Cuba Abolishes Dual Currency System|
November 19, 2013
The dual economy is about to be over. Cuban authorities announced on Oct. 22 that the dual national system of coins and currency that is separated into the official national peso and the so-called convertible peso tourist money or “chavito” is about to be abolished.
The official Cuban Communist Party newspaper Granma explained the “monetary and exchange rate unification” will be gradually implemented. The news came through a directive from the Council of Ministers.
Communist Cuba has had two currency systems since Nov. 8, 2004, when the U.S. dollar was banned from being accepted at Cuban retail outlets. The convertible peso became the only currency acceptable in many Cuban businesses after that time.
The chavito was exchangeable domestically at a fixed rate of $1.08 U.S. as of April 5, 2008. The chavito was placed on par with the U.S. dollar on March 15, 2011. This made the convertible peso the 12th highest valued currency unit in the world. The convertible peso is now to be unified with the significantly lower valued Cuban peso.
The chavito was introduced at the time when the communist nation was opened to tourism on a large scale. Money is exchanged through tourism, trade and overseas remittances. Cuban workers have been paid in the separate Cuban domestic pesos currency, which is valued at 25 times less than is the convertible peso.
The domestic system pays so poorly that on Oct. 23 NBC news reported, “Workers are paid in domestic pesos, forcing professionals such as doctors and teachers to moonlight as cab drivers or private tutors to supplement their state salaries.”
While Cuban citizens are in theory using the domestic currency system, visitors use 1-, 5-, 10-, 25-, and 50-centavos and 1- and 5- peso “tourist” coins in addition to Banco Central de Cuba 1-, 3-, 5-, 10-, 20-, 50-, and 100-pesos tourist bank notes.
According to Granma, “[Monetary unification] is not a measure that will by itself solve all of the economy’s current problems, but its application is crucial to guarantee the revaluation of the Cuban pesos. It will start with a period of preparations of the conditions that will lead to drafting legal proposals.”
The Granma announcement gave no date at which time the change would take place, but indicated the change would help boost economic efficiency as well as serve as a stimulus to privately owned Cuban companies that import both goods and services.
According to an Oct. 23 Reuters news reporting agency report, “President Raul Castro, who has slowly been rolling back certain facets of Cuba’s soviet-style economy, had previously mentioned plans to end the double currency system as early as July.”
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