Cubas announcement that it will phase out a convoluted two-currency system that angered housewives and befuddled accountants for decades has given hope to consumers and economists.
The communiqué Tuesday gave few details but should increase the purchasing power of average Cubans, lower prices for tourists, create more efficient accounting in state enterprises and increase incentives to step up exports, economists said.
Since 1994, Cuban has used two currencies, one the convertible peso (CUC) that is pegged to the U.S. dollar and used for foreign trade, the tourism sector and at stores carrying imported goods and the other, the Cuban peso (CUP), which is used to pay most salaries and for domestic products. A CUC is worth 24 pesos.
Cubans have been complaining about the dual currency system since it began.
It sounds like what people have been asking for, but who knows, said Havana teacher Elena Martinez. A liter of cooking oil costs me 3 CUCs. But my salary is 500 pesos a month. How is this going to help me buy that oil?
Cubas announcement said the government had approved a chronology to gradually unify the two currencies but gave no dates as part of President Raúl Castros efforts to allow more market forces in the countrys stagnant, Soviet-styled economy.
This is not a measure that by itself resolves all of the current problems of the economy, the statement said, but its application is indispensable to guaranteeing the re-establishment of the value of the Cuban pesos and its functions as currency.
Any changes will be applied first to enterprises and later to individuals, it said. There will be no shock therapies, and the government will give advance warnings of any devaluation so that those legally holding CUCs will not be hurt.
State-run enterprises currently get just one peso for every dollar worth of goods they export abroad and pay only one peso for every dollar worth of imported supplies they use meaning they have few incentives to increase productivity or salaries.
The unification will create the conditions for an increment in efficiency, a better measurement of economic events and an incentive for the sectors that produce goods and services for export and the substitution of imports, the government statement said.
Archibald Ritter, an economist at Carleton University in Canada, said Cuba must eliminate the two-currency system because it reflects an old system of government-controlled and subsidized prices that Castro has been gradually eliminating to improve the economy, long stagnant despite massive Venezuelan subsidies.
The old peso economy has almost disappeared, he told El Nuevo Herald by phone from Ottawa. A single currency also would help the Cuban enterprises to improve their income from exports and compete against imports.
The unified currency also should benefit Cuban consumers, as well as foreign tourists, by making prices now set in CUCs more accessible, Ritter said. The purchasing power of Cubans in pesos should increase significantly in time, he added.
Market forces should eventually set the value of the reunified currency, perhaps somewhere around 13 to 14 pesos to the dollar, said Ritter, who edits the blog The Cuban Economy.