iOS app Android app More

Cuba announces move toward currency unification

stumbleupon: Cuba announces move toward currency unification   digg: US Works With Sudan Government Suspected Of Aiding Genocide   reddit: Cuba announces move toward currency unification   del.icio.us: Cuba announces move toward currency unification

ANNE-MARIE GARCIA | October 22, 2013 03:15 PM EST | AP


HAVANA (AP) — Cuba's government announced Tuesday that it will take the first small, symbolic step toward eliminating a two-currency system that has become an uncomfortable manifestation of economic inequality on the island.

President Raul Castro said this year that the communist government must scrap the system, in which businesses driven by trade with foreigners use a currency known as convertible pesos that is pegged to the U.S. dollar. Most of the rest of Cuba's heavily subsidized communist economy, meanwhile, uses ordinary pesos worth about 5 cents each that cannot be directly converted into foreign currencies.

The system was designed to allow Cuba to receive hard currency needed for international trade from the outside world while insulating the rest of the communist economy from market influences.

Currently, Cubans who work in businesses that trade with foreigners generally receive higher earnings paid in convertible pesos and use that currency to acquire goods from stores and other establishments that only accept that money.

Those goods are more difficult to buy for many government employees who earn lower salaries in less valuable regular pesos, although a growing proportion of them have been receiving additional performance incentives in convertible pesos.

The government did not specify which currency it planned to get rid of.

But the official newspaper Granma said that the government's first step would be to allow several businesses that currently accept only convertible pesos, known by their Spanish acronym as CUC, to do business in ordinary Cuban pesos, or CUP.

The official exchange rate of 24 ordinary pesos to the dollar will remain in effect, Granma said, meaning the goods themselves will remain out of reach for Cubans without access to the foreigner exchange-driven economy, which includes millions of dollars a year in remittances from relatives in the United States and other countries.

"Experimentally, in select locations, cash payments in CUP will be allowed to take place," the paper wrote.

The double monetary system was established in 1994 amid an economic crisis sparked by the fall of the Soviet Union, which heavily subsidized Cuba for decades.

Cuba has said virtually nothing about how it will adjust the two currencies' exchange rates to prevent economic shocks. Granma assured readers that "the confidence of people who have maintained their savings in Cuban banks, in CUC, in other international currencies and CUP, will remain intact" and government subsidies of basic goods and services including food staples would continue.

Employees of a Havana bank that deals mostly with convertible pesos told The Associated Press Tuesday that they had recently received training in how to conduct more transactions with ordinary pesos, although they had not been told when they would put that training into effect.

Cubans on the streets of the capital said they welcomed the government announcement but saw it as a slow and incremental move toward broader change.

"For the moment I don't see any great changes. It'll take a while for us to end up with a single currency," said state worker Manolo Rivera, 49. "They are taking a first step toward establishing and formalizing it."

____

Correspondents Andrea Rodriguez and Michael Weissenstein contributed to this report.