10/14/13 - Indian Express - Cuba's dollar divide
Cuba is the only country in the world that mints two national currencies, a
bizarre system that even President Raul Castro acknowledges is hamstringing
the island's socialist economy and must be scrapped.
Exactly how to do that is the problem.
Months after Castro made currency unification a centrepiece of a forceful
address to Parliament, no details have been made public.
Since the system was created in 1994, most islanders have been paid in
national pesos worth 24 to the dollar in exchange houses, while tourists
and the Cubans who attend to them receive a much more valuable peso pegged
at 1-to-1 with the US greenback.
The imbalance means doctors and physicists can make more money driving
taxis or renting rooms than they can working in the professions for which
they spent years preparing. In his July speech, Castro denounced the set-up
as having a warping effect on the economy and society in general.
Shaking up the dual currency system risks spiking inflation and creating
new winners and losers. It would also force a change in accounting rules
that would eliminate a huge subsidy to state-run enterprises at a time when
cash is so short.
But there are signs of change. Pavel Vidal, a former Cuban Central Bank
economist now at Colombia's Javeriana University, said a pilot programme is
being launched with select state businesses operating at a 10-to-1 exchange
The businesses are in key sectors such as sugar, hotels and
non-agricultural cooperatives. "I think it's great because the elimination
of the double currency must be gradual," Vidal said.
Even incremental change may be tough to pull off, and requires the
unravelling of Byzantine accounting practices that effectively allow state
companies to purchase dollars at a fraction of what ordinary Cubans pay for
While the rate in exchange houses is 24 pesos to 1 convertible peso, or
CUC, the Cuban government treats them as equal in official accounts,
meaning state entities are getting them at a 1-to-1 subsidised rate.
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