Tuesday, September 25, 2012

The Presumed End of Cuba’s Dual Currency

The Presumed End of Cuba's Dual Currency
September 24, 2012
Vicente Morin Aguado

HAVANA TIMES — A man (who was over 60 and with a plastic bag full of
packets of detergent that he was trying to sell to me) commented quite
clearly: "I don't understand all this with us having two currencies. I
buy these packets at the hard-currency store in convertible pesos and I
sell them in domestic currency. I'm hoping to make a little profit,
because to get these smaller packets you have to stand in line forever,
and you can't find them just anywhere."

I thought to myself about how when I buy a pack of cigarettes at the
corner store, using either of the two currencies, I always get change –
except for when I pay with hard-currency CUCs, I'll lose a little –
roughly a peso (about 4 cents USD).

The logic is that if I didn't take the time to go to the money exchange
center beforehand, then that was my problem. In short, I just take the
hit. A peso isn't as much as the time, cost and trouble of going to an
exchange center, which aren't always open.

Actually, starting from when dollarization began back in the days of the
fall of the Berlin Wall, followed by the institutionalization of the
"Chavito" (hard currency CUCs), to the reform guidelines issued by the
Sixth Party Congress" (which endorsed the popular demand to end the dual
currency situation), we Cubans have had at least two currencies, and
we've always been willing to trade with them according to our needs or
depending on how many of each of them we possessed.

I don't think we're seeing the "beginning of the end of the dual
currency." Practice, the supreme criterion of truth, tells us that my
friend selling the detergent was right with his simple reasoning. The
"patently obvious" truth is that many people forget when it comes time
to explaining issues, which are seemingly complex but are really quite

What is money but the universal equivalent of all commodities? It is
printed on paper according to the laws of the state and needs in light
of the natural limitation on the movement of precious metals. In grade
school arithmetic we can understand that this involves a common
denominator, therefore we can understand the position of the gentleman
with the packets of detergent.

It's the same to me if a TV costs 300 CUCs or 7200 CUPs (at an exchange
rate of 1:24). Anyway, the important thing is to have the money, whether
it comes from remittances sent from "the beyond," or whether it's earned
by selling avocados or it's the payout from "La Bolita" (playing the

In a day, the state could change this situation through an executive
order (mathematically at least), but the trauma would be huge if we took
into consideration the complicated accounting of a country marked by
widespread corruption, where the economy would need to restructure
itself internally before carrying out the simple act of transitioning to
a single currency, where previously — and this is not a typo — the are
four denominations.

Let me explain. In the popular sense, we have the Cuban Peso, or
"domestic currency," called CUP. But we also have the Cuban Convertible
Peso, identified by the initials "CUC," which is equal to the US dollar
that was previously in circulation here.

There are, however, two more currencies: The ledger book CUC and CUP. In
terms of business economics, at the level of bank accounts, these have
values that don't coincide with the concurrency at the street level.
In any case, this involves four currencies, which is a real puzzle for
our economists.

Any hotel pays its workers in CUPs while charging tourists in CUCs (with
both currencies in circulation). But they also carry out banking
operations with these same denominations through checks or other
variations in which tangible cash is never touched.

As all this is very disadvantageous to the overall economy, thus there's
consensus around the need to change this situation. I sincerely believe
that the country (meaning us Cubans) wants to live with a single
currency, which is now a palpable reality that is recognized in retail
trade daily in both state and private commerce.

The time remaining until an executive order changes the current
situation is a logical process of arranging elements on a complex plane
of — if the expression fits — economic relations of this invention
called "socialism" (which can't ignore the market and its categories and
therefore must address them responsibly, without fear and without reproach).

As I was recently told by a former student, who is now a university
professor, we're socializing poverty, but we must learn to create wealth
in order to distribute it fairly. Socialism isn't defined solely on how
wealth is produced, but also in considering the most balanced way
possible for distributing it.

Countries like Norway, Denmark and Japan, examples of nations with high
United Nations Human Development Indexes (HDI), demonstrate one path.

I firmly believe (getting back to the subject), that it's essentially a
cultural problem.

Vicente Morin Aguado. morfamily@correodecuba.cu


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