In announcing the measure on the television program Roundtable on October 25, President Fidel Castro said it was taken in response to the U.S. government’s stepped-up economic pressure on Cuba. Washington has sought to block the use of the dollar in Cuba’s international operations, forcing Havana to go through expensive currency swaps in order to buy and sell internationally.

“The U.S. government has increased its pressures and threats on foreign banks to prevent Cuba from depositing money abroad to fulfill its trade obligations, the dollars spent by the population and by foreign visitors in the island’s outlets,” said a Cuban Central Bank resolution announcing the new measure.

The Cuban president cited a decision by the U.S. Federal Reserve in May to fine Switzerland’s largest bank, UBS AG, $100 million for allegedly sending U.S. dollars to Cuba, Libya, Iran, and Yugoslavia in violation of U.S. sanctions against those countries.

The purpose of the switch to the convertible peso is to minimize the risks caused by Washington’s actions, Castro said. The 10 percent fee will help cover the risks and costs assumed by Cuba in handling U.S. dollars, the Cuban president said.

The Cuban government decriminalized the use of U.S. dollars in 1993 as part of a series of measures taken when Cuba abruptly lost its aid from and favorable trade with Soviet-bloc countries at the end of the 1980s. Since then Cuba has had to purchase most imported goods in dollars and other hard currencies at world market prices. Tourism has been promoted as a needed source of hard currency to be able to purchase such imports.

Decriminalizing the use of the dollar and other measures were part of curbing inflation and increasing production. For Cubans with access to dollars, it has made it easier to acquire basic goods that are in short supply in pesos. At the same time, as Cuban leaders have pointed out, this situation has led to widening social inequalities between those with and without dollars.

Tourist-oriented businesses in Cuba, including hotels, cafeterias, stores, car rental companies, and taxis, accept U.S. dollars. A substantial number of Cubans have access to dollars through family remittances or because they work in tourism.

Prices of goods sold in dollars will not change except that now they will be sold for convertible pesos. Government officials said the possession of dollars, and every other currency, remains legal and will not be penalized. Dollar bank accounts remain legal, and account holders may draw out either convertible pesos or dollars.

Remittances sent to Cubans from abroad, if sent in dollars, will be subject to the 10 percent exchange fee. Cubans receiving remittances have been urged to arrange to have the funds sent in other currencies, such as euros or Canadian dollars, which can be swapped for convertible pesos with no fee. Credit card and other non-cash transactions will not be subject to the fee.
 
 
Related articles:
Cuba confronts new wave of blackouts
UN General Assembly: 179-4 against U.S. embargo of Cuba  
 
 
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