May 10, 1999
Cuba plans to go euro
Island switching to Europe's single currency to avoid trade exchange fees

                  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
                  single currency.
                     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,
                  told CNN.
                     "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
                  and need.
                     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.
                     Until now.
                     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
                  each year.
                     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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