Tuesday, April 16, 2013

Cuba and the Enslaving System of Two Currencies

Cuba and the Enslaving System of Two Currencies / Yusnaby Perez
Posted on April 16, 2013

The dual currency system in Cuba is one of the major economic and social
problems of the country. Don't take my word for it, on several occasions
the president of the country, Raul Castro himself (and I have no
intention of calling him a dissident) has recognized this. We Cubans
have already become accustomed to the existence of the two currencies,
and the government has become so entangled in an economic and payment
system that it would be very difficult to disentangle it without
enormous economic and social — and, of course, political — cost.

Lately I've dedicated myself to making several comparisons on Twitter
about the prices of things in Cuba and their equivalent in months'
wages. To someone who isn't Cuban and doesn't live in Cuba, it's very
difficult to understand the Cuban monetary system; which is why I would
like to give a brief introduction to it.

Historically, Cuba's currency has been the Cuban peso. This is the only
one that has always existed. In the '90s, with the opening to tourism on
the island, dollars began to come in. At first the use of dollars by
Cubans was prohibited and severely punished. I knew people who went to
prison for seven years for having one dollar in their wallet.

The threatening force that American money on the island represented to
the Cuban peso, forced the government to legalize its use by ordinary
Cubans and it became the currency that ruled the Cuban market.

All the stores, hotels, snack bars, restaurants and general services had
their prices in dollars, displacing the Cuban peso. I remember that at
the end of the '90s my parents rented out a room and I could watch many
dollars passing before my eyes.

This of course brought a political cost to the Cuban government. The
simple fact of devaluing the national currency versus the dollar didn't
bring much satisfaction to Comrade Fidel. From that moment the
two-currency system started. Now, how did the Cuban Convertible Peso
(CUC) come about. At that time, in 2004, using the excuse that "Bush has
prohibited the use of dollars in Cuba," they decided to withdraw all
existing dollars from the population and change them for convertible
pesos (CUC). The exchange was 1 for 1.

Fidel Castro set a deadline for the exchange and after that date started
to charge a 20% tax on exchanging dollars for CUCs. Fidel was very
clever, he was left with all the dollars and gave the people CUCs, which
are nothing more than pieces of paper printed with the "supposed"
backing of the USD. This supposed backing was spent on the Commander's
fabulous idea of buying "rice cookers" to sell to the people. Thus was
born the CUC, which up to today has accompanied the Cuban peso in an
apparently eternal rivalry.

Cubans are paid their wages in Cuban pesos. This is the official
currency of Cuba, the "socialist" money. With this money Cubans can pay
for some services such as water, light, gas, staple foods, bus fares, a
part of the phone bill (because the caller ID and international calls
are charged in CUC), their dues to the Committees for the Defense of the
Revolution (CDR), and a few other things.

The rest, such as the food in supermarkets, hotels, services, state
restaurants, getting a passport, the departure tax, paperwork, cell
phone services, car rental, entry to clubs and discos, drinks, taxis,
home appliances, buying school supplies like pencils and erasers, in
short, everything that is not "subsidized" is paid for in CUCs (the
"capitalist" currency) — and this is 99.2% of everyday things.

The Government is fully aware that some Cubans receive remittances from
relatives abroad; some get money from tourists in pay for prostitution;
some engage in the "disappearance" of goods, corruption…; and the
government disregards it on a huge scale to promote the development of
the national economy.

A convertible peso (CUC) = 25 Cuban pesos (CUP) today. The monthly wages
of an ordinary worker are around 375 Cuban pesos, which, applying basic
math, gives us a total of 15 CUC a month. Below I show a list of set
prices at a supermarket in Cuba.

1 liter of milk = 2.50 CUC
1 kg of rice = 3.15 CUC
1 liter of sunflower oil = 1.50 CUC
12 eggs = 1.80 CUC
1 kg beef = 17.00 CUC

The prices of some services are:

An ordinary passport = 100.00 CUC
A certified birth certificate = 20.00 CUC (expedited = 120.00 CUC)
1 night in the Habana Libre Hotel = 275.00 CUC
1 taxi from Vedado to Habana Vieja = 10.00 CUC
Airport Tax = 25.00 CUC
1 minute phone call = 0.35 CUC
One international text message = 1.00 CUC
1 1-minute phone call to Germany = 1.80 CUC
Shoes, low end = 30.00 CUC

So now you can see how little 15.00 CUC, the salary of an ordinary
worker, buys.

Now let's continue by looking at the comparison to understand what it
means for a Cuban to pay prices in CUC. Consider a staple like milk and
the 375 Cuban peso salary of an ordinary Cuban.

1 liter of milk = 2.50 CUC = 62.50 Cuban pesos = 16.7% of the monthly
salary of a worker

Let's take Switzerland as a random reference, where the minimum wage is
about 3,000 USD. If we apply the same percentages that a Cuban pays for
a liter of milk, it would be the equivalent of a Swiss paying 501.00 USD
for that same liter of milk in his country.

To calculate what it means for a Cuban to buy 1 liter of milk relative
to your salary, you can do the following calculation: Take 16.7% of your
monthly wages.

Imagine that the above result is what you would pay in your country for
one liter of milk. A horrible truth? Well the equivalent of this result
is what a Cuban in Cuba pays because of the dual currency.

Even though Fidel seized all the dollars in 2004, dollars still
circulates among us, and the government is subtly giving signs that it
needs U.S. surrency again. Why do you think that every month the phone
company ETECSA holds a 2-for1 promotion for recharges over the internet?
Because it's a very simple way to get "fresh" dollars for the government.

In fact, in the days when ETECSA is running the 2-for-1 promotion, a
Cuban who goes into the local ETECSA office with 20 CUC will not be
offered the promotion; because it can only be paid for with VISA or
MASTERCARD, and what ordinary Cuban has one of those?

Unquestionably the suppression of the second currency (the CUC) would
have a political cost which in my opinion would be unbearable.
Supposedly the CUC is the currency that tourists use (previously having
exchanged euros, dollars, Swiss francs, Mexican pesos for it…). Now, if
they suppress the CUC, then tourists would change their currencies into
Cuban pesos, and then they would see the abysmal economic inequality
without the "slavish" intermediary CUC. This same comparison can be
drawn today, but without the second currency it would be much sadder.

For example, if we eliminate the CUC, one night in a standard room at
Habana Libre Hotel would cost 6,875 Cuban pesos, or 18 months salary of
an ordinary worker. The reality is that mathematically it wouldn't
change anything relative to where we are now, but for millions of Cuban
who have spent more than half a century of continuous brainwashing, to
digest that it would take 18 months — without spending a single peso on
anything else — to be able to sleep one night in this hotel, would be a
serious blow to the government.

Raul has supposedly been working for years on a project to eliminate the
dual currency, but so far without success. To do it, he would have to
raise Cuban salaries 3500% (using as a reference point the costs of an
average family of four), for Cubans to be able to minimally survive with
the real prices that exist in Cuba today, without creating an internal
crisis. And the country does not have now, nor will it have in the
distant future, the conditions for such a change, such that, if such a
reform happened, I highly doubt that the majority of Cubans could meet
the minimum requirements for survival.

Today, we Cuban face an ongoing struggle with money. They pay us with a
money worth very little and with which we have to acquire many things
including food. Our work is devalued to the level of slaves when we have
to change Cuban pesos into convertible pesos. If, in theory, the
convertible peso is a currency "designed" for foreign tourists… Why do
they charge us in convertible pesos to get a passport? Or to buy ham? Or
chicken? And I can continue naming countless examples of things that the
government makes it very difficult and costly for us to access.

But, dear readers, I'm not talking about changing the peas for coffee.*
What I have outlined above was not a "mistake" by the government. No! It
has been a carefully calculated strategy of domination. Economic power
is political power.

By leaving the overwhelming majority of Cubans with meager wages and
depriving us of basic things like eggs and meat, they put us in a state
of despair. Cubans live every day just trying to get — to "resolve" as
we say — the food for that night. A teacher who is a mother with two
children, who after working 8 hours at the school has to tramp all over
the place to get food for her children's dinner, hardly has time to
think about "democracy."

This story is repeated every day for millions of Cubans, who over 50
years have become accustomed to subsisting, forgetting the decency of
the right to a fair life, and living with the hypocrisy of two
currencies: one socialist and the other capitalist.

*Translator's note: A reference to the fact that the "coffee" sold to
Cubans is greatly extended with peas.

2 April 2013


No comments:

Post a Comment