The Dallas Morning News
Tuesday, October 26, 2004

Ban means dollar buys less in Cuba

Castro: U.S. sanctions forcing nation to charge penalty on dollars

By TRACEY EATON / The Dallas Morning News

HAVANA Cuba's decision to penalize anyone using American dollars had some people wondering Tuesday whether U.S. economic sanctions were finally wearing down the socialist government.

More than $12 billion in debt and short on cash, the government said Monday night that on Nov. 8 it will begin collecting a 10 percent commission from those exchanging dollars for local currency.

That means, for instance, that if a traveler arrives with $1,000 in spending money, he or she will have to exchange it for the equivalent of $900 in so-called convertible Cuban pesos, which are worthless outside Cuba.

President Fidel Castro said he was forced to act because Bush administration sanctions are making it more costly for his government to conduct business in dollars.

But he vowed that his government will survive.

"The destiny of this country was decided long ago, and nothing can intimidate us," said Mr. Castro, appearing on television with his arm in a sling after a fall last week left him with a broken knee and arm.

In the past year, U.S. officials have strengthened the decades-long economic blockade against Cuba. They've taken steps to financially strangle 13 travel agencies, tour operators and other firms doing business with the island.

The latest strike came Monday when Juan Carlos Zarate the U.S. Treasury Department's assistant secretary responsible for efforts to fight terrorist financing and money laundering announced that the United States will seek to block any financial transactions with SERCUBA, an electronic money-transfer company that funnels remittances into Cuba. The company has offices in Cuba, Italy and Spain.

"As we have seen, the Castro regime uses a variety of schemes and businesses located not only in Cuba but also in countries around the world to feed its military and security infrastructure and not the Cuban people," Mr. Zarate said.

Mr. Zarate said Tuesday that the announcement by the Castro government about the dollar is "an act of economic desperation and a clear signal that President Bush's strengthened policies towards Cuba have hurt the Castro regime."

The toughened U.S. policies have made dealing in dollars too risky and expensive, Mr. Castro said. And many Cubans, lining up Tuesday to trade their dollars for pesos at the one-for-one rate, support the president.

"The government has to take these measures to counter what the American government is doing," said Iliana Batista, 35, a Havana singer. "We can't stand around with our arms crossed."

Others aren't pleased. "People are angry," said a 30-something hotel worker. "On the bus this morning, people weren't talking about anything else."

For many years, carrying around even a few dollars was a crime in Cuba. After the island's chief sponsor, the former Soviet Union, cut off nearly $6 billion per year in subsidies, the economy began to collapse.

Desperate, authorities legalized possession of the dollar in 1993. That allowed Cubans to spend money sent by their relatives in the United states.

The remittances total as much as $1.3 billion per year and are the country's most important source of hard currency, said Paolo Spadoni of the University of Florida, who studies the Cuban economy.

As the Bush administration steps up the pressure, the socialist economy isn't in immediate danger of collapsing, but "the situation is precarious," he said.