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Cuban experiment gives the peso some buying power

October 19, 2008|Will Weissert | Associated Press

BAYAMO, CUBA — A communist experiment is letting average government workers in this eastern city enjoy a few things usually only foreigners and moneyed Cubans can afford: a good burger, a kicking jazz bar and stiff cocktails.

Across the rest of the island, monthly government salaries of 408 pesos -- about $15 -- don't cover grocery bills, let alone a night out. But in Bayamo, the central government has made a special effort to support peso businesses, giving the lowly currency actual buying power.

Along the stylish pedestrian mall known as the Paseo, or the boulevard, six blocks of restaurants, barber shops, ice cream parlors and department stores give Cubans a taste of tourist life at local prices. Jazz bands jam for free until 2 a.m. at the Piano Bar, where mojitos go for about 20 cents. A 1950s-style diner serves up tasty meatball sandwiches for about 2 cents -- and four scoops of ice cream for about the same price.

"Almost everyone who comes in is surprised at first. The music is good. The cocktails are strong," said Ernesto Aldana of the Piano Bar, where the Cuba Libre -- rum pours with ice and splashes of cola and lime -- costs less than 19 cents.

"It's like you're paying in dollars," Aldana said. "But you're not."

Under the country's dual currency system, most things Cubans want and need are not available in the money they earn -- the Cuban peso, which is worth a little less than 4 cents. Virtually all upscale businesses across the island are priced for foreigners in so-called convertible pesos, worth $1.08 each.

Cuba has had two currencies since the collapse of the Soviet Union wrecked its economy and spurred its turn to tourism. Tourist businesses took U.S. dollars and charged U.S. prices; the peso was kept for everyday transactions.

The convertible peso, also called hard currency, was born around the same time but took on its current value in 2004, when the government banned the use of the U.S. dollar.

Cubans have long hoped the government would merge the two pesos and close the gap between the goods and services they and foreigners can afford. But so far, nothing has changed under Raul Castro, who took over as president from his ailing brother, Fidel, this year.

Cuba's government historically has tested potential economic policy changes in the provinces. In Bayamo, a city of 140,000 and the capital of Granma province, the regional Communist Party began expanding peso businesses in 2005.

"Normally, there's a gap between quality of service to foreigners and service to Cubans," said Isidro Alonso of Bayamo's Communist Party Committee on Ideology. "We are working to erase that."

Huge government subsidies are needed. Paseo businesses here take in only 1,000 to 1,700 pesos a day, about $38 to $64.

The program took shape only after Bayamo communists asked the central government for special autonomy and won the right to sell regionally produced items such as rum, seafood, beer, beef and dairy products to local residents, rather than shipping them in.

"We would see products like powdered milk made here and sold somewhere else and we said: 'How is this possible? If we make it in Granma, we should be selling it in Granma,' " Alonso said.

However, rising global commodity prices have made Bayamo's subsidies more costly, while hurricanes Gustav and Ike dealt serious blows to food production.

The government recently ordered all provinces to contribute more food to all parts of the country to reduce Cuba's dependence on foreign imports, said Humberto Rondon, technical director for production at a cheese and ice cream factory outside Bayamo. In Granma, officials will now have to ship about 80% of its cheese to points elsewhere in Cuba.

Despite the hurricanes and rising food prices, the Bayamo experiment is so successful that the Havana government is continuing to devote $10 million this year to reopen some peso businesses and cover operating expenses of those already established, Alonso said.

There are ordinary peso businesses all over Cuba, but the products are shoddy and service is mediocre. Shortages of everything from potatoes to pasta mean most of the dishes listed on peso restaurant menus aren't available, while peso stores have long lines of customers for mismatched inventory on largely empty shelves.

Contrast that with Bayamo, where the juice bar offers fresh mango or papaya juice for the equivalent of less than a nickel. The fully stocked dairy stays open until 11 p.m. on Saturdays. Ground beef is often hard to come by elsewhere, but here two hamburger joints serve up double patties heaped with ham for about 40 cents.

There's an office supply store, a flower shop, two beauty parlors, a pair of seafood restaurants, a Spanish eatery and a passable vegetarian place.

"Usually, without hard currency you never go to restaurants, you never go out on Friday nights. But here you can," said Vilna Lopez, who rents out rooms in her home three blocks from the Paseo.

Out-of-towners even brave long bus rides to spend their pesos in Bayamo.

"I would like to take this place home with me," said Alexey Rodriguez, visiting from Havana, 460 miles away.

But the experiment is too expensive to work on a larger scale. And for many, it has not done enough to soften the sting of the dual currency system.

Ana Luisa Gonzalez earns 225 pesos a month as a street sweeper on Paseo. Her son works at a tampon factory. A portion of his pay comes in convertible pesos.

"We live on that," Gonzalez, 50, said. "Salaries in [regular] pesos have no value."

When asked about all there is to buy on the Paseo, she said that even here, her salary isn't enough. A block of cheese is 80 pesos.

"If I buy two cheeses and two yogurts here, there goes all my salary. Then what?"

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