the days of the Fast-track Teachers) and extemporization and the non-mastery of subjects was not tolerated. With humble pretenses, I want to contribute to revealing the truth about my country, where reality always overcomes fiction, but where a novel style shrouds its existence.

14 thoughts on “The Consequences of Cuba’s Monetary Unification

  • January 17, 2015 at 9:16 am

    Now that Americans can spend credit in Cuba and send money to the island thanks to Obama’s changes to Cuba policy, I’m wondering if Cuba will have far greater incentive to speed up the process of currency unification. Given that some hardline supporters of La Revolucion are wary of seeing their country’s national identity destroyed if American tourists come to the island, it’s possible that all supermarkets that only used CUP may have to be renovated with thick coats of paints and tiles.

  • May 31, 2014 at 11:56 am

    Why would tourists not “tolerate” having the CUP pegged at the same rate as the dollar when they very happily now accept the CUC? There’s nothing very mysterious or earth-shattering about this change… just a long-overdue correction to unnecessary hassle of converting between CUC and CUP, which has never been very difficult anyway.

  • May 31, 2014 at 11:51 am

    The CUC is currently pegged 1 to 1 with the U.S. dollar and no significant black market exists. The only way a black market will pop up is if the government refuses to sell (or limits sales of) foreign hard currency at the set price. There’s no reason to think they’ll begin to do that.

  • May 27, 2014 at 11:20 am

    If it is pegged, a black market value will quickly develop and dominate street transactions. Wisdom would demand that the unified currency be permitted to trade at market value. Of course, given the negative trade balance Cuba maintains, the prospect of a floating currency must give State economists fits.

  • May 26, 2014 at 7:10 am

    When there will be one currency, it doesn’t much matter what you call it, CUP or CUC or simply “peso”. The interesting question will be whether the currency will be pegged at an artificial level or allowed to float, and be traded, on the international market.

  • May 24, 2014 at 8:15 pm

    “Once there’s only one currency in the country again, the CUP,”

    Unless there’s been an announcement that I’m not aware of, that’s a bit of an assumption that the CUP in its current form is what will be left when the dust settles. The CUC could be kept (and perhaps renamed) too, as could a new currency with a different value (pegged or floating).

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