Cuba to take 10% of exiles'
By Nancy San Martin
The Cuban government turned the economic clock back a decade Monday with
an announcement that it would soon stop accepting the U.S. dollar and
instead require the so-called ''convertible'' peso as the only form of
payment at businesses across the island.
Economists said the new measures, which take effect Nov. 8, was yet
another move in a series of steps in recent months to further
consolidate control over the circulation of U.S. currency and raise
needed money for the government. Under the new rules, the government
keeps 10 percent of all money being converted.
''This is a move that is following a trend: additional control,'' said
Paolo Spadoni, of the University of Florida, who has studied Cuba's
economy. ``All the money circulating will go through the government.''
The announcement was made on Cuban television Monday night and came in
the form of a resolution adopted by Cuba's Central Bank. Cuban leader
Fidel Castro looked on as his chief aide and a television personality
read from the document.
Dollars will be changed into convertible pesos at a one-to-one rate with
no extra charge until Nov. 8, according to the resolution. But after
that, the 10 percent fee will be added to the exchange transactions. The
convertible peso is one-to-one to the U.S. dollar, whereas the Cuba peso
is worth much less.
In remittances alone, the new 10 percent charge would provide a
substantial profit for the government's coffers. Between $400 million
and $1 billion is estimated to flow to the island each year in the form
of cash transfers from Cuban Americans, primarily from the United States
to relatives in Cuba.
''It's going to be very difficult for a lot of people,'' a Havana
resident told The Herald by telephone.
''If somebody sends me $100, then I will get $90 back,'' said Jesus, a
Havana street merchant. ``Why lose when you have nothing?''
Jesus said he will take advantage of the grace period to trade in the
U.S. cash he has saved, but after that, losing 10 percent of his money
will feel like ``a punishment for something we haven't done.''
Economists predicted that many Cubans, like Jesus, will flock to stores
to stock up on merchandise before the new rule kicks in.
ONLY THE DOLLAR
In his announcement, Castro suggested that Cubans tell their relatives
living abroad to send them money in other foreign currencies, such as
euros, British sterling or Swiss francs, The Associated Press reported.
There will not be a fee to exchange other currencies.
Cuba said the new rule was another necessary response to tightened U.S.
restrictions on travel and remittances that limit family visits to the
island to once every three years, reduce the per diem that can be spent
while on the island and restrict money transfers to immediate relatives.
Soon after the new U.S. measures were announced in May, the Cuban
government raised prices at stores that accept dollars by as much as 30
Last year, Cuba ordered state companies to conduct all of their
hard-currency transactions through the central bank, providing more
money for the government and enabling more centralized control over
Although only relatively few Cubans are estimated to have direct access
to U.S. dollars, U.S. currency has become the backbone of the economy,
enabling purchases of higher-quality food, clothing, appliances and
other products not readily available at peso-only stores.
VITAL TO ECONOMY
U.S. dollars have been the primary currency in Cuba since 1993, when
Castro legalized the dollar amid a grinding economic crisis caused by
the Soviet Union's 1991 collapse and the loss of about $5 billion in
annual subsidies from Moscow.
The government said the latest measure was tied to the U.S. Federal
Reserve's decision in May to fine Switzerland's largest bank for
allegedly sending U.S. dollars to Cuba and other nations in violation of
U.S. sanctions. The United States implemented an economic embargo
against Cuba four decades ago.
Miami Republican Rep. Ileana Ros-Lehtinen said that Castro's
announcement was ''a desperate act to change the subject'' from his own
failings at home at a time when his fall in Santa Clara last week led to
speculation about a future fall from power.
''It's a way for him to shift the blame to the United States,''
Herald staff writers Jennifer Babson, Pablo Bachelet, Jane Bussey, Gail
Epstein Nieves and Matthew Haggman contributed to this report.
Source: The Miami Herald
October 26, 2004