Cuba Ends Affair With American Dollar

Cuba Ends Affair With American Dollar

Giles Tremlett and Agencies in Havana
The Guardian - UK
10-27-4


Fidel Castro has ended Cuba's decade-long, bitter-sweet romance with the dollar.

The announcement that US currency notes will in a fortnight no longer be accepted as payment in the country marks a radical change.

Cubans have become used to shopping for all but basic goods with the greenback. Now they, tourists and others on the island can longer pay for anything in dollars cash, though bank transfers will still be legal.

Mr Castro, 78, with one arm in a sling, appeared in uniform on state television to inform Cubans of the changes, five days after a fall had left him with a fractured knee and arm.

He blamed the decision on the US administration of George Bush, citing restrictions placed recently on dollar remittances to Cuban families by Cuban American relatives, and attempts to prevent international banks providing Cuba with dollars (the Cuban peso cannot be used for international trade).

"The empire is determined to create more difficulties for us," Mr Castro said.

He said that it would not be illegal to hold dollars but, as from November 8, these would have to be exchanged for pesos to be spent, and there would be a 10% commission.

"As of November 8, the dollar will not be accepted in our shops, which will only take convertible pesos," a central bank statement explained.

The euro and other currencies, accepted in some resorts, will also have to be exchanged but will not carry the 10% commission. With an estimated $1bn a year (£540m) sent home, the commission could net the Cuban state up to $100m.

Mr Castro, however, suggested that emigrants might like to switch to the euro, the pound, or the Swiss franc.

"In the short term, there may be a slip in the remittances," John Kavulich, the president of the US-Cuba Trade and Economic Council, told Associated Press yesterday.

The dollar was legalised in 1993 after the fall of the Soviet Union put the island in economic crisis and forced it to open up to tourism and foreign investment.

It is unclear just how willing ordinary Cubans will be to part with their coveted greenbacks.

Observers speculated that a vigorous black market currency exchange may spring up, and that the island's black market in cigars and other goods may continue in dollars.

Cuba took the first step to curb the dollar last year when it banned state corporations from using it as hard currency in their domestic transactions with each other, and said dollar export earnings had to be sold to the central bank.

Mr Bush, meanwhile, launched a strategy in May to undermine Mr Castro's regime by tightening restrictions on travel by Cuban Americans and on the amount of dollars they could take home.

The US federal reserve decided the same month to fine the Swiss bank UBS $100m for allegedly sending dollars to Cuba, Libya, Iran and the former Yugoslavia in violation of sanctions.

Mr Castro, who has outlasted nine US presidents and survived the demise of the Soviet Union, said that Cuba's socialist system would prevail: "The destiny of this country was decided long ago and nothing can intimidate us."

Cuba has been seeking to draw attention to a UN vote due tomorrow over the US trade embargo on the island, imposed in 1963 following the abortive Bay of Pigs invasion backed by the CIA.

Guardian Unlimited © Guardian Newspapers Limited 2004 http://www.guardian.co.uk/cuba/story/0,11983,1336696,00.html

Tweet