Los Angeles Times
November 15, 2004

Cuba and Her Visitors Bid Adios to the U.S. Dollar

With the greenback being suppressed, the convertible peso is now the dominant legal tender.

From Associated Press

HAVANA Cubans and tourists lined up to change U.S. dollars into local currency Sunday, the last day to do so without paying a 10% surcharge that is part of a government measure to eliminate the dollar from circulation in this communist-run island nation.

As of last week, dollars no longer were accepted at Cuban stores, restaurants, hotels or other businesses. The 10% surcharge taking effect today is meant to further discourage people from bringing to the island currency from Cuba's No. 1 enemy.

President Fidel Castro has said the widespread use of the American money was being halted to guarantee Cuba's economic independence.

"I was given this [dollar] last night, so I had to come here today tomorrow it will be worth only 90 cents," Pedro Michelena, 82, said at a Havana cash exchange, holding the single greenback he had received from a group of foreigners for guarding their parked car.

The retired Cuban said that last week he changed $26 to get the Cuban convertible peso the local currency tied to the dollar and now the dominant legal tender on the island.

For a decade, the dollar was Cuba's dominant currency and was used to buy a wide variety of goods, such as shampoo, canned food and furniture. Cubans, as well as tourists, now must use the convertible peso.

No figures have been provided on how many dollars have been exchanged or deposited since the currency switch was announced Oct. 25. Cubans, who can still hold the American currency, are believed to have been hoarding several hundred million dollars at home, most of it money received from relatives living in the U.S.

Some independent analysts believe that many with savings will continue to maintain a dollar stash, though a smaller one.

The new measure was a bit confusing for tourist Marc Aupers of the Netherlands, who believed that, despite the changes, U.S. dollars were still accepted in the country. Arriving Saturday, he was told otherwise and on Sunday he lined up to convert his dollars.

"It's not inconvenient in any country you need to change your money into the local currency," Aupers said.

Castro said the move was necessary to protect Cuba from an increasing U.S. crackdown on the flow of American currency into the country.

The U.S. currency was made legal tender in 1993 to help attract hard currency after Cuba lost Soviet aid and trade.

The Cuban convertible peso, like the currency of many other smaller nations, has no value outside the country. The regular peso also exists here, but at 1/26 of the U.S. dollar, it has little value inside Cuba.

"We see this as a symbolic action to send the message to the United States that the Communist Party is still in control, and don't forget it," said Farid Abolfathi, an economist in Boston with the economic research group Global Insight.

Abolfathi said Cuba's move to eliminate the dollar was primarily political and would reap few economic gains in the country, where the average worker makes less than $20 a month while also receiving basic foodstuffs and subsidized housing and services.

"I don't really see much benefit to Cuba from this move," he said. "It removes valuable commodities from private hands to government hands, putting resources in the least economically competent sector in society, which is the political bureaucrats."