Understanding the Cuban Dual Currency SystemMarch 22nd, 2013 by The JetSetter Team | Comments Off on Understanding the Cuban Dual Currency System
Union caused some consternation in the heart of old-style dictator/repressionist Fidel Castro. As he watched the Soviets drift closer to America both politically and economically, his idealism caused him to declare a “Special Period” which was intended to be an austere time during which Cuba would figure out how to survive without the subsidies and other assistance from (at the time) the world’s largest communist regime.
The repercussions for Cubans were both familiar and severe. Castro reinstituted rationing. The list of included items eventually grew to several hundred. Factories decreased work hours and some closed completely, further depressing the economy. The effects of the 1962 United States embargo, which had been mitigated to some extent by trade with the Soviet Union and other communist regimes, suddenly struck with its full economic force.
In desperation, Cuba finally realized that they did have something people from all over the world craved – a natural resource besides sugar – and that was beautiful beaches. In desperate savvy, Castro realized that the global tourism industry was huge. Increasing the Cuban share of it could be the ticket to a solvent economy.
So was born the “miracle” of the dual country currency. The Cuban Peso (CP) is the money the government forces locals to use. The so-called Convertible Peso (CUC) is reserved for transactions in the island’s tourist industry and international trade. The CUC is worth about 24 times more than the CP. For a Cuban citizen who wants to buy an ordinary item, say a toothbrush, they can expect to have to pony up about two-days pay.
While the CUC is pegged to the US dollar at $1.08 (plus a 10% transaction fee), neither Cuban currency is allowed to naturally fluctuate in value. Though current Cuban president Raul Castro has promised an eventual abolition of the dual currency system, no time table has been set, which students of both Castro regimes’ know means that the transition may or may not ever get done.
While some tourists and Cubans living or traveling abroad have learned they can avoid the 10% penalty by converting their dollars to a third currency, like the Euro, some estimates say that as much as 40% of Cubans have no access to these alternate forms of hard currency and must scrape out an existence as best they can. For these social classes, daily survival is a challenge and the hope for economic improvement slim to none.
The real problem the Cuban government faces is that, even if they wanted to immediately increase the value of the CP, the resulting inflation and food shortages would likely destroy the economy.
So , for now, the dual currency system lives on in Cuba. Whether or not visiting the island and spending money makes you commie sympathizer and supporter of a repressive regime is your own decision. Though Jason Hartman has visited dozens of countries, he’s waiting for a truly democratic Cuba before he makes that trip. (Top image: Flickr | James Byrum)
The Jetsetter Show Team