Cuba to eliminate currency pegged to dollar

Posted on Friday, 12.20.13

Cuba to eliminate currency pegged to dollar
BY ANDREA RODRIGUEZ
ASSOCIATED PRESS

HAVANA -- Cuba will eliminate a currency pegged to the dollar as part of
a move to end its unique double-currency system, which had become a
symbol of economic inequality to many islanders, Cuba's top economic
official said Friday.

Tourists currently use a convertible peso roughly equal to a U.S. dollar
while most Cubans are paid in ordinary pesos worth about four cents.
Many goods are easier to find in government stores that exclusively
accept convertible pesos, a mechanism designed to keep the flow of the
special currency under government control.

The dual system has created special privileges for Cubans who work in
tourism, and resentment among those who don't.

The government of President Raul Castro pledged in October to gradually
unify the two currencies in order to prevent shocks like spikes in
inflation. Many Cuban economists said the process would take years.

On Friday, Vice President Marino Murillo told parliament that the peso
pegged to the dollar, known as the CUC, would eventually disappear, the
first time the government has explicitly said that. He promised that
savings in the convertible pesos would retain their value until the
change took place.

"People who have the convertible Cuban peso (CUC), whether in the banks
or kept at home, will not lose any financial capacity when the dual
monetary system is eliminated," said Murillo.

He did not say when the change would go into effect.

The double monetary system was established in 1994 amid an economic
crisis sparked by the fall of the Soviet Union, which heavily subsidized
Cuba for decades.

It was designed to allow Cuba to receive hard currency needed for
international trade from the outside world while insulating the rest of
the communist economy from market influences.

In October, the official newspaper Granma said that the government's
first step would be to allow several businesses that currently accept
only convertible pesos, or CUCs, to do business in ordinary Cuban pesos,
or CUPs.

The official exchange rate will remain in effect, Granma said, meaning
the goods themselves will remain out of reach for Cubans without access
to the foreigner exchange-driven economy, which includes millions of
dollars a year in remittances from relatives in the United States and
other countries.

Source: "HAVANA: Cuba to eliminate currency pegged to dollar - Latest
News - MiamiHerald.com" -
http://www.miamiherald.com/2013/12/20/3830373/cuba-to-eliminate-currency-for.html#storylink=misearch