Cuba to address currency unification ‘this year’

A group of US Democratic lawmakers who visited Cuba from 19-21 February have said that Cuban officials repeatedly told their delegation that 2018 would be the year in which the unification of the country’s dual currency system will take place.

Speaking to the media at the end of a visit to Havana (see United States section), Senator Ron Wyden (D-Oregon) said: “We talked at considerable length about getting the Cuban currency unified …The Cuban officials repeatedly told us this was the year to get it done, to unify the currency.”

Although large numbers of Cuban experts are understood to have been working for some years on how the process of unifying the domestic peso (CUP) and the convertible peso (CUC) might be achieved, up to now implementation has been delayed. This is believed to be because the issue is both technically complex and its delivery politically and socially sensitive, as it is likely to create inflationary pressures and see the price of basic commodities rise for consumers. The issue is further complicated by low rates of economic growth and a change in leadership this year.

In late December, at the end of the most recent meeting of the Cuban National Assembly (Cuba Briefing January 2, 2018), President Castro had said that the convergence of the two currencies “cannot be delayed any longer”. However, he provided no details other than to say such a step would be “the most decisive process to advance in the actualisation process of the Cuban economy”.

“Without resolving this, it is difficult to advance in a correct manner”, President Castro observed, while warning that the elimination of the country’s unique dual currency system will by itself “not magically resolve all the accumulated problems in the Cuban economy”.

It is now widely expected that when the Cuban National Assembly meets in April it will receive a report setting out government’s plans for the unification process. This will likely involve the devaluation of the CUC. At present the CUC is pegged to the dollar and worth CUP25, however for state purposes the CUP to CUC exchange is one to one. Although some analysts suggest the rate could move to CUP10, it is unclear whether this would be a starting or end-point for a progressive CUP devaluation.

Unless well managed, currency unification in the short to medium term could create further disparities between those who work in the non-state sector or receive money from relatives abroad, and those who work in state enterprises whose fixed state incomes are solely in CUP.

In order to try to pre-empt this it is expected that government will very soon increase its regulation and taxation of the non-state sector in ways that result in tighter economic and financial oversight by government.

Meanwhile, Reuters has reported that that it has seen a 166-page draft of new Cuban economic regulations which propose increasing state control over the private sector and curtailing some forms of private enterprise. The consultative document, the news agency said, had been sent to provincial and national administrative bodies for comment.

The draft lists 122 categories of self-employment, down from approximately 200 previously. It also reportedly calls for a new division under the Ministry of Labour to administer and control self-employed activities.

This is an extract from the Caribbean Council’s weekly editorially independent publication, Cuba Briefing, which provides in depth information on current economic, political and commercial developments in Cuba and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in Cuba find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region

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