Cuba announces moves to abolish cumbersome two-currency system
By Anne-Marie Garcia, APHAVANA--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.
October 24, 2013, 12:07 am TWN
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.