Without Confidence in the Money

Without Confidence in the Money / 14ymedio, Reinaldo Escobar
Posted on February 4, 2015

14ymedio, Reinaldo Escobar, Havana, 3 February 2015 – Any day can be the
eve of a celebration or a disaster, as much for those who hurried to
exchange their convertible pesos (CUC) to Cuban pesos (CUP – also known
as moneda nacional, or "national money") as for those who are purchasing
foreign currencies or who are trusting enough to think that everything
is planned and calculated so as not to cause anyone any harm. Although
its proximity can almost be smelled, the "final battle" of the end of
the dual currency system continues to be a mystery and the present lack
of transparency can endanger its presumed strategic objectives.

Those who have a good memory or who have dedicated time to digging
through our recent history know that the Law 963, passed on 4 August
1961, established the "obligatory exchange of currency" for bills of a
new design. That surprising operation took place on Sunday the 6th and
Monday the 7th of August 1961. No one was able to leave or enter the
country on those two days. Each family unit was only allowed to exchange
up to 200 pesos. Of the 1.187 million Cuban pesos considered circulating
in the country, only 724.9 million were exchanged. The rest lost its
value, vanished.

Some naïve people who had their savings inside banks trusted that their
money would be exchanged in its entirety. However, the government
decided to only hand over one thousand pesos annually, in the form of
100 a month, for ten years, even if people's accounts contained hundreds
or thousands or millions of pesos. Many of those affected by such a
drastic measure committed suicide. Such a disastrous exchange process
annihilated in one single blow not only the part of the creole
bourgeoisie that still remained on this Island, but also the entire
middle class. It ripped to shreds people's life work and savings and
also that of past generations.

Such a disastrous exchange annihilated in one single blow not only the
part of the creole bourgeoisie that still remained on this Island, but
also the entire middle class.

They say that that new currency came from Czechoslovakia, camouflaged in
large wooden boxes since the use of metal containers wasn't common in
those times. The signs on the boxes and the customs declarations
indicated that they contained spare parts for Czech-made Zetor tractors.
Two days before the exchange, the boxes were opened in secret and the
new Cuban peso was distributed to banks throughout the country.

Fifty-three years have gone by and anyone could argue that this is not
the same country as that from 1961. But the fear lies in that it is
still governed by the same people from before, who still invoke the same
"stern slogans."

The uncertainty is not only founded on reminiscences from the past; it
has solid contemporary motives. No authority has pronounced itself
officially on what will be the level of parity of the surviving currency
to foreign ones and it isn't even known whether, in the near future, it
will be possible to exchange the CUP for dollars or euros. It is also
unknown how much the State will pay for each CUC handed over by citizens
once that currency stops circulating.

Until now, the only visible advancement toward the end of monetary
duality has been the possibility of paying with CUP in stores that
previously only sold products for hard currency (the official name of
which, TRDs, stands for "foreign exchange collection stores").

In the beginning of 2015, a worker with a 480-peso monthly salary
(without access to remittances and without any other chance of getting
CUCs) would have to work 23 hours to buy two pounds of powdered milk in
one of those markets; 18 hours for a three pounds of chicken drumsticks;
another 18 hours for a pound of grams of spaghetti and 19 hours for one
quart of cooking oil. Thus, in order to pay this small bill at the
current 1-to-25 exchange rate, he will have to work a little over ten
8-hour workdays.

In the event that the illusion becomes a reality and the CUC comes to
cost 20 Cuban pesos, the worker from our example could get all that and
a little more with just over a week of labor, and if the miracle occurs
that it come down to 15, he would get everything with fewer than 5 workdays.

It is not necessary to be an economist to realize that the country is in
no condition to turn that dream into a reality. At least unless delirium
reaches the point of fantasizing that, from the secret tunnels where
today they keep the old soviet armaments, hundreds of containers of
goods surface to furnish the stores that would no longer be called TRDs,
because they wouldn't be collecting any foreign currencies at all, and
standing before whose cash registers wouldn't be today's nouveaux
riches, but the joyous working class, living decently from their salaries.

Jumping over our chimeras, other distressing questions remain: will
there be a limit to the cash that can be exchanged? Will cash be worth
the same as the money in savings accounts? No one has clarified this and
the lack of a commitment to these guarantees makes insecurity and
distrust mount even higher.

In workplaces where perks are received in CUC, beneficiaries are asking
themselves if this "stimulus" will keep the 1-to-25 exchange rates in
the national currency. In markets where the elevated prices were once
justified as a way for the government to "collect" foreign currencies,
clients wonder if now goods will cost what rationality suggests should
be their price. Will taximeters need regulation? Could ticket purchases
on international airlines be made in the new currency?

Parallel to the eventual disappearance of the CUC, there exists the
possibility that all the CUP bills circulating today will be
"demonetized" and new issues of 1, 3, 5, 10, 29, and 50 pesos be created
to match the recently-introduced 200, 300, 500, and 1000 pesos bills,
which make counterfeiting more difficult. The latter are already in
circulation and nowhere can anything along the lines of, "Guaranteed by
international standards of free exchange" or "Can be freely exchanged
for foreign currencies at the Central Bank of Cuba" be found, which is
currently the case for each CUC and which could also be seen on the
bills that premiered in the summer of 1961, signed by the person who, at
the time, was the president of the Bank, a man who had the effrontery to
sign the currency of the Republic of Cuba with his nickname: Che.

The secrecy that surrounds the end of the dual currency system attempts
to justify itself with the same arguments as always: above all, we can't
trust in the enemy. However, it won't be able to be delayed for much
longer because even in Cuba, where it has been demonized for decades,
money continues to be something that is essential and part of its value
lies in the trust it is accorded.

Translated by Fernando Fornaris

Source: Without Confidence in the Money / 14ymedio, Reinaldo Escobar |
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