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Posted July 23, 2003 by publisher in Business In Cuba

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HAVANA: The Cuban Central Bank said on Monday that state companies must exchange their dollars for local scrip to do business among themselves and purchase foreign exchange for their imports.

The government pegs the locally printed currency, called a convertible peso, as equivalent to the dollar, though it has no value outside the country.

As of Monday Communist Cuba’s 5,000 state companies must turn in to the Central Bank all dollars they earn in exchange for convertible pesos.

The 400 companies authorized to export and import must do the same with export earnings and exchange convertible pesos for hard currency to import, the Central Bank said, in a statement carried by the local media.

Cuba’s 403 joint ventures were exempted from the restrictions.

“The world is going through a severe financial crisis ... which obligates us to be more efficient and rigorous every day in the use of our resources,” the Central Bank said.

“Further, the measure is a notable contribution to ensuring companies and financial institutions meet with maximum rigor their foreign obligations,” the statement added.

The bank assured consumers the measure would not affect their right to have and use hard currency, practices punishable by up to two years in prison until a decade ago.

Local analysts and businessmen said the cash-strapped government wanted to take dollars out of circulation to bolster its foreign exchange reserves, as well as increase control over company accounts.

Both dollars and pesos circulate freely in Cuba.

The government officially maintains a 1-to-1 parity between the peso and dollar and convertible peso, but allows its exchange offices to trade dollars and convertible pesos at the street rate, currently 27 pesos for $1.

“This is a second step toward a single currency, though it is still a ways away” a state company executive told Reuters, asking that his name not be used.

Cuban officials have said that the dollar’s circulation is temporary, although no date for ending the Caribbean island’s dual monetary system has been set.

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