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Posted October 27, 2004 by publisher in Business In Cuba

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by Walter Lippmann | Cuba News Group

Cuba’s Mesa Redonda public affairs program announced tonight a series of measures designed to strengthen the government’s ability to direct the island’s economic resources. Cuba’s Commander-in-Chief, Fidel Castro presided over an extended version of the show tonight in which he, together with the head of the Cuban National Bank, reported on the steps which the government here has taken, and the reasons for them.

There will be a second Mesa Redonda program about this tomorrow. I’m no economist, so after a few comments of my own, I’ll place the wire service stories here on the same message.

Basically, the Cuban government decided it had to act to take full control over the dollars circulating here in the country for several reasons. First, Washington has been accusing the Swiss banks which have handled
Cuba’s international financial transactions of money-laundering. One of these was fined $100 million earlier this year in connection with this. The allegations that were aimed at Cuba caused foreign banks to be reluctant
to do business with the island.

Further, the US dollar is in decline in relation to the
other internationally convertible (“hard”) currencies,
and so the value of the many millions of US dollars that
have been circulating here has been in decline in relation
to the Euro, the Pound Sterling, the Canadian Dollar and
so on. I was quite surprised to see the decline in the US
dollar in relation to these when I looked it up in the
papers, where these currencies fluctuations are closely
monitored.

Between now and November 8th, Cubans and (anyone else here)
will be able to change their US dollars into Cuba’s second
currency, the convertible peso. This peso is denominated as
equivalent to the US dollar, but is not convertible outside
the country. Cuba’s government created the convertibles,
and uses them to enable it to take the US dollars which are
circulated here and to use them in international trade. The
changes to be made prior to November 8 will be at the rate
of 1-1, dollars for convertible pesos. After that there is
going to be a 10% tax or charge for such transactions.

Possession of the US dollar will not be illegal, as it was
prior to 1993, but the US dollar will NOT be useful in any
local transactions any longer. It won’t be possible to use
dollars to pay for food, transportation, or the purchase of
any commodities in any of the stores here as of November 8.

In this way Cubans who have been hoarding dollars will now
feel a strong pressure to turn them in, or their value will
decline by ten percent after November 8.

Tonight’s announcements also came in the way of yet another
step by Washington to prevent Cuba from receiving family
remittances from the United States. Washington froze the
assets of a corporation called SERCUBA which provided a
link so that Cubans in the US could assist their families
by sending money directly.

Fidel encouraged those in the United States who want to
send money to their families here in Cuba to do so using
other currencies than the U.S. dollar. There will only be
a charge after November 8 to change dollars into Cuba
convertible pesos. There will be no charge for the other
currencies. As is known, the Euro already circulates in
Varadero, but not in the other cities of the island.

The Cuban government has been slowly taking more and
more steps to retain control over the island’s economy.
Two years ago, for example, US coins were banned from
use in normal commerce. The dollar remained until this
latest announcement.  Earlier this year the government
took steps to restrict inter-enterprise transactions
in dollars, most of which had to be changed over into
Cuban convertible pesos.

Remember, I’m not an economist, so the details on how all
of this will play out. In the next days Cuba’s government
will certainly provide detailed explanations of these
changes beginning with tomorrow’s newspapers. English
translations will be available soon and we’ll pass them
on as soon as we receive them.

  1. Follow up post #1 added on October 27, 2004 by Cubana

    I wonder how independent tourists will be affected by this. For example someone arriving at Jose Marti airport will not have any convertible pesos to use for a taxi into Havana. Will there be a bank or exchange bureau at arrivals?

    Also what about Cubans living abroad but not in the US. Will this make it easier for them to send money as it does not have to be exchanged into dollars either in the country of origin or in Cuba.


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