Cuba Business

US dollar worth 90 cents in Cuba due to 10% surcharge

Posted November 17, 2004 by publisher in Cuba Business.

By Vanessa Arrington | Associated Press Writer

The value of a dollar in Cuba dropped to 90 cents on Monday as a surcharge on the American greenback took effect, the latest step in the island nation’s conversion from an economy based on U.S. currency to one using the new convertible peso.

Cubans and tourists lined up to change dollars into pesos over the weekend. As of last week, U.S. currency no longer was accepted at Cuban stores, restaurants, hotels or other businesses, and the new 10 percent surcharge is meant to further discourage people from bringing currency from Cuba’s No. 1 enemy to the island.

President Fidel Castro has said the widespread use of the American money was being halted to guarantee Cuba’s economic independence.

Pedro Michelena stood in line at a cash exchange station on Sunday to trade in the dollar he was paid for watching the car of foreign tourists.

“(Monday) it will be worth only 90 cents,” the 82-year-old said.

The retired Cuban said that last week he changed the other U.S. currency he possessed - $26 - to get the Cuban convertible peso - the local currency tied to the dollar and now the dominant legal tender on the island.

For a decade, the dollar was Cuba’s dominant currency and was used to buy everything from shampoo to canned food to furniture. Cubans as well as tourists visiting the island now must use the convertible peso.

No figures have been provided on how many dollars have been exchanged or deposited since the currency switch was announced Oct. 25. Cubans, who are still allowed to hold the American currency, are believed to have been hoarding several hundred million dollars at home, most of it money received from relatives in the United States.

Some independent analysts believe many with savings will continue to maintain a dollar stash, though smaller.

Castro said the change was necessary to protect the island nation from an increasing U.S. crackdown on the flow of American currency into Cuba. The U.S. currency was made legal tender in 1993 to help attract hard currency after the island lost Soviet aid and trade.

The Cuban convertible peso, like that of many other smaller nations, has no value outside the country. There also exists another currency on the island, the regular peso, but at 1/26 of the U.S. dollar, it has little value inside Cuba.

“We see this as a symbolic action to send the message to the United States ... that the Communist Party is still in control, and don’t forget it,” said Farid Abolfathi, an economist in Boston with the economic research group Global Insight.

Abolfathi said Cuba’s elimination of the dollar was primarily political and would reap few economic gains on the island, where the average Cuban makes less than $20 a month while also receiving basic foodstuffs and subsidized housing and services.

“I don’t really see much benefit to Cuba from this move,” he said. “It removes valuable commodities from private hands to government hands, putting resources in the least economically competent sector in society, which is the political bureaucrats.”

The new measure was a bit confusing for tourist Marc Aupers of the Netherlands, who believed that, despite the changes, American dollars were still accepted on the island. Arriving Saturday, he was told otherwise and on Sunday he lined up to get rid of his dollars.

“It’s not inconvenient - in any country you need to change your money into the local currency,” Aupers said.

Member Comments

On November 17, 2004, YoungCuban wrote:

U.S. citizens pay 28%-40% in taxes per dollar they earn.

On November 18, 2004, waldo Parravicini wrote:

Cubans do not pay income, sales, property and state taxes. In addition, there are 36 million US citizens under the poverty line, and over 42 millions without medical insurance.

On November 18, 2004, YoungCuban wrote:

Where’ Waldo! hahahaha.. sorry man had to say it…lol

We get taxed to wipe our asses,(excuse my French) but it’ true,by a roll of toilet paper and we must pay taxes on it.

I love how it’ all supposivly set up for my retirement, I have paid nearly $4mil in taxes in my young life,will I see 10% of those funds back when I retire? HELL NO!

On November 19, 2004, Jardine wrote:

As an Australian tourist about to travel to Cuba, I’m unsure now what currency I need to bring to Cuba. I hear the the Euro is now becoming generally accepted as cash for accommodation etc. Can anyone recommend what to do?

On November 19, 2004, waldo Parravicini wrote:

EXCHANGING U.S. dollars cash in Cuba involves a 10% surcharge from today, November 15, while the non-convertible peso has been slightly revalued.
In addition to dollars and convertible pesos, the largest exchange bureau opened in Havana will accept euros, Swiss francs, GB pounds sterling, Canadian dollars, Japanese yen, Venezuelan bolivares and Mexican pesos.
The Cuban government operation to replace U.S. dollars with convertible pesos began November 8. Now, stores, hotels, restaurants, taxis and all other services will not be available in U.S. dollars, as has been the case since 1993.
The convertible peso, established in the 1990s, has the same value as the dollar and is the only acknowledged currency on the island. Convertible pesos will continue to be exchangeable with the dollar and other hard currencies according to the international market rate.
Therefore a one-dollar bill will now be exchanged for 90 centavos of a convertible peso and for 23.4 non-convertible Cuban pesos which, to date, were exchanged for 26 to one dollar in the Cuban exchange bureaus known as Cadecas.
The measure was announced by President Fidel Castro on October 25, in response to U.S. measures to prevent Cuba depositing dollars in foreign banks for its commercial obligations.
“All bank accounts in U.S. dollars, in convertible pesos or in other currencies are totally guaranteed, and no surcharge on monies deposited in the banks will be subject to the surcharge,” assures the Banco Central resolution.
The resolution establishes that the 10% surcharge will only apply to U.S. dollar exchanges in cash, and not to check transactions or withdrawals from bank accounts, while there will be no penalization on exchanges of other hard currency accepted in the country.
Alongside the euro, Swiss francs, GB pounds sterling and the Canadian dollar, all accepted in the islandís exchange bureaus, Japanese yen, Venezuelan bolivares and Mexican pesos can be changed at Cubaís largest bureau, which has opened in Havana.

On December 01, 2004, B. Grueger wrote:

Question…how about carrying traveller’ check versus cash…? How difficult is it to cash checks outside Havanna..outside the resorts? Any difference in bringing Canadian $ vs Euros?