Cuba Business

Cuba hard currency to be channeled through central bank

Posted December 30, 2004 by publisher in Cuba Business.


Cuba on Thursday made a surprise move to tighten the government’s grip on hard currency, on the heels of an oil find that breathes new life into President Fidel Castro’s communist rule.

The Americas’ only one-party communist government said in a statement that from January 1, all revenues from state-run businesses must be channeled though Cuba’s central bank.

“Next year, there will be a considerable increase in financial in-flows from abroad,” thanks to deals with China, Venezuela and an oil exploration and production deal with Canada’s Sherritt, explained the note, signed by bank chief Francisco Soberon.

Castro, 78, announced on December 25 that oil reserves of at least 100 million barrels had been found off the north coast near Santa Cruz del Norte, east of Havana, which is to be developed by a Cuban state firm in cooperation with Sherritt.

Led by Castro since 1959, Cuba has been in dire economic straits since the collapse of the former Soviet bloc, which once provided subsidized food and fuel.

Havana has been unable to complete a Soviet-technology nuclear reactor that was planned for Juragua. Energy for years has been the Achilles heel of its economy.

And with its oil-burning plants, Cuba has had to rely on Venezuelan imports, while its own crude—which is high in sulfur—has required costly cleaning to be used.

Venezuela, Latin America’s only OPEC member, delivers 53,000 barrels of crude a day to Cuba.

Now, the new find—Cuba’s first since 1999, and cleaner than other homegrown crude, according to Castro—catapults Havana toward energy self-sufficiency.

Cuba’s future capital movements “must be tightly controlled to ensure their optimum use,” Soberon’s note stressed.

The shift would make the central bank the only Cuban institution authorized to move hard currency; state businesses would have to seek special authorization to do so.

In November, Castro took the US dollar out of circulation in Cuba, more than a decade after having made it co-legal tender.

Cubans, having no alternative, exchanged their greenbacks for “convertible pesos” usable only on the island. The government invented the currency—which Cubans call “chavitos” or “Monopoly (board game) money”—to make up for the short supply of dollars.

When he met Chinese President Hu Jintao in November, Castro threw the spotlight on precisely how differently his government has adjusted to the post-Soviet era: He told his key communist ally that Cuba would pursue social goals its own way—that is, he has no plan to embrace international capitalism as China has.

Earlier, Castro spent a staggering almost 10 hours on television in four broadcasts trying to explain power shortages that led to the dismissal of Basic Industries Minister Carlos Portal.

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