The Presumed End of Cuba’s Dual Currency

Vicente Morin Aguado (photos: Caridad)

HAVANA TIMES — A man (who was over 60 and with a plastic bag full of packets of detergent that he was trying to sell to me) commented quite clearly: “I don’t understand all this with us having two currencies. I buy these packets at the hard-currency store in convertible pesos and I sell them in domestic currency. I’m hoping to make a little profit, because to get these smaller packets you have to stand in line forever, and you can’t find them just anywhere.”

I thought to myself about how when I buy a pack of cigarettes at the corner store, using either of the two currencies, I always get change – except for when I pay with hard-currency CUCs, I’ll lose a little – roughly a peso (about 4 cents USD).

The logic is that if I didn’t take the time to go to the money exchange center beforehand, then that was my problem. In short, I just take the hit. A peso isn’t as much as the time, cost and trouble of going to an exchange center, which aren’t always open.

Actually, starting from when dollarization began back in the days of the fall of the Berlin Wall, followed by the institutionalization of the “Chavito” (hard currency CUCs), to the reform guidelines issued by the Sixth Party Congress” (which endorsed the popular demand to end the dual currency situation), we Cubans have had at least two currencies, and we’ve always been willing to trade with them according to our needs or depending on how many of each of them we possessed.

I don’t think we’re seeing the “beginning of the end of the dual currency.” Practice, the supreme criterion of truth, tells us that my friend selling the detergent was right with his simple reasoning. The “patently obvious” truth is that many people forget when it comes time to explaining issues, which are seemingly complex but are really quite simple.

What is money but the universal equivalent of all commodities? It is printed on paper according to the laws of the state and needs in light of the natural limitation on the movement of precious metals.  In grade school arithmetic we can understand that this involves a common denominator, therefore we can understand the position of the gentleman with the packets of detergent.

It’s the same to me if a TV costs 300 CUCs or 7200 CUPs (at an exchange rate of 1:24). Anyway, the important thing is to have the money, whether it comes from remittances sent from “the beyond,” or whether it’s earned by selling avocados or it’s the payout from “La Bolita” (playing the numbers).

In a day, the state could change this situation through an executive order (mathematically at least), but the trauma would be huge if we took into consideration the complicated accounting of a country marked by widespread corruption, where the economy would need to restructure itself internally before carrying out the simple act of transitioning to a single currency, where previously — and this is not a typo — the are four denominations.

Let me explain. In the popular sense, we have the Cuban Peso, or “domestic currency,” called CUP. But we also have the Cuban Convertible Peso, identified by the initials “CUC,” which is equal to the US dollar that was previously in circulation here.

There are, however, two more currencies: The ledger book CUC and CUP. In terms of business economics, at the level of bank accounts, these have values that don’t coincide with the concurrency at the street level.
In any case, this involves four currencies, which is a real puzzle for our economists.

Any hotel pays its workers in CUPs while charging tourists in CUCs (with both currencies in circulation). But they also carry out banking operations with these same denominations through checks or other variations in which tangible cash is never touched.

As all this is very disadvantageous to the overall economy, thus there’s consensus around the need to change this situation. I sincerely believe that the country (meaning us Cubans) wants to live with a single currency, which is now a palpable reality that is recognized in retail trade daily in both state and private commerce.

The time remaining until an executive order changes the current situation is a logical process of arranging elements on a complex plane of — if the expression fits — economic relations of this invention called “socialism” (which can’t ignore the market and its categories and therefore must address them responsibly, without fear and without reproach).

As I was recently told by a former student, who is now a university professor, we’re socializing poverty, but we must learn to create wealth in order to distribute it fairly. Socialism isn’t defined solely on how wealth is produced, but also in considering the most balanced way possible for distributing it.

Countries like Norway, Denmark and Japan, examples of nations with high United Nations Human Development Indexes (HDI), demonstrate one path.

I firmly believe (getting back to the subject), that it’s essentially a cultural problem.
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Vicente Morin Aguado. [email protected]


8 thoughts on “The Presumed End of Cuba’s Dual Currency

  • December 31, 2012 at 12:14 am
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    Hey at least Griffin is able to pay for his travelling and staying in Cuba with his earned money
    That is one thing, you, no matter how much you defend the Castro tyrants, can never do!
    Why do not you have the ”guts” to say how do you think the double currency affects the economy of the ”owners by force” of Cuba the Castro family!

  • September 29, 2012 at 3:20 pm
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    You write you have “no problem with democratic socialists running for office in free & democratic societies”, citing Bob Rae’s election as the NDP leader in Canada’s province of Ontario. I’ve never heard a Canadian from Ontario saying they thought Rae was a socialist. It smacks of Americans claiming Obama is a socialist. I’ll leave it to your imagination as to where ‘Griffin’s ”’heart” lies.

    Rae ran as a ‘New Left’ candidate, in the same vein as Tony Blair who no one thought was a socialist. So much for ‘Griffin’ not having a problem with ‘socialists’ – of his making.

    ‘Griffin’s currency experiences either date from a time in the distant past or he’s reading out-of-date propaganda manuals – the latter is most likely. Why would locals prefer US dollars over Canadian dollars when they are worth 10% less? This is the first time ‘Griffin’ claims to have been to Cuba – just like he claims to be Canadian. He certainly got the Rae thing wrong as well.

    ‘Griffin’s “equality vs inequality” construct shows extreme ignorance of reality. I have often asked myself what is the problem with inequality if I’m doing okay. It’s not quality of life issues or jealousy, but THE POWER THOSE WITH MORE MONEY HAVE OVER MY LIFE AND MY GOVERNMENT.

    ‘Griffin writes he “would rather live modestly in unequal Canada than equally in impoverished Cuba.” Presumably, ‘Griffin’ is able to live his ‘modest’ existence without suffering from the inequalities that most Canadians have to endure. Lucky him. It’s better to have a system based on equality so you don’t need luck on your side.

    ‘Griffin’ writes about an “absolute standard of living” being important, whatever that means, where. “unequal but fed is better than equal and starving.”

    Wow, that sounds exactly the same as what white southerners used to tell their slaves.

    ‘Griffin’ finishes by stating, in his opinion, Raul’s transition policies are the same as “unequal societies with huge levels of absolute poverty and a wealthy elite.” Like the US? In his wet dreams, I suppose.

  • September 27, 2012 at 1:51 pm
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    Orwell was a democratic socialist, not a Marxists socialist. I have no problem with democratic socialists running for office in free & democratic societies and offering their ideas to the political mix. Heck, I even voted for Bob Rae back in the day when he became Premier.

    From my experience in Cuba, the locals did not want to take Canadian currency, but they did accept Euros and US dollars, and CUC of course. Most of the American greenbacks arrive as remittances from family in the US. There is indeed a black market trade in US dollars in Cuba.

    Equality vs inequality is not the real problem or cause of suffering. If I have an average salary that allows me enough to eat and a decent place to live, it matters not a bit if 1% of the country lives in huge mansions and own yachts. On the other hand, if my $18 per month salary is not enough to feed and clothe my children, as the case in Cuba is increasingly becoming, it does not help me to know all my neighbours (but not the ruling elite) are in the same condition. I would rather live modestly in unequal Canada than equally in impoverished Cuba.

    The important economic measure is the absolute standard of living. Unequal but fed is better than equal and starving.

    Of course, it is also true, there are unequal societies with huge levels of absolute poverty and a wealthy elite. It is my opinion that Cuba is, under the current transition policies of Raul Castro, in danger of becoming just such a country.

  • September 26, 2012 at 5:17 am
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    Some tourists may give Cubans their home currency that would require Cubans to find a way to convert it but any foolish tourists using foreign currency would have to overpay by a considerable amount to compensate Cubans for the effort of disposing of it, especially US dollars as there’s a 10% ‘punishment tax’ levied on US currency when exchanging it. There’s an insignificant number of American tourists in Cuba and most would likely bring euros with them to avoid the tax.

    Canadian dollars, which you don’t mention, indicating your ignorance of the situation, is by far the most common foreign currency as 60% of tourists are Canadian. You cannot exchange foreign currency at a cadeca in Cuba without a passport.

    So writing, “When official exchange rates don’t reflect actual value, there will always be an opportunity for corruption,” while true elsewhere, doesn’t apply to Cuba. It was the main reason for the dual currency. Your propagandist handbook seems to have missed this little detail.

    ‘Griffin’ writes that “Marxists make a fetish of equality”. Capitalists, of course would see equality as some kind of neurotic obsession, whilst most who come to HT, I think, see it as a logical requirement for achieving a society that serves the common good, not just a 1% elite.

    Not surprisingly, ‘Griffin’ hasn’t the foggiest idea of what socialism is. I started to reply in detail but I think it’s best to encapsulate the Neanderthal thinking in a Chernobyl-like sarcophagus as it would be baby talk to HT readers and a waste of time explaining reality to the encapsulated delusional author. Suffice it to say, he’s inappropriate to this website that he insists on submitting comments to.

    But I will note one glaring confusion on ‘Griffin’s part. Orwell was a SOCIALIST!. The quote is from Animal Farm, Orwell’s allegorical novella warning of the dangers of Stalinism.

    Some folks are still seeing reds under beds it seems. As long as ‘Griffin’ is around, McCarthyism is not dead.

  • September 25, 2012 at 7:50 am
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    This detail is interesting:

    “Let me explain. In the popular sense, we have the Cuban Peso, or “domestic currency,” called CUP. But we also have the Cuban Convertible Peso, identified by the initials “CUC,” which is equal to the US dollar that was previously in circulation here.

    There are, however, two more currencies: The ledger book CUC and CUP. In terms of business economics, at the level of bank accounts, these have values that don’t coincide with the concurrency at the street level.
    In any case, this involves four currencies, which is a real puzzle for our economists.”

    There is actually a 5 or 6 currencies in use in Cuba, if one includes Euros and US dollars. Many Cuban’s accept these notes in tips or payment for products or services (not all of them legal). Rather than exchanging them for local pesos or CUC at the artificially set official rates, they trade them on the black market, or hold on to them in expectation the value will go up as the CUP & CUC value drops.

    When official exchange rates don’t reflect actual value, there will always be an opportunity for corruption.

    Moses asks: “if Cuban society is growing to reflect the inequality that capitalism produces, what really is the point?”

    Marxists make a fetish of “equality” by blaming economic inequality for all of society’s evils. The Socialist devil’s bargain is to make everybody equal, in exchange for which people have to give up all their rights and freedoms. It’s a rotten deal, as many nations have learned to their sorrow. For they end up equal only in their poverty while lacking the political freedom to do anything about it. And of course, as Orwell observed, some are more equal than others.

  • September 25, 2012 at 7:41 am
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    I don’t see the subtext you refer to in what Vincente wrote. Maybe you are trying to add one? Fernando wrote nothing about the dual currency system fomenting a widening economic gap. It is evidence of a gap, not a cause of it. If there was one currency, the gap would still exist.

    There is absolutely no rationale for asserting that “doing away with the dual currencies will help to address the inequality”. Vincente did not write this either. It’s something you also added.

    No one questions that the gap exists and everyone is aware of the inequalities it brings yet you insist on writing about it – rubbing salt in the wounds? Typical of torturers attempting to get their victims to give in to their demands. In light of your government’s policies regarding torture, I am not surprised.

    ‘Moses; writes, “The worse part of this difference is that it is seldom based on merit or intelligence.” Inequality never is, especially in his country like the million dollar salaries paid to bankers responsible for the current economic debacle. Unless you think what they did had “merit” and exhibited “intelligence”.

    ‘Moses’ writes, “if Cuban society is growing to reflect the inequality that capitalism produces, what really is the point?” The point of resisting what capitalism irepresents in his country, an absolute bust at the moment? That’s an easy one.

  • September 25, 2012 at 7:29 am
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    Thank-you Vincente for your thoughtful essay. It puts the dual currency system in perspective, actually a number of perspectives. As you note, money is just what is “printed on paper”, a “universal equivalent of all commodities,” and “the important thing is to have the money, whether it comes from remittances sent from “the beyond,” or whether it’s earned by selling avocados or it’s the payout from ‘La Bolita’.”

    But the currency we use always has cultural significance as you noted in your last sentence – our currency is part of our culture. There are many examples, ranging from what European countries went through when they gave up their national currencies in favour of the Euro, or chose not to, like Sweden, to Canada, that eliminated its paper dollars, replaced by coins, and is on the verge of phasing out pennies. It was a logical move but the US has resisted both changes, emotionally holding onto its greenbacks and cents, despite it not making much sense..

    Cuba’s dual currency also has a history, driven more by events than logic. As you wrote, “we Cubans have had at least two currencies,” “starting from when dollarization began back in the days of the fall of the Berlin Wall.” The dissolution of the Soviet Union of course led to severe economic recession in Cuba, the Special Period, and hyperinflation of the Cuban peso (CUP).

    In order to regain monetary stability and control, the government legalised the US dollar. The growth of tourism and remittances from the US again created an unstable economic environment based on a foreign currency – the currency of the enemy of Cuba’s government – with a resulting black market. The government effectively regained control and fixed the exchange rate by creating the CUC.

    From my perspective, it is unclear whether this is “very disadvantageous to the overall economy.” One would assume if it is, there would be sufficient impetus for making changes. You have, however, noted that “carrying out the simple act of transitioning to a single currency” is not a trivial exercise.”

    That “there’s consensus around the need to change” is undeniable. Although practically, as you wrote about, the two currencies are interchangeable – vendors at farmer’s markets in Cuba always amazed me, being able to instantly give me mixed change that took me a few minutes to calculate if it was correct – there are emotional issues that always make dual currency systems unpopular, primarily the class system it represents.

    I remember, in my first trips to England having to wrestle with the currency prior to decimalization. Some stores, in posh areas of London, priced their merchandise in ‘guineas’. There was no guinea coin and I learned that a guinea was equivalent to a bit more than a pound. It had to do with ‘class’, what England is notorious for – the upper class, or those who aspired to it, paid in currency worth more than what most people used.

    The government has declared the dual currency system is temporary. Changing the entrenched mechanisms that have grown up around the system, as you wrote, will require some effort, however.

    I’m always surprised how rapidly human beings can make changes when change is possible and “suitable”. I surrounded the word in quotes as it is always what is suitable to those who have the power to makes changes, not what makes sense for most people. It is up to us to hold power to account – if we must have power imbalances (I personally don’t think so). This includes in Cuba – what is happening in the pages of HT.

    The Cuban people, with a system of government based on egalitarianism, stand more of a chance at affecting change that benefits ordinary citizens than those in capitalist societies do, based on the intrinsic imbalances of power capitalism is based on. This is why New Orleans is still not back to normal seven years after Katrina and why 400,000 people are still living in tents in Haiti, almost three years after the earthquake.

    I wrote, “when change is possible”. What changes are possible while American imperialism is still holding Cuba under a state of siege? The factors that caused the dual currency system are still in place – the US blockade continues to have a stranglehold on Cuba’s economy.

    There are no signs that the US will give up its blockade unless Cuba agrees to give up its independence. There can be no doubt the only government the US will tolerate, as the price for lifting the blockade, is one subservient to US interests. And Cuba, with its past history, certainly knows what that means.

    Are the irritations a dual currency system causes worth enduring in order to maintain independence from the Empire? It’s a question Cubans will have to answer, independent from American propagandists like the author of the first comment who never give up trying to subvert thinking.

  • September 24, 2012 at 5:08 pm
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    The subtext here is that the existence of the two currencies foments the widening of the gap between the haves and the have-nots (more like the have a little and the have even less), Cubans who are paid or have access to CUC or receive remittances in foreign currencies which they convert to CUC live markedly better than Cubans mostly limited to CUP wages. They dress, eat, and play differently. The worse part of this difference is that it is seldom based on merit or intelligence or even revolutionary fervor. A young prostitute who receives money from former foreign customers lives better than an experienced neuro surgeon or engineer. Doing away with the dual currencies will help to address the inequality increasingly prevalent in Cuban society. After all, if Cuban society is growing to reflect the inequality that capitalism produces, what really is the point?

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