The Dollar Remains Legal in Cuba, but…
…banks no longer accept cash
HAVANA TIMES – Some of the unknowns that have hung over the island in the last ten days began to lift today, which marked the start of a suspension on certain types of dollar transactions. Though banks will no longer allow customers to make cash deposits of U.S. currency, the dollar remains legal tender and is so omnipresent in the lives of Cuban citizens that it is reasonable to think it will enjoy a long life on the informal market, especially because foreign visitors who arrive on the island with this currency sustain it.
Cubans still believe it is safe to hold dollars because, come what may, U.S. currency remains the universal standard for the time being. Conversely, the convertible peso virtually disappeared, at least officially, months ago. It has been gone from everyday life even longer than that, in anticipation of its eminent demise.
As for the Cuban peso, its value overseas is zero, a victim of inflation caused by the country’s ongoing economic and financial crisis. Not even government officials seem to have faith in it. Paradoxically, they now require Cubans to use the dollar even when purchasing the most basic consumer products.
On June 10 authorities announced that banks would no longer accept cash deposits in dollars, claiming the government has been unable to use the banknotes it has been accumulating due to international sanctions. Banks will, therefore, only accept deposits and transfers in other currencies as of June 21.
A couple of days later, the vice-president of the Central Bank of Cuba (BCC), Francisco Mayobre Lence, said in a TV interview that tourists would no longer be able to change cash dollars. They will need a different currency to pay for expenses or will have to use one of the international credit cards accepted on the island. (The U.S. embargo prohibits the use of cards issued in the United States.)
The state-owned Cuban currency exchange company, Cadeca, has also begun selling pre-paid cards in 200, 500 and 1,000-dollar denominations at its bureaus in resort destinations. Cuban customers can buy them by first presenting a passport, which must be renewed every two years. Dollars are still legal, however, and it is quite possible that travelers will continue introducing them as cash into the country’s economy.
Tourists buy a large number of alternative products and services — from guided tours to private taxi rides to black market cigars — which private entrepreneurs (whose existence only recently became legal) sell them for dollars.
Most of these activities are illegal but the practice is open, widespread and generally tolerated, even though the number of American visitors, who are usually the ones carrying this currency, remain very low.
Cuban-American visitors to the island can be also be relied upon to carry cash remittances into the country which they would have previously sent from overseas. Those dollars will end up on the black market, where ’mules ’and would-be emigres are eager to acquire them, though at the moment the only destination to which anyone is allowed to travel is Russia.
While many people began waiting in line outside banks at dawn on the day after the government’s announcement, there was no indication of a huge rush to unload the currency.
“Why should I keep this money if I won’t be able to use it after this date?” asked a young man waiting outside the entrance to branch bank on June 11. He was one of many who were there to hand over their savings in an operation reminiscent of the so-called houses of gold and silver.
In the 1980s people exchanged their jewelry and precious gemstones at these government-run stores in exchange for vouchers which they could use to buy clothing, footwear and home appliances.
Last Thursday there was also a run on euros in Miami, which were already in short supply in many of the city’s branch banks. They saw a stampede of Cuban immigrants eagerly buying euro coins to send to their relatives on the island. However, many Cubans there remain cautious. The euro is not experiencing the meteoric rise that was predicted on the first day, nor are dollars flying out of peoples’ hands. Instead, most are waiting to experience firsthand the tangible absence of a currency that has ruled their lives for so long.
The Cuban government is caught in a dilemma of its own making. The American dollar is a global currency. It is used and generously accepted in every progressive economy in the world. Now, Cuba, after the country had banned the currency for a few years (severe punishment for those in possession), then had its value reinstated in colorful printed monopoly money called CUC then discontinued, now wants to ban on the island the use of U.S. currency outright, again.
How is that going to happen in today’s inter connected global economy? Doesn’t the Cuban government want to be an integral part of the global economy, or is it toying with the notion of venturing into a hermitic North Korean prison style total monetary isolation? Even if Cuba was geographically located where New Zealand is geographically located, far away from American shores, the American dollar would still penetrate its shores especially when its local currency, the Cuban peso, is completely worthless on the global financial markets.
As the article clearly states: “As for the Cuban peso, its value overseas is zero, a victim of inflation caused by the country’s ongoing economic and financial crisis.” The Cuban communist Party’s economic leaders know this for a fact. Paradoxically, the Cuban communist government is telling its people, wink, wink, don’t hold American dollars because the Cuban economy can live without them; however, if you should have some laying around they can be used to purchase, or don’t refuse dollars from incoming tourists.
Dollars are still legal inside the country. No Cuban will be fined nor go to jail owning or operating in American dollars. Soon those abundant tourists arriving from Western countries will be carrying Canadian dollars, European Euros, and yes, the much despised American dollar in the pockets of Americans. The Cuban government wants to desperately kick start the economy. It cannot do so with its anemic Cuban peso. Services that were once prohibited like private entrepreneurs are now legal. That is a good thing.
Astute Cuban private entrepreneurs want value for their services and products and if that value comes form an American dollar, it will gladly be accepted. Why? Because tourists “ . . . buy a large number of alternative products and services — from guided tours to private taxi rides to black market cigars — which private entrepreneurs (whose existence only recently became legal) sell them for dollars.”
Is the Cuban government going to severely punish (tried that years ago) those private entrepreneurs for dealing in a “prohibited” currency when it is that very currency plus those ambitious, enterprising entrepreneurs that the Cuban government absolutely needs to grease the wheels of internal economic commerce? Hardly.
Private entrepreneurs will not rush to the banks to deposit American dollars. No. The American dollar simply circulates within the Cuban economy as the de facto currency of trade and enterprising commerce despite what the Cuban government authorities say or do.
Carrying wheelbarrows full of Cuban pesos to the local bank is something the Cuban communist government does not want publicized to the outside world so, wink, wink, no, no, to the American dollar on the island absolutely, but absolutely if Cubans are using the dollar in Cuban circulation, we, the communist government know nothing about that monetary transaction, or was it a transgression?
This statement is not accurate: “(The U.S. embargo prohibits the use of cards issued in the United States.)” The Obama Administration approved, and the Trump Administration did not reverse, the authorization for United States credit card companies to unblock usage in the Republic of Cuba for credit cards issued by United States banks. MasterCard did so; Visa did not. Stonegate Bank, Banco Popular in Puerto Rico, and NatBank each authorized their Mastercard products for use in the Republic of Cuba.