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Despite Government Efforts, Cubans Hold Tight to the U.S. Dollar

January 01, 2006|Carol J. Williams | Times Staff Writer

HAVANA — More than a year after the communist government here replaced the U.S. dollar with a convertible peso, the greenback remains in the hearts and hands of the Cuban people.

Prices for most goods are still listed in dollars. Tens of thousands of families still get handouts from U.S. relatives in dollars, much of it funneled in by visitors to skirt the Cuban state bank's 10% cut for conversion. Taxi drivers, private restaurants and those with rooms to rent still accept payment in U.S. currency.

"We have more trust in dollars," said a partner in an Old Havana paladare, one of the private but heavily regulated eateries some Cubans are allowed to operate in their homes. Anyone who can afford to save money does so in U.S. dollars, he added.

The resilience of the dollar here has created a complicated, three-tiered monetary system, as the convertible peso, or CUC, also circulates alongside the official moneda nacional, or MN. Most Cuban salaries are paid in moneda nacional, which consumers must exchange for convertible pesos, at a rate of 25 to 1, if they want to shop in what are still referred to as dollar stores -- the only source of meat, milk and most consumer goods. Neither the convertible peso nor the moneda nacional has any value abroad.

The attempt to "de-dollarize" Cuba was instituted in November 2004, purportedly because the economy had recovered from the gut punch dealt by the 1991 collapse of the Soviet Union and the loss of billions in aid and subsidies Moscow had provided. The dollar became legal tender in 1994, at the close of an austerity program dubbed the Special Period in Peacetime, during which the gross domestic product fell by a third and Cubans lost an average of 22 pounds.

Remittances from U.S. relatives now total as much as $1 billion a year, and ordinary Cubans can still legally hold and save dollars. But the government has reeled in hard-currency earning and spending autonomy granted to state industries and services during the special period.

Cuba reported 5% economic growth in 2004, and President Fidel Castro said just before Christmas that 2005 would see an 11.8% expansion.

Foreign analysts say the growth figure is inflated by inclusion of subsidies and intangible benefits such as social services. The U.N. Economic Commission for Latin America and the Caribbean, which calculated that Cuba's 2004 expansion was 3%, dropped the island nation from its report for 2005, saying the data made available by Havana were insufficient to calculate reliable figures.

The nation does a healthy trade with Venezuela and China, but independent analysts suspect that Cuba has undisclosed debts and a widening trade deficit as exports grow at a much slower pace than imports.

Even the most critical analyses, though, peg the 2005 growth at upward of 5% and bolster claims by Economy Minister Jose Luis Rodriguez Garcia that Cuba has turned the corner on post-Soviet privations.

"The country has begun to overcome the shortages of the crisis period," Rodriguez told the National Assembly in December. He said tourism, nickel sales and the export of services accounted for "the highest performance in revolutionary history," referring to the 47 years since Castro's anti-capitalist guerrilla force came to power.

With all but about 2,000 legally self-employed service providers earning state salaries averaging $15 a month, the boom times are hard to see on the streets. The government raised salaries for most state workers by 25% in 2005, but a 4% inflation rate, an artificial devaluation of hard currencies when the convertible peso was introduced, and a severe crackdown on pilferage and private enterprise in recent weeks have served to counterbalance that increase.

Castro deployed thousands of university students and young Communist Party supporters to oversee gas station operations in December after disclosing in a national address that more than half the gasoline in the country was being stolen. He also dispatched police to raid farmers markets and arrest vendors and bicycle taxi drivers who couldn't show a state license.

"You can't survive without doing something on the side," said a 39-year-old teacher who sells homemade salsa CDs and cassettes to tourists.

"We work to eat. That's all our salaries cover," said a cardiovascular nurse who left that job eight years ago to work as a hotel maid. "You need dollars from tips or from family outside for clothing and anything else."

Energy shortages have eased, apparently one public dividend of the economic upturn that can be traced to lucrative trade with Venezuela and China.

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