NEW YORK (CNNfn) - If Cuba's central bank has
its way, businesses doing trade with Europe will soon
conduct their transactions in euros -- Europe's new
For years Cubans have relied on the venerable
U.S. greenback to pay for goods and services they
imported from other countries. Large inflows of U.S.
dollars from relatives living in America and a massive
black market where only U.S. dollars are accepted all
but guaranteed the venerable greenback would be the
staple currency on the communist island.
Now the government wants to wean its importers
away from U.S. dollars and make euros the staple of
trade and commerce with the European Union, its
largest trading partner and dominant importer,
Francisco Soberon, Cuban central bank president,
"We have instructed all Cuban firms to start using
the euro as of the first of June of this year in
transactions with the 11 nations of the European Union
as well as several others," Soberon said.
Cuba has been under a U.S. trade embargo since
In the 1990s, with the fall of worldwide communism
and a lowering of geopolitical tensions, Cuban
merchants and banks have increasingly turned their
attention to Europe to get the goods they both want
Before the introduction of the euro at the beginning
of this year, a typical Cuban merchant would have to
sell his stash of U.S. dollars, buy deutsche marks, for
example, purchase the goods he wanted and then sell
the goods at home in Cuban pesos.
To gain any kind of profit on the sale, that Cuban
merchant would then have to reclaim his U.S.-dollar
outlay -- a difficult proposition in a country where U.S.
dollars are worth their weight in gold.
The Cuban central bank now is encouraging
businesses to use the euro as an alternative method of
payment, possibly saving cash-strapped Cuba
hundreds of millions of dollars in banking commissions
According to Soberon, it will benefit the country in
several ways -- by reducing costs associated with
converting U.S. dollars into other currencies and then
converting the proceeds back into U.S. dollars, by
speeding up the clearing process of U.S.-dollar
deposits that must be cleared through banks in New
York and, most importantly, by eliminating the stigma
of using a currency of an arch rival. Eventually it's
possible that the euro would replace the U.S. dollar as
the second staple currency.
"If it's the case that certain kinds of trade are not
done with Cuba right now because they're in U.S.
dollars, then that's fine -- changing to the euro might
help that," said Michael Gregory, a senior economist at
Lehman Brothers in New York. "If it's a case where
using euros to conduct more liberal trade with Europe,
then that's certainly of benefit, as well."
That's because a euro switch will afford closer ties
with Europe -- something Cuba needs to sustain its
economy without U.S. trade. What's more, on a
psychological level, using the euro rather than the U.S.
dollar may be a way for Cubans to give the last sneer
to a country they both love and hate.
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