Cuba’s communist government plans to eliminate its dual currency system to boost efficiency and trade as President Raul Castro takes measured steps to stoke economic growth on the Caribbean island.
Cuba, which has maintained a peso used by citizens and a separate convertible peso mainly used by tourists since the mid-1990s, will work to unify the system, according to a statement today in the state-controlled newspaper Granma. The convertible peso has been pegged 1-to-1 with the dollar, with the regular peso at 25-to-1. The system upends trade and creates two tiers of wage earners, said Philip Peters, an analyst at the Cuba Research Center in Alexandria, Virginia.
“It distorts price signals to make economic decisions,” Peters said in a telephone interview. “The economy will only benefit by getting rid of it.”
The overhaul is the latest effort by the 82-year-old Castro, who succeeded his brother Fidel in 2008, to open up the island’s economy. His government has loosened property laws, allowed the creation of more cooperatives and expanded the list of professions people can pursue outside state-run enterprises. Early this year the government also eased travel restrictions, letting many dissidents travel abroad more freely and return.
Cuba’s economy, which relies on tourism and nickel exports, expanded 3 percent last year, up from 2.8 percent in 2011, according to the nation’s statistics office. Tourism increased 3.8 percent in August from a year ago, with most visitors coming from Canada and the U.K.
The government is also seeking to build golf courses and theme parks to bolster tourism while expanding the Mariel port with upgrades by Brazilian construction company Odebrecht SA to increase trade.
The currency changes will first apply to businesses. Because of the “complexity” of the overhaul, the government warned it will “take careful preparation and execution” to eliminate an exchange system that was initiated after the collapse of the Soviet Union.
“The unification of the exchange rate isn’t on its own something that can solve all of the economy’s problems,” according to today’s statement. “But it’s application is needed to guarantee the reestablishment of the Cuban peso’s value and its role as a currency, that is to say, as a unit of account, means of payment and store of value.”