Cuba begins process of unifying currencies

Reuters

* Pilot projects to be generalized

* Unification still months away

By Marc Frank

HAVANA, Oct 22 (Reuters) - Cuba has approved a plan togradually eliminate its dual monetary system as part of reformsaimed at improving the country's economic performance, acommunique carried by official media on Tuesday said.

"The Council of Ministers has adopted a chronogram ofmeasures that will lead to monetary and exchange unification,"the government statement said, giving few details.

"(Unification) is imperative to guarantee thereestablishment of the Cuban peso's value and its role as money,that is as a unit of accounting, means of payment and savings,"it said.

Since 1994, after the fall of the Soviet Union, Cuba has hadtwo currencies. One is pegged to the dollar, while the other isvalued at a fraction of the greenback's value, angering thepopulation which is paid in the latter, and complicatingaccounting, the evaluation of performance, and trade for statecompanies.

Plans to decentralize and introduce market mechanisms intothe Soviet-style economy adopted by the Communist Party in 2011under the leadership of President Raul Castro included currencyunification.

The two local currencies are the peso (CUP) - in which mostwages are paid and local goods priced - and the convertible peso(CUC), used in the tourism industry, foreign trade and upscaleeateries and stores carrying imported goods. Neither are legaltender outside Cuba.

In a country where almost the entire economy is in statehands and prices fixed, companies must exchange dollars and CUCswith the government at the official exchange rate of one peso,while the CUC is currently valued at 25 pesos by the governmentat exchange offices.

The unification of the two currencies is expected to be agradual process that will take up to 18 months, according toCuban economists, and will involve devaluing the CUC and perhapsrevaluing somewhat the peso.

The official communique said the government would make goodon the value of the CUC by announcing any devaluation and givingpeople time to convert their holdings.

The government has already begun pricing more goods andservices in pesos and collecting taxes in pesos, even as itadjusts the official exchange rate by allowing some companies toexchange dollars earned abroad for up to 12 pesos, instead ofone, in an effort to increase exports and provide more pesos tothe companies to increase wages and buy local products.

The government statement said these measures would becomemore generalized in the coming months, as would the purchase ofCUC priced goods in pesos at the 25 peso CUC exchange rate.

"The main changes in this first phase will be in thebusiness sector to foster conditions that will lead to increasedefficiency, better measurement of performance and thestimulation of sectors that produce goods and services forexport and the substitution of imports," the statement said.

View Comments (0)