The Miami Herald
May. 12, 2004

Castro pulls the rug out from under dollar stores

Cuba's suspension of dollar sales of nonessential items has created a panic on the island as citizens brace for harder times ahead.


Cubans awoke Tuesday to shuttered stores that sell goods in U.S. dollars after a government announcement that sales of nonessentials in greenbacks would be suspended indefinitely.

The government blamed the new measure, first announced on television Monday night, on the Bush administration's decision last week to tighten trips and cash remittances to the island.

Notices posted on many government-owned stores that do business only in dollars all said the same thing: ``Closed for Inventory.''

Although the exact details of the new measure remained unknown, analysts said it could have a serious impact for some of the island's 11 million people.

By the government's estimates, about 30 percent of Cubans have direct access to dollars, either cash sent by relatives abroad or dollar-denominated salaries in some jobs, usually in the tourism industry. Such dollars were most often spent in the so-called ''dollar stores,'' which provide Cubans with the ability to buy items such as clothing, appliances and other goods usually unavailable on the Cuban peso market.


The government said peso prices, usually for rationed basic essentials such as foodstuffs, would remain stable. It was not clear if or when the dollar sales on nonessential items would resume.

''Many people are completely dejected,'' a journalist in Havana told The Herald by telephone. ``They are shocked by the government's decision because they consider it to be a form of punishment.''

''The effect has been crushing,'' said the journalist, who asked to remain anonymous for fear of reprisals. ``There is a lot of anguish. And no one knows what will come of this.''

Roger Noriega, assistant U.S. secretary of state for Western Hemisphere affairs, defended the tightened rules on Cuba.

U.S. policy, he said, ``can't be based on the psychosis of Fidel Castro or any petty dictator. We have to do what we think is a smart policy, and that's what we've done.''

Monday's announcement that most dollar sales would be ''suspended until further notice'' sent scores of Cubans to late-night minimarts to stock up on dollar-priced goods such as soap, over-the-counter medications and foodstuffs.

Long lines stretched again Tuesday at gas stations and state stores as people hoarded supplies such as shampoo and cooking oil. Household goods and other supplies were roped off or covered with tarpaulin. Liquor also appeared to be off-limits.

''This is insanity,'' Odila Morales, 64, told The Associated Press as she waited to buy laundry detergent. ``Politics are filthy.''

The official announcement said food, gasoline and personal hygiene products would be exempt from the halt in dollar sales but hinted that prices would be raised on food and gasoline and perhaps other products.

''Days of work and sacrifice await,'' the government warned.


Cubans were assured, however, that other aspects of the economy would not be affected. People will still be able to exchange dollars for pesos and buy food and other items in pesos at nondollar shops.

Cuba blamed the move on ''the brutal and cruel'' measures adopted last week by President Bush to hasten the end of the communist government and prepare for a new democratic system.

Besides tightening the rules on travel and cash transfers to Cuba, the Bush administration also announced it would spend an extra $45 million over the next two years to enforce the tighter restrictions, to support the dissident movement on the island and to buy an aircraft that can broadcast U.S.-funded Radio and TV Martí to Cuba.


Possession of dollars in Cuba was legalized in 1993 amid a grinding economic crisis after the collapse of the Soviet Union in 1991 and the loss of about $5 billion a year in Moscow subsidies. It has since evolved into the backbone of an economy sustained by family remittances from abroad and the millions of foreign tourists who flock to Cuba each year.

The government opened the dollar stores in large part to capture those dollars.

The tactic proved profitable, with the stores' revenues in 2003 estimated at $950 million, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council in New York.

Although some experts speculated that limiting the dollar stores' sales would divert dollars to the black market, where most goods can be bought at usually exorbitant prices, others said the move will help the government.