Cuban Gov. Repeats a 1980s Scam, This Time with USD

Long lines began forming in the early hours on Friday morning June 11, in front of bank branches. (14ymedio)

By Juan Diego Rodríguez (14ymedio)

HAVANA TIMES – “I deposited everything I had: eighty dollars.” Reinaldo waited in line early Friday morning outside the Banco Metroplitano on Infanta Street in Old Havana to hand over his modest hard-currency fortune that he has been saving for emergencies.

Thousands of Cubans like him woke up worried, after learning the night before that the government would suspend cash deposits of dollars on June 21. “What’s the use of having this money if I can’t use it after that date?” a young man in the doorway of the bank asks.

“The bank really planned ahead,” he notes. “Normally there are only two or three tellers available but today everyone was there, ready to take people’s deposits.”

On the TV news/interview program Roundtable, officials described the decision as a necessary step to deal with obstacles created by the U.S. embargo. But the official explanation has failed to convince either ordinary citizens or economists, who expressed astonishment the day after the announcement.

At the end of May, the government suspended currency exchange services at the country’s international airports, claiming it had run out of cash. It indicated that, despite a “significant shortage” of hard currency, it had been able to continue operating within established limits but that a “lack of liquidity” had made those operations unsustainable.

Long lines formed again on Friday outside stores that only accept freely convertible foreign currency, especially those selling home appliances. Outside the Plaza de Carlos III shopping mall in Central Havana, dozens of people were already in line by 5:00 AM, when the pandemic curfew ends, eager to spend their dollars on a refrigerator, air-conditioning system or rice cooker.

“People are going crazy because they’re afraid they’ll be hit with more measures like this in a few days,” says one young man waiting in line to buy clothing at a foreign currency store in the capital’s biggest shopping center. “What this has done is create more doubt and given people the impression that the those at the top don’t know what they’re doing.”

Lines outside hard-currency stores were especially long after the announcement that banks would not be accepting deposits of U.S. banknotes for the foreseeable future. (14ymedio)

For many the situation has brought back memories of the so-called Houses of Gold and Silver. In the 1980s the government operated stores known as “Houses of Diego Velazquez” — a reference to early Spanish explorers who traded tiny pieces of mirrored glass for gold — in which customers exchanged jewelry, gemstones and precious metal objects for vouchers which could be used to purchase clothing, footwear and household appliances.

No figures were ever released on how much gold and silver was ultimately collected but the operation lives on in the Cuban imagination as a kind of institutional scam, especially since the merchandise bought with the vouchers turned out to be shoddy and wore out quickly.

Read more from Cuba here on Havana Times.


5 thoughts on “Cuban Gov. Repeats a 1980s Scam, This Time with USD

  • June 15, 2021 at 4:35 pm
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    >The Cuban on the street valued the American dollar as it could buy much, much more than the national currency, the Cuban peso.

    The United States is the most the most powerful country in the world, it’s natural that the currency of the most powerful country in the world will be more universally useful than a national currency. The dollar is more valuable than any other specific national currency just as well. There is of course a natural trend for hard currencies to come in and displace the national currency, but a government has to resist this or else it loses it’s monetary sovereignty and is subject to the whims of a central bank in Washington DC that makes no accounting of the welfare of its people in its decisions.

    Usually a national currency in a developing country has to back up the value of their currency by accumulating reserves of hard currencies from powerful and rich countries – the dollar being by far the most important here, and usually the largest constituent part of virtually any foreign reserve in most nations. They attain these reserves by engineering trade surpluses with the United States and skimming off the top through various gimmicks. Actually the CUC scheme you described earlier is one of these schemes. China on the other hand forces it’s manufacturers to convert any dollars it receives from sales to Yuan at an unfavorable exchange rate, and collects the dollars (it also makes it extremely difficult to convert large amounts of Yuan back to Dollars, to avoid people draining their reserves that way). You will find schemes like this in virtually any growing export based economy, the developing countries that don’t do stuff like this don’t do so because their state is incapable and probably on the verge of anarchy at any one moment.

    Cuba’s currency is specifically vulnerable to devaluation precisely because of the embargo, it’s blocked off from easy access to the most important reserve currency in the world. It collects dollars from American tourists and such that avoid the travel restrictions but that’s about it. So it’s central bank is always running dry of dollars and always trying to prevent it’s exchanges from exhausting, it is naturally very difficult in Cuba to legally exchange currency for dollars. If it was not their exchanges would run dry eventually and they would have an economic crises.

    All of this is entirely unfamiliar to Americans because our government doesn’t have to deal with any of it. We already print dollars. America has virtually no foreign exchange reserves because they would be useless to us. Do not be willfully ignorant of conditions in third world countries and act like there are easy fixes. America doesn’t have to do stuff like this because it’s powerful and priviliged, the most powerful country is the who’s currency naturally comes to dominate. It is not some free market magic we figured out through lots of elbow grease.

  • June 15, 2021 at 4:18 pm
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    >But the official explanation has failed to convince either ordinary citizens or economists, who expressed astonishment the day after the announcement.

    Half of the point of the embargo is to create a shortage of hard currency, which in turn makes international trade extremely difficult. This eventually leads to situations where the central bank has to take extreme measures like suspending convertibility, otherwise the central bank would just run out of hard currency. Something like this is like the ideal scenario of the embargo, yet somehow supposedly it “fails to convince… economists”. What kind of willfully ignorant economist is this who is amazed that an embargo by the country that prints the international reserve currency might eventually lead to shortages of that currency and difficulties in the banking system. Frankly I’m surprised they managed to keep convertibility up all this time, there must be a lot of Americans thumbing their nose to the restrictions on their liberty to travel.

  • June 15, 2021 at 7:47 am
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    “What this has done is create more doubt and given people the impression that the those at the top don’t know what they’re doing.” Exactly.

    Those at the top, those communist elites in control of Cuba’s economy and finances are scrambling on full speed trying to control the total collapse of a country’s economy.

    In recent history, there was the American dollar circulating the island which the totalitarian state resented. The communist elites did not want an American financial symbol to dominate and circulate the island so they banned its use. Any Cuban caught or transacting with American cash paid a hefty penalty. The Cuban on the street valued the American dollar as it could buy much, much more than the national currency, the Cuban peso.

    The Cuban so called financial Party people came up with a “bright” idea. Why not invent a substitute currency, call it the Cuban Convertible Peso, CUC for short. This monetary invention will stand in place for all foreign currency and Cubans can convert their pesos to CUC and vice versa. The CUC would be completely worthless outside the island. The many tourists coming to visit the island would be required to convert their foreign currency to CUC to purchase, transact, like taxis and so on. This seemed to work for awhile or so it seemed.

    Then for some unknown reason this invented, worthless, money no longer was the go to currency in Cuba. It was trashed into the heap of ashes like many, many other invented economic communist policies that simply do not work in today’s 2021 economy.

    So, now the majority of Cubans who are paid in Cuban pesos are not allowed entry into Cuban run American dollar stores because they have no access to this American currency unless they are fortunate, and those are few, to have remittances sent directly to them in a foreign transferable currency.

    Moreover, as the article points out those with American dollars in hand had better, and very quickly before the 21st of June, bring those dollars to the bank or use them up quickly to buy mediocre merchandise sold by the state. “I deposited everything I had: eighty dollars.” Reinaldo waited in line early Friday morning outside the Banco Metroplitano”.

    Multiply Reinaldo’s predicament thousands of times across the island and you have a mass run on banks, mass confusion, mass panic among the population, all wondering what is going on in this country. Stress heaped upon more stress.

    Of course the totalitarian state takes no responsibility for this financial incompetence, this monetary mismanagement. The response of the propaganda machine is what one expects from a frightened political elite: “On the TV news/interview program Roundtable, officials described the decision as a necessary step to deal with obstacles created by the U.S. embargo.”

    The U.S. embargo is the sledge hammer that the Cuban state has been using over and over for the past 60 plus years to distract the Cuban masses from the real incompetence, the real inexplicable state of affairs, the real truth, the real reality this communist administration by its very own actions now finds itself in. And, those who suffer are the unfortunate majority of hard working Cubans trying so desperately to put food on the table for their families; meanwhile, the communist financial elites are playing monopoly with people’s money and lives.

  • June 14, 2021 at 6:06 pm
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    Yes, it seems like a scam of the Cuban people.

    As I understand it, the government claims the blockade prevents it from using the international banking system for dollar transactions. So, they need to stop taking in so many dollars. But, to prevent hardship, they will allow people to deposit dollars up to June 21, 2021.

    Now think about it.

    1. As noted in the article, only a couple of weeks ago, the government said it was short of dollars and could no longer sell them to tourists at the airports. Similarly, a month ago the government restricted the amount of dollars that could be withdrawn from dollar accounts….because they were short of dollars. Now, they have a surplus of dollars? What changed?

    2. Dollars are accepted worldwide. Does anyone believe that physical dollars can’t be changed to another currency in some other Caribbean country? Indeed, food products which are much needed in Cuba, can be bought and imported from the U.S. This would be a easy and beneficial way of using excess U.S. Dollars.

    3. What rate do the people get from the bank for their dollars? Probably 24 CUP….when the street rate is 60-70 CUP. (If a person really wants to get rid of their dollars, it is easy to do so on the street….at the much higher rate)

    I feel sorry for Renaldo, the gentlemen in the article. He is converting his dollars out of fear…because he mistakenly trusts his government. He will lose the little financial security he has.

  • June 14, 2021 at 5:56 pm
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    I have got to question this; saying what the hell is Happening in Cuba, I am guessing only a pre paid charge card is the only thing that can buy anything from the stores. What about buying on the street; shops as food or other needs.

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