Cuba and the two currencies

Cubans exchange peso notes in Havana after the government announced last week that the two existing currencies would be unified.
Cubans exchange peso notes in Havana after the government announced last week that the two existing currencies would be unified.
Yamil Lage / AFP/Getty

The government of Raúl Castro has declared its intention to put a gradual end to monetary duality. Splendid. The faster that cruel anomaly disappears, the better. The fraud, begun in 1994, has lasted all too long.

Two currencies circulate on the island. One is the peso, or CUP, lacking in purchasing power, which is used to pay workers. The other is the CUC, or convertible peso, more or less equivalent to the dollar, which is used to purchase — at international prices — anything its bearer wishes to buy.

Although officially the regular peso and the convertible peso have the same value, in reality the CUC is traded for 24 CUPs. That’s one reason why the average salary of Cubans is one of the lowest in the world, ranging from $10 to $20 a month.

The end of monetary duality will not end the island’s economic woes. All it will achieve is to make the disaster more transparent. The more transparent the economy becomes, the more obvious its failings will be.

Let us understand: This detestable trick is not the problem. It’s only the reflection of a grave reality, the system’s huge lack of productivity.

The Cuban currency is a faithful expression of Cuba’s economy. It’s a mess, because the collectivism planned by the commissars, based on the superstitions of Marxism-Leninism, causes the production and productivity of Cubans to be abysmally low. (“It’s the system, stupid,” James Carville might say.)

While the gold standard existed, any currency that was backed by that metal and freely convertible — as the Cuban peso was until the Revolution — was respectable. Once the gold standard was abandoned, the currency was protected only by the solvency, stability and predictable character of the society that printed it.

Therein the contemptible insignificance of the Cuban peso. Therein, too, at the other end, the supremacy of the U.S. dollar, and also, to a lesser degree, the euro, the yen, or the pound sterling. Even the Swiss franc, despite Switzerland’s scant 8-million population.

The imposing productivity of that Alpine nation and the strength of its institutions make the Swiss franc a refuge in the face of any international economic turbulence. Every time that the financial experts’ knees go wobbly, they buy Swiss francs.

What can Raúl Castro do to really straighten up Cuba’s economy? Unquestionably, he must bury that asinine way to produce and organize society. The system cannot be fixed. Mikhail Gorbachev, who also tried to save communism, ended up admitting that such a goal was impossible, as happened in practically all of eastern Europe.

Why doesn’t Raúl Castro do this? For three reasons at least, I suppose: for muddled ideological convictions that he has never shaken off; for clinging to power, and — the weightiest — for being emotionally incapable of accepting that he has spent 80 years defending wrong ideas.

It must be very hard to admit that the work of one’s whole life was a perfect blunder that generated massive damage.

Of course, the end of communism would mean the political extinction of the ruling caste in Cuba, but if Raúl Castro really wanted that poor country to begin producing the way God intended, and if he wanted Cubans to live decently, as he claims he does, he would have no alternative but to totally renounce the collectivist error, admit the democratic freedoms, and return to the existence of private property as the principal economic agent and the market as a way to assign resources, even if he has to tear down the maze into which his brother Fidel irresponsibly led the Cuban people.

So long as the foundations of communism remain, even if mitigated by some lateral reforms, it makes no difference whether one currency or four exist. The country will remain on its back and the Cuban people will desperately continue to flee.

The problem lies elsewhere. Let’s see if he realizes it.

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