Simon Calder: The Man Who Pays His Way

You can't keep a good money down

Black markets have all but disappeared from most mainstream tourist destinations. In the 1980s, many a skiing holiday to Bulgaria or Romania was enhanced by the thrill of shady dealings in the local currency (which, in the curious case of Romania, comprised packs of State Express 555 cigarettes). A little financial acumen anywhere behind the Iron Curtain could dramatically cut the cost of holiday living, and increase your consumption of inordinately cheap "champagne" and other such Eastern Bloc delicacies. There were risks, of course, and it was routine for East Berlin border guards to search Westerners leaving through Checkpoint Charlie for unspent Reichsmarks that they had bought on Unter den Linden for one-fifth of the official rate. The stiff fines were levied in hard currency.

Black markets have all but disappeared from most mainstream tourist destinations. In the 1980s, many a skiing holiday to Bulgaria or Romania was enhanced by the thrill of shady dealings in the local currency (which, in the curious case of Romania, comprised packs of State Express 555 cigarettes). A little financial acumen anywhere behind the Iron Curtain could dramatically cut the cost of holiday living, and increase your consumption of inordinately cheap "champagne" and other such Eastern Bloc delicacies. There were risks, of course, and it was routine for East Berlin border guards to search Westerners leaving through Checkpoint Charlie for unspent Reichsmarks that they had bought on Unter den Linden for one-fifth of the official rate. The stiff fines were levied in hard currency.

Black markets in money and goods flourish only when governments try to constrain the free market. You may not regard Baroness Thatcher as the traveller's best friend, but one of her first acts on coming to office in 1979 did us a favour: getting rid of the exchange control regulations that restricted holiday spending. A decade earlier, you were not allowed to spend more than £50 beyond the Sterling Area - a curious group of nations, including Iceland and Libya, whose currencies were locked to the pound; anywhere more alluring, and you had to count the coffees.

Some former British colonies inherited our defiance of the free market. In Zambia, for example, the official rate of exchange used to be one-tenth of the street rate. Accordingly, the authorities did everything they could to suppress the illicit trade. The guidebook writer, David Else, says that the way around the rules was to wait outside a tourist hotel. Soon, a taxi would draw up, apparently empty except for the driver.

On the floor at the back of the taxi would be a currency dealer. "You had to get in, lie on the floor and change money as the taxi drove around town." Thank goodness for ATMs, and for a more sensible attitude from the Zambian authorities today.

The morality of black-market dealings is troubling: if the government of a poor country seeks to protect its currency, are tourists who change money illicitly guilty of undermining the economy? David Else thinks not: "As a backpacker, it was the only way you could afford to visit Zambia. Otherwise it would have been absurdly expensive, with a loaf of bread costing $5."

These days, only a handful of madcap nations try to defy the reality of the marketplace. Cuba saw economic sense 11 years ago, when Fidel Castro finally legalised possession of the dollar. With a stroke of the presidential pen, the Cuban leader eliminated a parallel economy that offered huge rewards to foreigners prepared to gamble on the black market; at one point, the peso had been trading at more than 100 to a dollar, compared with an official rate of 1:1. The rate of exchange soon settled to 21 pesos to the dollar.

The Cuban economy has been on the mend ever since - until Fidel Castro's unfortunate tumble this week, which appears to have damaged his political judgment. He issued what even by Cuban standards was a monumentally daft decree.

The US dollar, the currency that keeps the whole mad republic teetering on the right side of anarchy, is no longer to be common currency on the island. From 8 November, dollars are to be exchangeable only with a 10 per cent penalty.

Travellers will be expected to change their funds to "convertible pesos", the Bank of Toytown currency that Cuba pretends is on a par with the US dollar. The move will have the immediate effect of bringing back the black market; the 10 per cent premium guarantees it. To try to limit the damage, tourists are being urged to bring pounds, euros or Swiss francs; but in the back end of Cuba's beyond, such currencies will be about as welcome as Zambian kwacha in Keighley.

"We think it's going to be a complete shambles," says David Gilmour of the specialist South American Experience. "We're advising our clients to take a variety of currencies with them - euros, pounds and US dollars - while we wait for things to settle down."

Castro's timing is bizarre. If John Kerry wins the US presidential election on Tuesday, he is likely to abandon the American government policy of banning tourism to Cuba. As a political weapon it has been about as hopeless as currency exchange controls, and has done wonders for travel agents in Mexico and the Bahamas, who have been acting as very profitable middle men for thousands of American visitors to Cuba.

Yet Castro's move will deter millions more, who will shun any Caribbean nation with the temerity to outlaw US dollars. Perhaps this is all part of Castro's grand plan: he must be fretting about the prospect of his land of the not very free at all being overrun by freedom-loving Americans. The only beneficiaries of the rule that I can discern are the smaller and less interesting Caribbean islands. They are dreading a Kerry victory, fearing US travellers will divert to Cuba, rather than further away and more expensive destinations.

Either way, to see the last bastion of communism in the West, go now while daft ideas last.

FLYING INTO THE SUNSET: AIRLINES RESHUFFLE THEIR ROUTES

We'll always have Paris. Or will we? Besides all the new air routes described on pages 16-18, some are being closed. The link from Gatwick to Paris is ending, with British Airways unable to make it pay because of intense competition from Eurostar trains to the French capital. Air France is cutting flights from Bristol and Glasgow to Paris, and hopes that passengers connecting to points worldwide will instead fly via Amsterdam; the airline recently took over its Dutch rival, KLM. Conversely, anyone who used to fly from one of the many UK airports served by KLM to connect in Amsterdam for Casablanca and Turin will be directed to Paris. While Air France is expanding its flying programme this winter, some long-standing KLM routes have been axed by the new bosses in Paris. For example, the flight from Amsterdam to the Venezuelan capital, Caracas, has been abandoned in favour of daily departures from Paris Charles de Gaulle.

British Airways is cutting its flight from Gatwick to Bari in south-east Italy, and axeing its Manchester-Bologna link (Manchester-Knock ended last month). BA flights between Gatwick and Paphos are to be suspended between 14 January and 4 March. Going against the grain, though, BA is re-starting flights between Gatwick and Zurich, after easyJet withdrew from the route. Two more easyJet routes are to disappear in December; the links to Copenhagen from Bristol and Newcastle are to end after less than a year, with the planes being redeployed to serve Geneva instead.

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