Double trouble? Cuba moves to scrap its dual currency system

President Raúl Castro plans to abolish convertible peso in bid to ‘update economic model’

In a rare display of economic reality from the government in Havana, Cuba has announced plans to scrap its own hard currency, the convertible peso.

Cuba’s president Raúl Castro told the nation’s parliament of the plan to eliminate the dual currency, as part of a strategy “to update our economic and social model”.

The country’s official newspaper, Granma, gave more details of the “advance toward monetary unification” – in other words, allowing foreign tourists and businesses to transact exclusively in the island’s basic currency.

Since Fidel Castro and his fellow revolutionaries took power in 1959, Cuba’s financial footing has been shaky – exacerbated by the US economic embargo, which has prevailed for half a century.

The humble peso, known as moneda nacional, maintained a fictitious exchange rate against the US dollar, but in reality continued to slump. To try to maintain control of foreign exchange, a convertible peso was introduced in 1994. It carried the symbol CUC, but was known as a chavito, valued at parity with the American currency.

One effect was to make anyone who worked in the tourist industry, with access to convertible pesos, relatively affluent compared with those who toiled in poorly paid jobs.

Many tourists never handled any local currency. Meanwhile, independent Western travellers were permitted to pay for local transport, food and beer with ordinary pesos. By bringing in undeclared dollars and participating in the thriving black market, which offered a rate up to 10 times better than the official rate, it was possible to travel cheaply. One guidebook advised: “Avoid being lured into a dark alley to change money... check that you’re not being fobbed off with one peso notes, which when grubby are difficult to distinguish from five peso bills.”

Nine years ago, with US-Cuban relations tense, the regime in Havana outlawed dollar transactions, imposing a 10 per cent penalty on any tourist trying to change the currency. The convertible peso prevailed – and, with Cuba’s economy improving, appreciated relative to the dollar.

Today, citizens are entitled to exchange local pesos to the convertible variety at a fixed rate of 25:1. It appears that the authorities have concluded that, since the “ordinary” peso is freely convertible, maintaining a second currency adds unnecessary complexity.

In his speech to deputies, President Castro stressed the need for “majority support of the population,” and rejected European-style austerity. He condemned “the use of shock therapies and the abandonment of millions of persons” – though following the collapse of the Soviet Union in the early 1990s, and the loss of subsidies, Cubans suffered far more than the Irish, Spanish or Greeks have recently endured.

The process of eliminating the dual currency is likely to take over a year.

Tourists are not likely to be able to obtain pesos overseas, but can convert sterling or euros to local currency once on the island. Rafe Stone, product manager for the travel specialist Journey Latin America, said: “Having one collective currency in Cuba will be less confusing for tourists... however, we are also concerned that it could lead to inflated prices which will make life difficult for the majority of ordinary working Cubans.”

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Receptionist / Office Administrator - Full or Part Time

£14600 - £18000 per annum: Recruitment Genius: Established in 2003 the company...

Recruitment Genius: Social Media & Content Marketing Executive

£20000 - £25000 per annum: Recruitment Genius: This fast growing, Google certi...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE: SThree: SThree are a global FTSE 250 business...

Recruitment Genius: Customer Service Advisor

£18000 - £22000 per annum: Recruitment Genius: This company has won the award ...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn