On Cuba’s Devaluation & Further Proposals

By Pedro Campos

Havana from the Hotel Deuville. Photo: Ihosvanny

HAVANA TIMES, March 25 — The Cuban government recently announced the effective devaluation of the Cuban Convertible Peso (CUC) to the US dollar, an action that will benefit the Cuban economy in general and many individual Cubans in particular, though what was still left in place is a staggering and controversial 10 percent surcharge.

Nonetheless, along with this positive measure in the area of finance, which will have medium and short-terms effects, others should follow.

Apart from the official studies and analyses — which point to the stimulation of flows of hard currency into the country (especially through tourism, foreign investment and remittances) — the devaluation will also receive the political backing of wide sections of the island’s population, not to mention Cubans abroad. In short, it will contribute to the reduction of existing pressures building up at the core of Cuban society.

It will benefit the Cuban government, which controls the country’s finances, its banks, the domestic hard currency market (through the network of money exchange centers, CADECA), large and medium-sized tourism agencies, government chains of retail stores that sell in hard currency, and is the principal beneficiary of dividends accrued through foreign investment.

Rental cars. Photo: Ihosvanny

However also emerging as direct beneficiaries will be those Cubans who receive remittances, those who travel abroad to fulfill professional contracts and then return with dollars; tourism workers, who will now will be able to receive more tips from the expected increase in activity, self-employed workers who have some type of relation to tourism, and all those persons who are not controlled nor controllable by the government and who operate independently – a not so insignificant percentage.

Indirectly the devaluation could bring benefits to all Cubans because it could contribute to energizing the internal and external market, promoting the real value of the domestic currencies and stimulating other types of rational economic measures. And especially, it could help to create conditions for the elimination of the dual currency.

Further proposals

Now, if the government would reduce the value of the CUC from 25 to 20 regular Cuban pesos would mean putting the CUC at the value previously held by the dollar in relation to Cuban pesos, which increased to 25 pesos with respect to the CUC. This would immediately and effectively help the popular economy and the general invigoration of the domestic market.

We would see important short-term positive effects in the increase of production and the revaluation of the domestic currency by virtue of the increase in the turnover and monetary circulation of the currency and of value added (something that our economy experienced previously with the measures of the 1990s, but which were later cutback).

Other very important general regulations that would be very welcome and would benefit the economy for many Cubans would be the elimination of absurd prohibitions and regulations that incredibly continue to persist. These would include allowing the sale and purchase of automobiles and houses, the elimination of current travel restrictions and immigration requirements and their high costs, and the deactivation of monopolistic government systems over production, distribution and consumption.

Havana police officers. Photo: Ihosvanny.

If one wants to have a vibrant external market, it is first necessary to promote the internal one. No solid international economy has been created that was not based on a strong domestic market. How can this be accomplished without economic incentives, without micro-credits, with high taxes, and without family or individually-owned capital that can be employed individually or cooperatively, or without increasing the revenues of the workers (who are those who consume en masse)?

But if one wants to advance to socialism, what is especially needed are changes in the current state relations of wage-labor production and in the bureaucratic regulations that constrain popular creativity and the generation of necessary consumer goods and services.

These would include such changes as direct incentives to workers in government enterprises through the equal distribution of part of the profits of each production unit or service, as well as the active and democratic participation of the workers in the management and administration of these entities.

It would also include the full authorization of self-employed work without any discrimination against technical or professional work, reductions in taxes on self-employment, a new law on cooperatives that frees this form of production from the current government/state tutelage and extends to industry and services, the dismantling of the monopolistic systems that block the productive and commercial labor of farmers and other producers, the reduction of direct and indirect taxes on non-state economic activities and the establishment of credit policies that stimulate these.

Other democratic and socializing measures would be necessary (as I have been explained in other articles) to guarantee advances toward the new socialist society “with all and for the well being of all.” But that is not the point of this commentary.

However there are some actions that are urgently needed because of their degrading significance toward human beings and their counterproductive effects on the Cuban revolutionary process itself. These include those related to the travel restrictions within the country, the ley de peligrosidad (vagrancy law) and the need to train the police and members of the various security agencies so as to end the siege against people of African descent and those people who think different politically.

Without socialization, without democratization and without full freedom, no socialism is possible.

To contact Pedro Campos write: [email protected]


3 thoughts on “On Cuba’s Devaluation & Further Proposals

  • March 25, 2011 at 7:03 pm
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    It is highly disingenuous, if not outright dishonest, to attribute the non-convertibility of the CUC as the cause of your postulated insignificance of Cuba’s currency devaluation on export growth. It is no secret that Cuba is still under a tight 50-year economic blockade. If your assertion is true, then, more than anything else, it is the blockade and not the dynamics of international exchange mechanisms that are at the heart of the matter. I am no economist but I challenge anyone to show me how an economically-besieged nation can achieve normal trade without the cessation of hostilities on the part of the aggressive side – which in this case happens to be the only military superpower on the planet , an empire with the most extensive global tentacles, and the most geographically-situated, logical trading partner. Cuba is not an island when it comes to the blockade!

  • March 25, 2011 at 3:02 pm
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    The change in the rate between the CUC and foreign currency will not have a significant effect in the economy or even more purchasing power for Cubans, but in most cases less. Shortly before the devaluation, electricity and gas prices were raised between 10% to 50%. Prices in the dollar stores have also been raised. Cubans that need to exchange CUP for CUC to make purchases are therefore worse off and not better.

    There will also be no increase in exports due to decreased prices. The CUC is an internal currency, all exports are priced in USD or Euro at the international commodity price (nickel & sugar) or at the best hard currency price that can be obtained.

    The article above is based on the false interpretation that the CUC is a freely convertible currency in the world market when in reality it is only an internal mechanism to use USD. With a corresponding or higher increase in price of goods in services in the market place all of the points above are not valid.

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