Dollar replaced by 'monopoly money' in Cuba

Dollar replaced by 'monopoly money' in Cuba

by Patrick Lescot
Tuesday, November 9, 2004
HAVANA, Cuba (AFP): The US dollar disappeared from stores, hotels and restaurants in Cuba on Monday in what communist leader Fidel Castro has called a move to counter US attempts to stifle the island's economy.

Cuban businesses can now only accept the "convertible peso" which has a face value equal to one dollar but which is worthless outside the country.

The coloured notes have become known as "chavitos", or "monopoly money", by the local population. But most people have accepted the change ordered by Castro.

"People have been well informed and, up to now, we have not had any problems. Everyone comes to pay with 'chavitos'," said Mileidis Suarez, a checkout cashier in a supermarket in the centre of Havana.

Castro, shortly after breaking his arm and leg in a fall, appeared on television on October 25 to order the end of dollar transactions, which have been allowed since 1993 under an earlier initiative to boost the economy.

His move came as a new jolt to the population which has seen conditions steadily deteriorate in recent years because of the US embargo and the loss of European communist allies in the 1990s.
The authorities originally gave the population two weeks to change dollars for convertible pesos, but this deadline has now been extended until November 14. After that date a 10 percent surcharge will be added to currency swaps.

Cubans can still keep dollars at home and hold dollar bank accounts.

But many have been queuing at hundreds of special exchange counters to swap dollars for the convertible peso. There has also been a surge in the opening of dollar accounts in banks.

Until Castro made his decree last month, Cubans had hoarded dollars to be able to buy products -- including some essentials -- in dollar stores.

Castro said that withdrawing the dollar from circulation was a response to "mafia-like" US policies against Cuba.

Experts in the United States the move is likely bring hundreds of millions of dollars into government coffers in the short term but that Castro's order has been mainly political.

Cuba has little access to international monetary institutions and has to borrow on short term markets. It is struggling to pay off foreign debts of about 11 billion dollars.

Castro legalised the dollar in Cuba in 1993 in a bid to boost the economy after the collapse of the communist bloc. A US trade and political embargo has been in place for 42 years.

In recent years the economy has become increasingly dependent on tourist dollars, which bring in about two billion dollars a year and remittances from expatriate Cubans who send an estimated 800 million dollars a year.

Now there will be the local peso and the convertible version.

Rene Lazo, deputy chairman of the Cuban central bank, said the use of the dollar prohibited attempts to estimate the amount of money in circulation, the Trabajadores newspaper reported Monday.

He said that now the central bank will be able to "maintain an adequate balance between monetary circulation and the offer of goods and services."

The official press has called the currency change "a new victory over imperialism" saying that Cuba was regaining its "monetary sovereignty".