Back to a Single Currency: Preparing Cubans Psychologically for What’s to Come
Vicente Morin Aguado
HAVANA TIMES — The recent decision of Cuba’s Council of Ministers to re-establish a single currency system in the country has, first of all, a psychological aim with a clear political motivation: getting us used to the high retail prices we will be seeing when this one currency, most likely the Cuban Peso (the “CUP”, in bank jargon), becomes generalized.
In practice, however, it makes no difference whether one pays 500 Cuban Pesos (CUP) or 20 Convertible Pesos (CUC) for a pair of shoes. The self-employed, in fact, do not object to being paid in pesos. They even exchange the CUC for 24 pesos and, after some haggling, they may end up selling the article in question for a few less CUP so as to end the day with a good sale.
Let us imagine that a hard-working man from the countryside (a guajiro, as they are known in Havana) has sold four well-fattened pigs and arrives at the capital with twenty thousand Cuban pesos. Nowadays, he is forced to go to a currency exchange locale (CADECA) in order to acquire Convertible Pesos. There, he exchanges his money for 800 of the latter, which circulate throughout the country (as do the regular pesos).
The gentleman heads to a hard-currency store (known as TRDs) to purchase a variety of products, today sold exclusively in CUCs. Quite a different story is that of a pensioner who receives maybe 250 CUP a month, the equivalent of 10 CUC. Mathematics has no feelings and, in both cases, we have a common denominator which does not alter the earnings of the self-employed or the TRDs in the least.
The psychological effect of this measure, however, is very real, because, in the course of many years, we Cubans became used to paying for things in Cuban pesos and are totally put off by the notion of having to pay, say, 25 thousand pesos for a plasma TV, which would be the rough equivalent of the one thousand Convertible Pesos this TV costs today.
The numbers are shocking, they get to you, they remind you how screwed you are, that they’ve hit you with the double currency, paying you for your day’s work in one and selling you products in the other.
So, now they are giving us the option – first on an experimental basis, before the measure is implemented throughout the country – to pay for products and services in any of the two currencies, as though they were actually changing the country’s economic situation with that, when, in fact, it’s a simple mathematical equivalence, in a world where everyone has an electronic calculator at hand.
What they are in fact doing is accustoming our minds to what we will be heading towards in the near future. We will have a single currency, it doesn’t matter whether it’s the CUP or CUC (though, for “prestige-related” reasons, I suppose it will be the old Cuban Peso). The point now is to accustom us to thinking in high figures, something common in other countries, but until now unthinkable under the revolutionary government.
As they do in Venezuela, Mexico or Japan, we will speak in hundreds or thousands of pesos about things we regard as having a small value, a pack of candy, a chocolate bar, a fan or a bicycle. The idea is to prepare Cubans psychologically for the hard reality that there are no magical solutions out there, that things cannot be changed by presidential decrees. We’ve had a single currency for a very long time, now we’re simply giving this reality legal expression.
Before concluding, however, I would like to point out that, in addition to the “prestige” I mentioned, there are a number of services that Cubans pay in CUP (like electricity, gas, water, subsidized products offered at ration stores, bread and others), which justify the choice of the CUP as the single currency that will remain.
Cuba is slowly moving towards a limited market economy whose subsequent growth appears unavoidable. There are no magic-wand or immediate solutions.
For the time being, they’re “preparing” us for the coming step, the implementation of a single currency system, without altering the current relations between consumer item prices and salaries (as a government decree cannot change a country’s economy). It is a question of softening the psychological impact of things to come.
Another aspect of this measure is actually positive, even though it has nothing to do with the purchasing power of the population: the unification of the country’s accounting system will give rise to more reliable financial mechanisms, which will henceforth have a single referent.
This will put an end to numerous arbitrary phenomena which today result in conflict, embezzlement, scams and other contradictions inherent to the absurd two-currency system.
A single price for Cubans and tourists, a single payment obligation in any establishment: this will close the door on blackmailing inspectors, eliminate a double accounting system for the payment of products, their preparation and sale and do away with a number of prerogatives enjoyed today by the bureaucracy that has become enthroned in Cuba.
I applaud the measure aimed at re-establishing a single currency system because it will legalize what is already a reality and will curtail the “swindles” of those who take advantage of the sweat of workers. I realize this is still too little, but it is nonetheless a step forward. I can only hope we won’t be seeing any steps backward, as tends to happen in my unpredictable country.
P.S. No corporation, no matter how powerful or dominant, will ever have one-tenth the power over the Cuban people that the oppressive Cuban government has. At least no corporation run under any system of law that is at all like those in the USA, Canada, Japan, Korea, Western Europe, etc.
It would seem that the totalitarian state is what keeps the Cuban revolution fairly intact. Right? If people were allowed to vote and if Cuba had an accountable government with distributed powers and checks and balances, it’s likely that things would be VERY different, and likely better.
Griffin, the US hostility towards Cuba not only radicalized their revolution, it provided (and still does so) a reason to unify their society against the perceived enemy and a ready excuse for the shortcomings of their own leadership.
It is a catastrophic policy failure in the sense that has achieved the exactly opposite of its intended goals and that for a laughably long span of time, while isolating US on the issue along the way -even from their closest allies. So yes, I’m more than justified in calling it that.
Fidel was an opportunist that knew that his revolution could only survive with the blessing from the north. He tried to get their approval first, when that failed he had no other choice than fall into soviet sphere of influence. Not doing that would have been suicidal (see what US did to democratic governments that they didn’t like back then).
Notice that the key moment happened in April 1959 when he traveled to the US to discuss the direction of the revolution with the US government and faced open dismissal from Eisenhower and veiled threats from Nixon. That was a full month before they enacted the agrarian reform, starting the this for that that spiraled to military intervention two years later.
From that botched visit (and the predictable reaction to the agrarian reform), it was bloody obvious that the US government was going to do whatever they could to get rid them, so he simply did what he feel he must to save himself and his project.
That the US embargo has not resulted in the collapse of the Castro regime is perhaps regrettable, but it is far from a “catastrophic policy failure”. At the very least, the embargo has prevented US firms from trading with Cuba and then getting burned for extending credit that the regime would inevitably fail to pay off, as they have to European creditors.
While it is true the US government has maintained a hostile attitude toward Cuba, the Castro brother’s attitude toward the USA has been even more unrelentingly hostile.
But you really must put to rest that very tired and threadbare story that it was US intransigence that pushed Castro towards Marxism and the Soviets. Castro was a Marxist and he intended to turn Cuba into a Marxist socialist state from the from the very beginning of his political career, as he later admitted. Raul and Che’s early relationships with the Russians are well documented. The first president of Cuba after Batista fled was the Communist Osvaldo Dorticos.
Fidel, a brilliant strategist to be sure, regularly provoked the US while stoking the Cuban masses with a steady diet of anti-american propaganda. He sidelined rivals and place more and more communists into positions of power. Schools began to teach Marxism from the Soviet texts as was noted by Reinaldo Arenas in his memoir, Before Night Falls. Arenas recalls being sent to a college for an agrarian economics course in 1960, where the Cuban teachers were assisted by Russian “advisors” while the students were taught from Russia texts translated into Spanish.
Fidel chose well the best time to make the big announcement: April 16th, 1961. Interestingly, that was the day BEFORE the Bay of Pigs Invasion on April 17th. Not after, as is sometimes alleged.
The Cuban Revolution did not “turn to the Soviets” in response to US meddling. The US merely played into Fidel Castro’s plan.
Yes, I know. It was implied US government, not the the people but the distinction is not important in the argument; the end result is that Cuba perceives US as hostile and rightfully so. You would feel the same if a foreign country wanted to overthrown your government and in order to do so implements policies that hurts your people.
In the grand scheme of things, after the fall of the eastern block Cuba is simply a minor issue for the US and thats the only explanation of why a vocal minority has dictated the terms of US foreign policy for this long, particularly in the face of a catastrophic policy failure of the last 50 years.
One small but significant correction: The “US” meaning the American people bear no “animosity” towards Cuba. Rather, and read this carefully, because of a lack of interest in Cuba by 98% of the American public, a small, well-financed and well-connected minority of Cubans exiles have been able to dictate US policy for more than 50 years. Even US policy has been fairly benign for nearly a generation. No new legislation, no new regulations, nada. What Bush did to increase pressure, Obama undid. The continued inclusion in the list of States which sponsor terrorism has become an annual ritual with little debate or discussion. Until the Castros die or are exiled, US policy will likely remain boring and unchanged. Americans could not be bothered less. This is hardly “animosity”.
Funny, because it was precisely the US involvement what trowed Cuba into the soviet sphere of influence in the first place.
But forget about minor details, the US animosity (of which the embargo is just a tool) has put extra stress in their government and add to that the mismanagement of their economy in the good times and the result is what you have now. BOTH factors have an important impact and you simply can’t dismiss either and be taken seriously.
About the CUC part, you are simply wrong. If the goal was simply to get the dollars in circulation, there were better alternatives and the simplest one was leaving the CUP as the only currency in circulation.
The problem is, back in 1994, the crisis was thought to be relatively short lived, so they changed the less they could in order to keep the country from sinking completely (back then they lost 50% of the GDP from 1989 and about the same percent in infrastructure), so it was done in the premise of a temporal compromise that could be rolled back at any time.
The goals with the implementation of the CUC were two pronged, from one side they tried to gouge as much as possible from Cubans working with foreign investors while at the same time masking the huge income difference between people with and without access to the currency.
This was a half-assed, shortsighted, stupid and politically toxic decision that as we can see, trowed the economy in a downwards spiral that keep people artificially impoverished while at the same time empowering corruption and people with adverse political affiliation.
Yes, you read right, the new rich in Cuba are either the corrupted, the ones doing illegal activities and the ones receiving remittances from abroad. Thats not the whole picture, of course, there is still some legally rich (like artists, farmers, some artisans, etc.), a middle class mostly defined by its access to CUC and the political and military elite (that is not technically rich, but has lots of privileges), but the game has changed for the worse and now the level of living for that classic elite has been long surpassed, and that has been slowly but steadily eroding its foundation and threatening its continuity.
Now the question is whether is possible to fix the situation without throwing the country into complete chaos (the discussed time-line hints of a half-backed shock therapy instead of a truly gradual change) and whether they manage keep the political power and if they do, in which direction they’ll move afterwards.
No, the revolution was not caused by private enterprise. The people rebelled against a criminal dictatorship. During the fight against Batista, the rebels openly and repeatedly called for electoral liberal democracy and a return to the 1940 Constitution.
It was only after Batista fled and Castro had consolidated his grip on power that the new regime cancelled promised elections and declared the socialist character of the Revolution.
By whatever method the Cuban government decides to eliminate the dual currency, one thing is certain:
The Cuban people will get screwed.
The people will pay the price while the regime elite will reap the profits.
Do you hear yourself? You claim Fidel’s ‘lack of involvement’ as if it were something noble considering running Cuba is somewhat of the family business. The US embargo has nothing to do with the foolhardy establishment the double money policy. You can thank Fidel’s ego for this. He was responding to the passage of the Helms-Burton act by making it illegal to use US dollars. In doing so Cubans were forced to “convert” US greebacks into CUC. He also knew he would have trouble keeping his dictatorship if he couldn’t get his hands on dollars to buy needed imports. Without the CUC, Cuba would have faced a similar crisis to what is going on in Venezuela today where the black market exchange rate for USD is six to seven times greater than what the government will pay to acquire USD. The problem is that using CUC was a slippery slope and let to the same bifurcation of society that Castro was hoping to avoid. Instead of USD, Cuban elites traffic in CUC. Again, this is simply faulty monetary policy and has nothing to do with the embargo.
The effects of private enterprise on the general population is what caused the revoution and most of the left/socialist movements and revolutions around the world.
The Cubans being through the experience and having had the benefit of an education which points this out is what keepes the Cuban revolution fairkly intact .
FYI, Fidel retired some six years ago and quite deliberately avoids interferring with brother Raul’s administration
You might want to take note of this.
Also FYI, the U.S. government has been waging an economic war on the islnd for over fifty years; something you always and quite deliberately avoid mentioning.
The one magical wand they could wave would be massive economic reform, allowing at least some measure of private property, free enterprise, and incentivizing people to work. And it doesn’t have to be a wholesale conversion to a free-market democracy. The Chinese showed how to do this thirty years ago. It’s still a one-party state that is run for the benefit of the elite. The big difference in China now is that the pie is so much larger that everyone is WAY better off, including the bureaucrats. Cuba needs to do something similar. The USA is the least of Cuba’s problems; most of those problems are self-inflicted.
Kim G
Boston, MA
Where we suspect it could take some time to unlearn Communist “economics.”
What the Castros fear most in eliminating the convertible peso is reconciling the current foreign exchange accounting practice of making hard currency purchases of foreign goods using Euros or USD and presenting these purchases on a 1 to 1 basis with the CUP or national peso. In other words, when Cuba buys $1 million of frozen chicken from the US company Foster Farms, they report the purchase as $1 million CUP expenditure instead of a $25 million CUP purchase using domestic exchange rates. It makes it seem as if Cuba is running a profit. When the real numbers come out, GDP will plummet, actual purchasing power will decrease and rising inflation will fuel further hoarding and shortages. Cuba will face a mirror image of the economic crisis that is crippling the Venezuelan economy WITHOUT the benefit of huge oil revenues to keep the economic ship afloat.
An excellent summary. There is one additional point; it will no longer be possible to blame income inequality on the dual currency system.