For Many Cubans, an Uneasy Farewell to the Dollar
By JAMES C. McKINLEY Jr.
HAVANA - In the dusty, dim recesses of his bookshop here, William Rodríguez Muñoz keeps a worn leather wallet full of Cuban currency past and present, from the faded gray pesos of the time before Fidel Castro's revolution to the shiny notes that in recent days replaced the United States dollar as the dominant legal tender here.
Mr. Muñoz, a retired leftist newspaperman who collects everything from stamps to coins, says he fully supports Mr. Castro's decision to ban the dollar from use in all transactions. It was, after all, a symbol of what Communists like him consider an implacable capitalist enemy. Yet Mr. Muñoz is going to hold on to the $7,500 in his savings account, which he is still allowed to have under the new law.
"I'm earning interest on it," he said "I'll only change the dollars for pesos as I need to, to buy necessities."
Mr. Muñoz is not alone in his ambivalence toward the new currency, known as the convertible peso or, on the street, the chavito. Cubans greeted the changeover with a mix of patriotic pride and uneasiness.
While many people said they were happy to see greenbacks with portraits of American presidents leaving their streets, others said they were worried that the brightly colored peso, which the government has decreed is equal to the dollar, will not hold its value in the long run.
"Nobody knows if this is permanent or momentary," said a 33-year-old plumber, who like many people interviewed for this article asked that his name not be published. "A year from now the law supporting the convertible peso could not exist. This exchange rate only exists here in Cuba, because Fidel Castro is the only one who says it is true. So the smart ones who have money are guarding their dollars."
On Oct. 25, Mr. Castro decreed that beginning this month the dollar would no longer be accepted in stores, restaurants, hotels or anywhere else on the island, although dollar bank accounts would still be allowed. The government also declared that it would charge a 10 percent surcharge to exchange dollars for pesos after Nov. 15, encouraging citizens to turn in their dollars or deposit them in the bank.
The convertible pesos, bright with etchings memorializing revolutionary heroes like Che Guevara and Jose Martí, were actually printed in the mid-1990's as part of a plan to cover occasional shortfalls of dollars, but it was not until November that they went into wide circulation.
For Mr. Castro, the decision to ban the dollar in transactions was politically ingenious, diplomats and experts on Cuba say. In a single stroke, he has collected millions in hard currency that Cubans had saved, while putting an end to the long-running contradiction that his country's economy depends on the currency of his sworn enemy, the United States.
Francisco Soberón, president of the Central Bank, declined to say how many dollars the government had collected in exchange for the convertible pesos, nor would he say how large a reserve the government intended to create to support the currency, arguing that "in a war, information is very important."
He said that at least 2.5 million Cubans had lined up to change dollars during the last 18 days, and hundreds of thousands had opened bank accounts, taking dollars they had been hoarding at home and putting them in government-controlled banks. "It exceeded all our hopes," he said.
In recent speeches, Mr. Castro, 78, has argued that he must wean the country off dollars to protect its economy and sovereignty from the "economic warfare" being waged by the United States.
Over the last four years, the Bush administration has taken harsh steps to stem the flow of dollars to the island, cracking down on American tourists who have been visiting the island illegally, and limiting what Cubans living in the United States can send to their families. The White House has also set up a special team of law enforcement officials to find ways to cut off other sources of hard currency flowing into Cuba.
Mr. Soberón said the Bush administration had also tried to use fines and other forms of pressure to curb Cuba's ability to deposit dollars in international banks, hamstringing its ability to import goods.
The only defense, Mr. Soberón said, was to switch to other currencies, like the euro. "This is to confront an aggression," he said. "And to deprive our enemies of a weapon."
The dollar was made legal tender here in 1993 in a desperate move to attract hard currency during an economic collapse that followed the loss of aid after the fall of the Soviet Union.
The convertible peso, like the currency in some other small nations, has no value outside the country. The government has also kept in circulation the old Cuban peso, with which state salaries are paid. Those pesos are worth only about four cents, even in Cuba.
The currency switch is also a clever way for the government to tap into the more than $800 million that Cubans in America wire home every year to family members. Now expatriate Cubans must either send the money in some other currency or let the Castro government collect 10 cents on the dollar in taxes once their family members change the dollars for pesos.
For more than a decade, the dollar has remained the dominant currency on the island, used to buy everything from shampoo to furniture and automobiles. The state even embraced the enemy currency, setting up dollar stores, where people with United States currency could buy clothes, food, appliances and durable goods not available to most Cubans. State companies devoted to tourism also collected American dollars.
A dual economy quickly evolved. Cubans receiving money from relatives in the United States or earning tips in the tourist industry lived far better than people who depended on meager government salaries paid in Cuban pesos, which range between $5 and $50 a month. The state provides free education and health care as well as subsidized food rations.
Today, Cubans say the food rations they can buy with the old pesos at government stores are not enough to live on.
As a result, people here have learned to survive through a daily struggle to get hard currency by whatever means necessary. Factory workers steal cigars from corrupt warehouse managers and sell them on the street. Prostitution is widespread in Havana. Teachers and engineers moonlight as cab drivers. Fishermen sell fish illegally door to door. "If you don't do it, there is no way to survive," said Tania, a 32-year-old worker in a cigar factory who did not want her last name published. She was selling stolen Cohiba cigars from the dingy back room of a house near a major hotel in the Vedado neighborhood. Her salary, she said, was about $4.50 a month. "I have two children," she said. "What are they going to eat? One has to do bad things."
The introduction of the new currency comes as the Cuban government is reining in private enterprise and re-establishing centralized control over much of the tourist economy. Last April, the government stopped granting licenses for new restaurants and rooming houses. It also reduced the number of categories of private employment people may legally pursue. Some more established restaurant owners said privately that they would continue to accept dollars, though some said they might charge a little more to cover a government surcharge.
Still, one successful restaurant owner, who asked not to be named, said he would continue to accept whatever currency his patrons wanted to use. He also said he was intending to keep his profits in dollars, tucked away in foreign banks if possible. "I don't like these pesos," he said. "I would be crazy to keep my money here."