The Cuban Money Crisis - Bloomberg Business

Bloomberg Business

by Patrick Symmes

The biggest change to the island’s economy isn’t the thaw in U.S.-Cuba relations

Photographs by Sebastián Liste for Bloomberg Businessweek

Havana’s Vedado neighborhood in March 2015.

The currency crisis starts about 75 feet into Cuba. I land in the late afternoon and, after clearing customs, step into the busy arrivals hall of Havana’s airport looking for help. I ask a woman in a gray, military-like uniform where I can change money. “Follow me,” she says.

But she doesn’t turn left, toward the airport’s exchange kiosk. Called cadecas, these government-run currency shops are the only legal way, along with banks, to swap your foreign money for Cuba’s tourist tender, the CUC. Instead, my guide turns right and only comes clean when we reach a quiet area at the top of an escalator. “The official rate is 87 for a hundred,” she whispers, meaning CUCs to dollars. “I’m giving you 90. So it’s a good deal for you.”

I want to convert $500, and she doesn’t blink an eye. “Go in the men’s room and count your money out,” she instructs. “I’ll do the same in the ladies room.”

The bathroom is crowded, with not one but two staff and the usual traffic of an airport in the evening. There’s no toilet paper. In an unlit stall I try counting to 25 while laying $20 bills on my knees. There’s an urgent knock, and under the door I see high heels. “I’m still counting,” I say.

She’s back two minutes later and pushes her way into my stall. We trade stacks, count, and the tryst is over. For my $500, I get 450 CUCs, the currency that’s been required for the purchase of almost anything important in Cuba since 1994. CUCs aren’t paid to Cubans; islanders receive their wages in a different currency, the grubby national peso that features Che Guevara’s face, among others, but is worth just 1/25th as much as a CUC. Issued in shades of citrus and berry, the CUC—dollarized, tourist-friendly money—has for 21 years been the key to a better life in Cuba, as well as a stinging reminder of the difference between the haves and the have-nots. But that’s about to change: Cuba is going to kill the CUC. Described as a matter of fairness by President Raúl Castro, the end of the two-currency system is also the key to overhauling the uniquely incompetent and centrally planned chaos machine that is the Cuban economy.

Photographs by Sebastián Liste for Bloomberg Businessweek

Lining up to exchange ­currencies in Old Havana.

Even in Cuba there are markets, and the effects of Castro’s October announcement of a five-step plan for phasing out the CUC are already rippling out to every wallet in the country. The government has issued notifications and price conversion charts, and introduced new, larger bills to supplement the low-value national peso. Over the next year, the CUC will be invalidated—what Cuban economists call Day Zero—and then, in steps four and five, the regular Cuban peso will become exchangeable and be floated against a basket of five currencies: the yuan, the euro, the U.S. dollar, and two others to be named later.

Thanks to the expected normalization of relations with the U.S., tourism, already the engine of Cuba’s current economic boom, is expected to grow enormously—though by this time next year foreigners will be required to negotiate their visits with mounds of regular pesos. Raúl Castro is effectively gambling that he can release some control over the economy in exchange for growth, ensuring the regime’s survival.

The reality, however, may be anything but orderly. During my visit, I witness the hoarding of dollars, an unstable black market, and a deep distrust of the government’s financial speculations. Get out of CUCs, the rumors urge, and into dollars. For a 3 percent spread, a woman will even follow you into a bathroom stall.

“Those in the peso-only economy are completely dependent on the government”

In January 1961, a cargo ship arrived in the harbor of Santiago de Cuba bearing a load of freshly minted cash. Cuba’s pre-revolutionary peso had been stable and valuable for decades, a source of patriotic pride. Overnight, the Cuban revolution invalidated the old peso and replaced it with new bills, signed by Che Guevara and worth what the government said they were worth. The gesture sidelined opponents, reduced the independence of the professional and middle classes, and effectively seized the island’s remaining wealth in one gesture. In 1967, when Che died, it was his face that went on the currency, memorably gracing a 3-peso note that would get you lunch and a drink. Today that same bill is worth 12¢.
The end of Soviet subsidies in 1991 brought real economic desperation to Cuba. Dollars were traded on the black market. (In a dark Havana alley, I once got 125 pesos for a single greenback in a hurried transaction with a frightened man.) By 1994, in an effort to co-opt the black markets and once again take hold of the island’s resources, the government introduced the CUC. Initially this was strictly for tourists, the only legal tender for all those mojitos and langoustines. The CUC was pegged at 1:1 with the U.S. dollar, and just the commissions on exchanging it—up to 20 percent—earned the Cuban government billions a year.

Workers in a CUC shop managed by the government in Sancti Spiritus.

Photographs by Sebastián Liste for Bloomberg Businessweek

The CUC turned tourism into a lucrative lifeline during the 1990s, and at first only a few essential imports—shoes, soap, tires—were sold to Cubans in CUCs, at a few, heavily guarded stores. Today those misnamed “dollar stores” exist in every neighborhood, and the CUC, first intended to insulate Cubans from capitalism, is the only way to buy the majority of consumer goods.
This is the Cuban dilemma: Salaries are paid in ordinary pesos, and average just $20 a month, even though the cost of survival runs around $50 a month, and must be paid for with CUCs at government stores that, until now, accepted nothing else. As crazily inefficient as the existing two-currency system appears, it has allowed the government to maintain near-total dominance of the economy. The Cuban revolution has always viewed money as a problem, not a solution. That’s why the peso of the old republic had to be destroyed overnight in 1961. Having money let people be independent and operate outside the system. “It’s part of the DNA that Fidel imprinted on the revolution,” notes Ted Henken, a sociologist at Baruch College who has specialized in the island.
What the government has finally grasped is that the two-currency system has become economically and politically unsustainable. To get around it, Cubans steal state resources, work black market jobs, and even arbitrage the price differential between mangoes at opposite ends of the country. “Those in the peso-only economy are completely dependent on the government, which is in control of more than 85 percent of the total economy,” says John Kavulich, president of the U.S.-Cuba Trade and Economic Council in New York. For the citizenry to “have a legitimate stake in the economy,” he notes, there should be one currency, used for salaries and all stores, and traded openly. “It needs to happen,” Kavulich says.

“There are over 250,000 entrepreneurs in Cuba since the new opportunities. This is a door opening that isn’t going to close.”

No política. That’s what Yamil Alvarez Torres says as he settles onto a hotel sofa in Old Havana, his Under Armour socks showing a fashionable amount of ankle from beneath pressed jeans and a striped dress shirt. Alvarez looks the part of the new Cuban entrepreneur, a successful restaurant owner who has bourgeois hobbies—dogs and free diving—and an almost unlimited confidence in the future. But no politics. Like most Cubans, he avoids talking or even thinking about the nation’s closed and secretive political system too much.
Havana today is in physical bloom. A gallon of paint costs 30 percent of a typical monthly salary, yet half the houses in the city seem freshly painted. The once-ubiquitous and fuming thunder chariots of old Detroit are either shined up with new chrome and paint or, more often, sidelined by more recent and reliable Korean and Chinese vehicles. The people I’d known on the edge of starvation over the last 20 years of visiting are now fighting the creep of their waistlines and the return of pastries and deep-fried everything at street-corner kiosks. Even in 1991, Cuba seemed more open than it was, an island without barbed wire or machine guns, the friendly blue ocean serving as its Berlin Wall. Now the openness is tangible: In December, Cuba and the U.S. announced that the two intend to reestablish relations after more than four decades of enmity. On Havana’s streets, there’s a charge of anticipation, and one senses a people eager to embrace the world.

Photographs by Sebastián Liste for Bloomberg Businessweek

A “bookshop” located at the door of a private residence in Havana. Until a few years ago, Cubans were not allowed to open private businesses.

“It’s getting easier and easier to do business in Havana,” Alvarez tells me. “If you get your logistics worked out, you can do it.” I’d first visited his restaurant, Los Mercaderes, two years before, when he’d opened it as a paladar, or home restaurant, and the place had an empty, tentative feel. Now he has 50 employees and full tables every night, with musicians treading out jazz and Buena Vista Social Club hits from a tiny balcony; he and his wife have moved to another property.
He’s nonplussed about the currency change: “If you are running a business and doing well, you are going to do well with one currency or two. ... Honestly, I believe that anything you do efficiently and professionally is going to succeed in Cuba.”
Efficiency and professionalism require reversing decades of perverse Cuban incentives, however. Most waiters are state-trained and paid in worthless pesos: They often spend more time on break, or talking to friends in the street, than attending to diners. “They expect to have their job forever,” Alvarez says. “They get used to being bad.” So he hires blank slates: English-speaking college grads, many of whom have never seen the inside of a nice restaurant before. “The main thing,” Alvarez says, “is we want zero experience.”
He sounds optimistic. “Very,” he says. “There are over 250,000 entrepreneurs in Cuba since the new opportunities. … This is a door opening that isn’t going to close.”
If the opening has an official advocate, it’s Omar Everleny, the lead economist at the Center for the Study of the Cuban Economy. The center is in a onetime private residence in an elegant Havana neighborhood, surrounded by embassies. Despite arriving at the building with an appointment at 4 p.m., I find it empty; the next morning Everleny meets me in the library, amid the smell of decaying paper, to walk through the slow death of the CUC and the likely benefits for Cuba.
Everleny, like many Cubans, can recite the exact date economic reforms began: Sept. 9, 2010. Raúl Castro had assumed control in 2006, during his brother’s gastrointestinal illness. But his official promotion to leadership took two more years, and not till the fall of 2010 did he spell out reforms that expanded self-employment, removed limits on hiring by small businesses, and protected foreign investors from expropriation. Joint-venture hotels are routine now, with 60,000 rooms available. A new container port at Mariel, built by the Brazilian government, has created export capacity for a country that exports very little. More important, Brazilian President Dilma Rousseff has gambled that pharmaceutical production and other tightly controlled businesses can thrive here.

Photographs by Sebastián Liste for Bloomberg Businessweek

The bar at Fabrica de Arte Cubano, a gallery/nightclub that has private investment.

The most probable scenario is that Cuba will reluctantly follow the China model. Cuba isn’t embracing freewheeling capitalism—Cubans are still allowed only one business each and are hemmed in on all sides by monopoly controls—but the back streets of Havana reminded me of no place more than the grim but awakening Beijing of 1987, when the People’s Republic also had two currencies. Cuba limits self-employment to 201 categories, like Doll and Toy Repair (No. 128) and Breeder/Seller of Pets (No. 26). Even so, the number of licensed entrepreneurs has grown from 140,000 in 2010 to more than half a million today. Unlike a previous wave of self-employment in the 1990s, which was limited to survival-oriented trades like knife-sharpening (No. 6) or tire repair (No. 113), about half of today’s licensed businesspeople are real entrepreneurs, concentrated heavily in tourism and restaurants but including taxi drivers, transport companies, clothing shops, cooperatives producing baby clothes, and lots of construction.
Raúl Castro has meanwhile removed a series of prohibitions that infuriated Cubans: They can now own cell phones, buy and sell their houses, and even stay in the hard-currency hotels (817,000 did last year) that were once the symbol of foreign privilege. Raúl has also loosened, if not released, his grip on expression. Dissidents and regime opponents who were long blocked from leaving the country are now routinely seen at conferences in Miami, New York, and Brussels. In the 1970s, Cuba had some 15,000 political prisoners; today that number is between 50 and 60, according to the Cuban Commission for Human Rights and National Reconciliation.
The currency change is already happening, Everleny notes. Step one was to tell people, to prepare them psychologically for the coming transition. Step two, which began a week before my February arrival, was to roll out new, larger-denomination peso bills, so that people could pay higher prices without carrying a backpack.
The timing of the remaining three steps remains vague, in the Cuban way. Raúl had said in his speech that the two currencies had to be reconciled before the next Communist Party congress. That’s scheduled for April 16, 2016. The only thing known was that Day Zero would come before then.

To see how Raúl’s changes and the looming currency conversion are playing out, I travel to Sancti Spíritus, a colonial town in central Cuba I hadn’t seen for 24 years. I’d hitchhiked there in 1991, a two-day epic that required waiting under bridges with crowds of kind but needy Cubans and a return trip on a dilapidated train that stopped randomly for hours. This time I buy a seat in an unmarked Moscovich, a legal private taxi that roars inland, stopping only to slip behind a barn to buy black-market gasoline, fuel that was manually cranked into our tank. “Sorry about the smell,” my driver says, “but this is the only way.”
Six hours of driving sweep me into the flat, colonnaded city. Many things are still as I remember them. The streets are sleepy, the bars bleak, and the local bus network consists of eight-person carts towed by horse. Yet even here there’s fresh paint, a computer repair business, and private furniture shops. I try to pay for ice cream with CUCs, making the woman laugh; the price is in pesos, 1/25th as much. The reverse happens at night, in the town’s best restaurant. Because everyone in the place is Cuban, I expect grim portions and pesos. But the shrimp are superb, a sommelier shows off a genuine wine cellar, and the Cubans all pay hard-currency prices, half a month’s salary on beer, beef, and watching baseball. In two decades of visiting, this is the first time I’ve shared a real restaurant with Cubans.

The storefront of a government-managed hardware shop in Sancti Spíritus.

Photographs by Sebastián Liste for Bloomberg Businessweek

In the morning I go to buy a refrigerator. Home appliances are one of the most desirable items in Cuba, but their sale is restricted to a narrow range of state stores called electrohogars, and Sancti Spíritus has two of them off the town plaza. One is shut, the other sleepy and small, with more floor space given over to selling ice cream and soda than consumer durables. But in one corner are hair curlers, electric frying pans, all-in-one laundry machines, and a few Daewoo refrigerators. Many Cubans are eager to replace their 1950s fridges, but buying a full-size model means coming up with 910.65 CUC. At the bathroom-stall conversion rate, that’s $1,001, or twice the price of a similar model on Amazon.com. It’s also—as a new price tag says—22,675 pesos, or about four years’ worth of the average Cuban salary. “If you’re going to buy a refrigerator,” Everleny tells me, “you’re not going to pay for it with 20s. You’d have to carry a trunk.” The release of new, larger denominations of standard peso bills is meant to smooth such transactions, but a year from now, with the peso possibly floating against a basket of currencies, there’s a risk that hidden inflation and exaggerated purchasing power could surface. Many people are hoarding hundred-dollar bills simply to be safe.
On the way back to Havana, I ride on a CUC bus. In the past, regular people had no choice but to ride peso buses that were scarce, slow, and crowded. For 23 CUCs I get a seat on a punctual express that fills up mainly with foreign tourists but also some Cubans, the kind who have more than an average month’s salary to spend on a bus ticket. We pass quickly through a string of grim cities—Colón, Cárdenas, Matanzas—all poor and unvarnished yet bustling with shops and commerce I’ve never seen before in Cuba. Like a vacuum, the unmet demand of Cubans is pulling reform to the farthest corners of the island.

Photographs by Sebastián Liste for Bloomberg Businessweek

Even in the town of Sancti Spíritus, business is picking up.

Cuba has had a mixed economy for a long time: socialist until the food ran out, free-market thereafter. Critically, some of those markets are now legal and enriching, like the new real estate market that has seen houses in prime parts of Havana trade for hundreds of thousands of dollars (or CUCs, actually). There are also smaller, more clandestine markets, even for things like data. Many thousands of Cubans pay a fee to get what’s called el paquete, an assortment of films, TV shows, video games, glossy magazines, and books from inside and outside the country. Cuba is ranked alongside Iran and North Korea for Internet censorship, with only a heavily filtered intranet available at an hourly price. El paquete is therefore a black-market delivery system, full of inefficiencies. The information is hand-carried into the country once a month, and the collection of American, Spanish, Mexican, and even Cuban media is passed around Havana on a terabyte-sized drive, or shared via illegal Wi-Fi networks in private homes.
The blogger Yoani Sanchez points out that this black market in information sticks to a familiar Cuban rule—nothing in el paquete should be explicitly political, to avoid drawing attention. But even the apolitical is subversive here, she says; when Cuban readers flock to lifestyle articles and glossy celebrity magazine covers, they’re imagining themselves in a different country. Everything they see in this digital realm—churros recipes, listicles on the secrets of entrepreneurial thinking—is part of a different state of mind, a terabyte of autonomy and desire.
Even though the economy looks better than at any time since 1991, Cuba remains deeply, dangerously reliant on Venezuela’s collapsing economy. The heirs of Hugo Chávez have kept the lights on in Havana by granting Cuba 100,000 barrels of oil a day at about half the market price. That effectively hides 45 percent of the island’s trade deficit. Venezuela also pays $5.5 billion a year for the almost 40,000 Cuban medical professionals who now make up half of its health-care personnel. Neither support can endure unchanged.
When MasterCard announced it would begin accepting charges from Cuba on March 1, the Cuban government slapped that down. U.S. airlines can now start flying directly to Cuba, or so Washington says—but there will likely be years of negotiations over safety, landing fees, and the reciprocal right of Cubana, a state-controlled, military-operated airline, to land its planes in Miami. The last thing on the Cuban list of reforms is sharing power. The Communist Party reflexively insists that nothing will change in Cuba, ever, but Obama’s rapprochement is certain to have an effect. Dissidents, the politically ambitious, and human-rights activists believe that some day they’ll be legally allowed to exist and their now-secretive work can become routine. The death of the CUC may turn out to be Day Zero for more than funny money.

Los timadores de la Cadeca

Cubanet

Luis Cino Álvarez  

LA HABANA, Cuba -En los alrededores de las Cadecas (casas de cambio) hay que andar alerta, porque los estafadores y los asaltantes están a la orden del día.

Lo más prudente, por mucha cola que haya y muy apurado que uno esté,  es no escuchar las propuestas de los tipos que merodean las Cadecas, no importa que parezcan serios y decentes –esos son los más peligrosos-  ni que el cambio que ofrezcan por los euros o dólares que vas a cambiar sea más que el oficial.

Estos timadores, como los pillos de las chapitas en las guaguas que tantos incautos atrapan,  son maestros del ilusionismo y la prestidigitación… Apartados de la fila,   cuentan y recuentan los billetes ante tu vista, una, dos y tres veces, siempre con la recomendación apremiante de que tengas cuidado que no venga un policía…Y ahí están los billetes, casi siempre flamantes, sin que falte uno…Ahora los ves, ahora no, aquí están… Hasta que no los  veas más, porque el tipo se desprende a correr con el dinero y no hay Dios que lo ataje

O puede suceder que te hayas despedido conforme, puede que hasta le hayas dado las gracias y  él a ti, y  luego que hayas caminado unos pasos descubras que te dio billetes falsos o que te falta dinero.

Casa de cambio de la calle Obispo, en La Habana

Tengo  un amigo a quien estafaron a solo unos metros de la Cadeca de La Palma, en Arroyo Naranjo.  Un gordo de acento cantarín, de unos cuarenta y tantos años, con gorra de los Yankees de New York, le preguntó qué iba a cambiar. Cuando mi amigo le dijo que cambiaría un billete de 100 euros, el hombre  ofreció comprárselo, pagándole el euro a 1.35 cuc. Ese día, el cambio oficial estaba a 1.31 cuc. El cambista  le explicó que necesitaba los euros con urgencia porque iba a viajar a España.  Sacó un fajo de billetes y se lo contó dos veces. No había duda,  eran  135 cuc: seis billetes de 20, uno de 10, y uno de a cinco. “¿Está bien? OK, guárdalos rápido,  que el guardia nos está mirando”, le dijo.  Cuando caminó unos metros, mi amigo tuvo el presentimiento de que lo habían tumbado. Efectivamente: cuando se sacó el dinero del bolsillo, descubrió que el tipo le había dado seis o siete pesos estrujados y doblados dentro de un billete de 5 cuc. Eso fue todo lo que pudo recuperar de los 100 euros.  Y jura que no vio en qué puñetero momento el estafador, del que ya no quedaba ni rastro por todo aquello,  hizo el pase de manos decisivo que trocó el fajo real por el trucado.

Conozco otro hombre a quien lo atracaron, también en la Cadeca de La Palma, que parece ser una de las más peligrosas. Se decidió a cambiar  con el mulato de espejuelos oscuros que le hizo la propuesta, porque había mucha cola y él estaba muy apurado.  Caminó solo unos pasos con el cambista. Este le contó el dinero dos veces,  estaba completo, pero cuando alargó la mano para dar el billete de 50 euros y recoger lo suyo, un mastodonte en camiseta que no vio aproximarse, lo embistió por un costado y lo lanzó contra el piso.  Los dos tipos corrieron como galgos y se perdieron entre el tráfico y la multitud, sin que la víctima, que solo resultó con un golpe en el hombro y la  mano lastimada,  lograse alcanzarlos.

El hecho ocurrió poco antes de las nueve de la mañana, en la calzada de Diez de Octubre, a la vista de varias decenas de personas, entre ellas las que hacían la cola de la Cadeca, pero nadie intervino. Y mucho  menos apareció un policía.

El hombre no logra ser consolado del robo  por los que le dicen que salió bien que no le dieron una puñalada.

Ya sabe, si va a la Cadeca, ¡cuidado! Agarre firme el bolso o la cartera y no escuche proposiciones.

Cuban economist predicts ‘Day Zero’ for currency merger

Cuba Standard

By Vito Echevarría

CUBA STANDARD — A leading Cuban economist believes “Day Zero” of currency unification for businesses and government institutions is just a few months away.

Pavel Vidal, a former Central Bank economist who currently teaches at the Pontífica Universidad Javeriana in Calí, Colombia, raised eyebrows at a recent conference in New York when he said he believes that a key step in one of Raúl Castro’s most dramatic economic reforms — the unification of the Cuban peso for companies and government institutions — is approaching at the beginning of 2015 (the currency merger for consumers in the Cuba government’s step-by-step approach will occur at a later date).

The topic that stirred most interest during a conference on Cuba in late May at the CUNY Graduate Center in New York was the future of the Cuban peso and its impact on living standards, as well as on foreign investment.

For more than 20 years, the country has lived under a two-currency system, with local workers being paid in Cuban pesos (CUP) (worth about 24 pesos to the dollar), while many goods and services are available only in convertible Cuban pesos (CUC) (pegged more or less on par with the dollar). Foreign investors operate almost exclusively with the CUC.

Cuba’s Ministry of Finance and Prices (MFP) published a series of resolutions on the future of the Cuban peso in the Gaceta Oficial last March, and mentioned a Día Cero as the time when the dual currency system will be eliminated for businesses and government institutions. But it didn’t provide a date.

“I believe that Día Cero will be in January 2015, given the annual cycle that the [Cuban government] plans the economy,” Vidal told Cuba Standard. “By September 2014, [Cuban] enterprises must submit to the Ministry of Economy and Planning (MEP) their plans for 2015, so that they are approved.”

“There is no total certainty, but it’s very probable,” he added.

Vidal also predicts a 10:1 exchange rate.

“It’s likely that these plans have already incorporated the exchange rate of 10 CUP:1CUC (10CUP:1USD). The resolutions are aiming to regulate pricing and accounting practices once the CUP is re-established as the only currency for transactions in the business sector.”

Vidal feels that when Día Cero occurs, it will be swift, in order for the government to control the pace of such a dramatic change in the island’s economy.

“Certainly, one of the disadvantages of a step-by-step, anticipated currency reform is more uncertainty and opportunities for speculation,” he noted.  “Cuba’s economic authorities count as a factor in their favor their control over capital flows,” he added.

Vidal didn’t discard the possibility of currency speculation among segments of the island’s population.

“Even though the resolutions only refer directly to the business sector, they have triggered expectations and reactions among citizens,” he said. After the Gaceta Oficial’s March 2014 publication about Día Cero, a growing number of locals reportedly exchanged their CUCs for CUP at state-run CADECA currency-exchange shops.

A World Bank skeptic

Another participant at the CUNY event was critical of the Cuban government’s gradual approach to currency reform. Augusto de la Torre, chief economist (Office of Latin America and the Caribbean) at the World Bank in Washington, told attendees that Cuba’s “dual-rate system is a fiscal scheme of large but implicit taxes and subsidies” (with the Financial Times calling this a “95% sales tax”), and mentioned that an exchange rate unification would require fundamental fiscal reform. He notes that the Cuban government’s best option is for swift implementation of the peso reunification.

De la Torre, an Ecuadorian who has worked with the World Bank since 1997 and previously headed the Central Bank of Ecuador, recommends a series of measures called the “fiscally-cushioned Big Bang” — unifying on Day One the island’s two exchange rates at 24:1, in order to limit balance of payment pressures. “Replace on Day One the dual rate-based shadow taxes and subsidies with equivalent but efficient lump-sum taxes and subsidies for existing enterprises,” he urged.  De la Torre said that such actions should adequately cushion the blow of a dramatic currency reform.

Noting that Cuba has perhaps the largest-ever known spread between exchange rates under its current dual currency system, de la Torre said that “this highlights the importance of tight monetary control [by the government] during and after unification”, and spotlights the dangers of taking a gradual path to achieve this goal.

He also said that Cuba’s “sector-by-sector gradualism” is problematic, because “much of the supply response would be postponed”. There is “policy uncertainty — discretionary adjustments with risk of incomplete reform,” he said. An “even greater multiplicity of exchange rates would segment markets, and so distort price signals as to impede efficient resource allocation across sectors.”

De la Torre said that Cuba should also avoid a third currency reform option, called “economy-wide gradualism”. Under that scenario, the pain of currency reunification is spread out over time, but addresses the “pain/gain balance” insufficiently. “There is a clear risk of a self-fulfilling failure,” he said, impacting in particular foreign investment opportunities. “Investors wait, [this] raises transition costs, forces abandonment of [the] pre-announced path, and justifies waiting” for completion of currency reform.

De la Torre insists that the Cuban government must follow through on currency reunification, since the current system entails huge efficiency losses, and hurts the country’s attractiveness to badly-needed foreign investors. “It discourages employment, undermines quality of service, hinders new foreign direct investment, reduces tourism inflows, and promotes stealth employment,” he said. “The 2,300% [exchange rate] spread implies a heavy tax on local labor, hence high labor costs for the foreign-owned or managed tourism industry.”

De la Torre also commented that Cuba stands out, since it is not a member of multilateral institutions like the IMF, the Inter-American Development Bank, or the World Bank, and is thus unable to turn to such institutions for support in its path toward currency reform. “Cuba’s limited access to international finance is an additional complication,” he said.  “Concessional (international) finance could greatly facilitate unification.”

Vicious circle of low salaries

One CUNY attendee who spoke on background said that the reunification of the Cuban peso could resolve what some called the “vicious circle” of low salaries and low productivity that has long existed on the island.  “Productivity in Cuba can go up once workers are given salary-driven incentives,” he said. “The consumerism that would accompany more buying power can indeed help the local economy grow, driving the production of more locally-made goods and services.”

In the case of the Mariel Special Development Zone (ZEDM), the state agency employers must use for hiring only withholds 20% of the salary — much less than before — but pays workers in Cuban pesos (CUP). For the conversion of salaries to Cuban pesos, an exchange rate of 10CUP:1USD was established, closer to market rate. Despite withholding and pay in CUP — as well as high income taxes — this should make jobs at Mariel very attractive for Cuban workers.

“For the remainder of companies with foreign capital, there will be changes in salaries, but their magnitude has yet to be known,” Vidal said. “State companies will be able to decide their compensation system, and increase salary levels according to their financial capacity, as long as the relation of median salary/productivity doesn’t deteriorate.”

Pago en pesos cubanos en tiendas en divisas se extiende a todo el país

Café Fuerte

Por Redacción CaféFuerte

La opción de pago en pesos cubanos (CUP) en las tiendas en divisas se ampliará este mes a centros comerciales de todo el país como parte de la estrategia gubernamental para la unificación monetaria en la isla.

La oferta pagar en CUP o combinándolos con pesos convertibles (CUC) mediante efectivo o con tarjetas magnéticas se extenderá a los 28 centros comerciales más grandes del territorio nacional y luego a establecimientos más pequeños hasta completar al menos uno por provincia a fines de mayo, según informaron autoridades comerciales a la prensa oficial.

Desde comienzos de marzo, los mercados habaneros de La Copa, de la corporación TRD, y La Puntilla, perteneciente al CIMEX, comenzaron de manera experimental la aceptación de pagos en CUP a los usuarios, ajustando el importe a su equivalencia en CUC. La operación se realizaba aplicando el cambio oficial de un CUC por 25 CUC.

Bárbara Soto Sánchez, vicepresidenta comercial de CIMEX, y Arturo Kautzmann Torres,  especialista comercial, ambos de CIMEX, explicaron al diario Juventud Rebelde que la medida se aplicará paulatinamente a lo largo de los establecimientos a nivel nacional, y está fiscalizada por la llamada Comisión de Implementación que supervisa las transformaciones económicas en marcha,

Avance sin traumas

“El proceso avanza sin traumas y el cronograma de trabajo permite aplicarlo de forma gradual, primero por el área de alimentos y luego a toda la tienda, para que los clientes se familiaricen con el sistema”, dijo Kautzmann.

Los funcionarios agregaron que a los efectos de las corporaciones el inventario de los productos se sigue contabilizando en CUC y sus cuentas bancarias se manejan en esa moneda, lo que conlleva a un depósito diferenciado de los ingresos en CUP y nuevas medidas de seguridad para evitar cualquier tipo de delito.

El pasado octubre, el gobierno cubano anunció la puesta en marcha de la unificación monetaria y cambiaria  en el país, un paso decisivo en las transformaciones impulsadas por Raúl Castro. No hay una fecha fijada aún para el llamado Día Cero que marcará la desaparición del CUC, pero todo indica que la medida entrará en vigor a mediados de este año.

La información indicó que las cajas de los establecimientos han sido programadas para realizar automáticamente la operación al tipo de cambio oficial de CADECA, lo que queda registrado y detallado en el comprobante del cliente.

Solución temporal

Kautzmann manifestó que mantener el fondo de cambio solo en CUC es “un requisito técnico y práctico”.

“Esta es una facilidad más de pago, como ya lo es el uso de tarjetas magnéticas. Pero no puede olvidarse que es una solución temporal. No tiene sentido invertir en cajas más grandes o complejas cuando en un determinado período se volverá a operar con una sola moneda, pues el país avanza hacia la unificación”, manifestó el especialista.

Como medida de seguridad por la implementación de la medida, las tiendas  proceden a la extracción periódica del dinero que se acumula en las cajas, con el fin de que los empleados no tengan que manejar un volumen alto de billetes.

Sobre el pago con tarjetas, se puede operar con todas las nacionales existentes, ya sean de crédito, salario, jubilación o de cooperantes en misiones en el exterior, y también con algunas internacionales vinculadas a bancos extranjeros que no estén afectados por las regulaciones del embargo estadounidense.

Se pierden los CUP

El reportaje mecionó como dificultad para ampliar el sistema de pago por tarjetas magnéticas la escasa disponibilidad de terminales de punto de venta, debido a su costo y al del servicio telefónico para establecer la comunicación.

Los dependientes deberán informar siempre al cliente del precio en CUC y será opcional si decide pagar en CUP, CUC o combinando ambas monedas,

De acuerdo con las cifras reveladas, durante marzo La Puntilla recaudó 50,000 CUP, y en la primera semana de abril ingresó  25,000 CUP. Los expertos vaticinan que las cifras se cuadripliquen en la medida que se popularice la opción de pago.

Actualmente, reportes independientes coinciden en señalar una falta creciente de CUP a causa de la venta desmedidade CUC por parte de la población.

Tras el anuncio de la unificación monetaria el sistema cambiario comenzó a confrontar dificultades y varias casas de cambio CADECA se han visto obligadas a cerrar sus operaciones temporalmente por falta de CUP.

Primero de Mayo en Cuba para celebrar más explotación

Cuba Encuentro

Eugenio Yáñez
Una vez más, la dictadura cubana contra la clase obrera, con el silencio cómplice de los sindicatos oficialistas. Ahora con relación al pago a los trabajadores en las empresas que se creen en la Zona de Desarrollo Especial de El Mariel (ZDEM).

Se mantiene la contratación de trabajadores a través de una “entidad empleadora” estatal y no mediante relación directa inversionista-empleados. Así es desde hace muchos años, dispositivo para esquilmar trabajadores; el Estado cobra de los inversionistas en moneda fuerte y paga a los cubanos en devaluada moneda nacional y con tarifas salariales locales. Ahora, según anuncios edulcorados, lo haría no para buscar ganancias, sino como función “facilitadora”, que incluye pactar el salario de los trabajadores con los empresarios.

Facilitación innecesaria, pues en todas partes los trabajadores negocian con empleadores sin necesidad de una estructura burocrática y parasitaria de por medio, y que en el caso cubano, además de no apoyar a los trabajadores, incrementa costos y establece procesos discriminatorios y excluyentes contra ellos, a través del concepto de “idoneidad”, en la práctica un control político de la fuerza de trabajo “autorizada” a prestar servicios a inversionistas extranjeros. El mismo mecanismo que empleaban los racistas surafricanos en tiempos del apartheid para contratar trabajadores en Namibia.

El costo de tal actividad “facilitadora” ascenderá al 20 % del salario de cada trabajador. Así que la quinta parte de lo que gane cada uno en la ZDEM es para mantener burócratas y represores políticos que serán los facilitadores más caros del planeta. Si no existieran harían más sencilla la contratación de empleados por los inversionistas y permitirían al trabajador recibir su salario sin descuentos para sustentar vividores.

Los trabajadores recibirán su pago mensual en pesos cubanos (CUP), a una tasa arbitraria de 10 pesos cubanos (CUP) por cada peso convertible (CUC), cuando el cambio oficial es de 25 CUP por cada CUC. Es decir, los cubanos recibirían de la “entidad empleadora”, con esa tasa de cambio, un 40 % de lo que les corresponde.

Con pesos cubanos, hay pocas opciones: una parte fundamental de alimentos, vestuario, calzado, artículos de higiene y aseo, materiales de construcción y reparación, y hasta de medicamentos y transporte, debe obtenerlos en pesos convertibles en tiendas del Estado que venden en esa moneda. Entonces, se necesitan 25 pesos cubanos por cada peso convertible del precio del producto en las tiendas estatales, o comprar CUC en las Casas de Cambio estatales (CADECA) a razón de 25 pesos cubanos por CUC.

Para explicar esta “lógica” totalitaria, veamos un ejemplo concreto de cómo serían los números con este atraco a mano armada diseñado por el gobierno “revolucionario”:

La “entidad empleadora” negocia el salario de los trabajadores con los empresarios. El sindicato oficialista es simple adorno, ni pinta ni da color. Supongamos que se pacta un salario mensual de 600 pesos convertibles (CUC) para un mecánico de mantenimiento. No importa ahora si ese es el salario apropiado o no, simplemente tomemos esa cifra como ejemplo.

La “entidad empleadora” estatal se apropia de 120 CUC (20 %) como gasto de operación, quedando para el mecánico 480 CUC. En una CADECA 480 CUC equivalen a 11.520 pesos cubanos al precio de venta de 24 CUP por cada CUC. Pero el Estado “proletario” despluma 6.720 pesos cubanos al obrero con la tasa de cambio de 10 CUP por 1 CUC, y le paga solamente 4.800, gracias a la revolución de los humildes, por los humildes y para los humildes.

Además, el trabajador debe pagar impuestos por el salario que recibe, como sucede en todas partes. Para un salario de 600 CUC, si los impuestos fueran del 10 % -podría ser mucho más- el obrero pagaría 60 CUC, ó 1.500 pesos cubanos (CUP). Entonces, de los 4.800 CUP que cobra, le quedarían 3.300 después de pagar sus impuestos.

3.300 pesos cubanos en una CADECA estatal cubana permiten comprar 132 pesos convertibles (CUC). De manera que de un salario inicial de 600 CUC el trabajador cubano recibiría solamente el 22 %, y el 78 % irá para el Estado “socialista” y sus burócratas, represores y vividores, con la complicidad de los sindicatos, parásitos también ellos mismos. ¿Es eso lo que celebrarán los trabajadores cubanos este Primero de Mayo?

Digan lo que quieran decir los sicarios verbales del régimen por estos foros, esa es la realidad: más o menos la quinta parte del salario para el trabajador, casi cuatro quintas partes para el Estado “de los trabajadores”. Y quienes laboren en la Zona de Desarrollo Especial de Mariel serán privilegiados comparados con el resto de los cubanos de a pie. Si eso no es explotación, plusvalía o plustrabajo, ¿qué es y cómo se llama?

Papá-Estado se siente con derecho a esquilmar y estafar a los cubanos y a la vez decir que los subsidia, pero son los cubanos quienes subsidian a los parásitos en el poder.

¿Recuerdan lo que se canta en La Internacional? “Agrupémonos todos/en la lucha final/la Tierra será el paraíso/bello de la humanidad”.

¡Solavaya!

Millions of Cubans May Lose Their Life Savings This Year

VICE News

By Justin Rohrlich

“Fucking cops in Cuba are always busting everybody’s balls.”

A man mutters this to me in perfect English as I walk down the once-elegant Calle 23 in downtown Havana. He is the very last customer waiting in a Kafkaesque line that wraps around the block and doubles back on itself twice. The afternoon is stiflingly hot, and two police officers are hassling a nearby teenager because he took off his T-shirt.

“But that’s why things here are so safe!” the man continues, much louder this time. I’m confused until I realize another cop is standing behind me, having wandered over after spotting a Cuban nacional talking to me, an American gusano. “Very safe, very safe. You know, because the police do such a good job!”

The officer gives him a long, hard stare, then wanders away. And so I take my place at the end of the line next to my new buddy, who says his name is Yaniel.

He, several hundred other Cubans, and I are waiting to get into Coppelia, the iconic ice cream parlor created in 1966 by order of Fidel Castro and named for his then-secretary’s favorite ballet. Located across the street from the Habana Libre hotel, a one-time Hilton from which Fidel directed the revolution for three months in 1959, Coppelia has been called the “ultimate democratic ice cream emporium.” But as I quickly find out, that isn’t exactly true. When the Cubans around me spot a foreign tourist standing with them in the endless queue, they’re quick to inform me that the line we're in is for people using Cuban Pesos — which is to say, most Cubans. As a woman in curlers and a tube top explains, people holding Convertible Pesos, the country’s other currency, aren’t forced to endure such Socialist indignities. Foreigners like me carry Convertible Pesos.

She then points to a tiny building surrounded by a well-kept patio and leafy trees offering respite from the blistering mid-summer sun. There is no line at this Coppelia stand, and sitting in the shade, enjoying their ice cream, are several happy, relaxed-looking people.

This, in a nutshell, is what having two currencies has done to the already dysfunctional Cuban economy for the past 20 years. The good news is that the government is finally attempting to fix it. The bad news is that millions of Cubans could lose their life savings in the process.

KOOKS AND COOPS
Cuba is the only country on earth that prints two currencies. When the Soviet Union fell in the early 1990s, the subsidies the USSR had been sending to Havana were cut off. As a result, Cuba suffered a devastating 35 percent drop in its GDP. The situation on the ground was dire; in Con Nuestros Propios Esfuerzos (With Our Own Efforts), a 300-page volume of everyday survival strategies distributed in the early ’90s by the publishing arm of the Revolutionary Armed Forces, Cubans were offered helpful instructions for how to make shampoo out of rum, and for a recipe for “sausages” made of nylon stockings stuffed with seasoned grapefruit rind.

Desperate for hard currency, Fidel Castro grudgingly legalized use of the US dollar in 1993. People working in the tourism industry were allowed to earn — and keep — tips given to them in foreign currency. In addition, a resolution by the National Bank of Cuba permitted some Cuban citizens to own foreign currency; the list included government officials, artists and athletes paid overseas, airline and fishing vessel crews, and employees of foreign embassies or organizations.

Castro’s ultimate goal was to get greenbacks into the state’s coffers. In order to capture as many of the now-circulating dollars as possible, the Cuban government promptly opened a network of so-called “dollar stores,” which carried otherwise-impossible-to-find goods available only to people who used American dollars to pay for them. The Cuban government would purchase, say, cans of Pringles and bottles of Gatorade from American manufacturers thanks to a humanitarian loophole in the then 30-year-old US trade embargo. Then the government would sell the Pringles and Gatorade to citizens at a 240 percent markup. The state kept the profit.

However, the trade embargo made it all but impossible for the Cuban government to do much with their American dollars, especially after the US Federal Reserve fined Swiss bank UBS $100 million for its dealings with the regime. And so in 2004, Fidel Castro once again outlawed the US dollar and popularized the Convertible Peso, or CUC, which had been in limited use since 1994. CUCs (pronounced “kooks”) are worth one US dollar, and are used primarily in domestic tourism and foreign trade. Cuban Pesos, or CUPs (pronounced “coops”), are worth 1/24th of one CUC — about four US cents — and are what the government uses to pay Cuban salaries. (The government owns just about everything in Cuba, and so nearly every Cuban is a government employee.) Doctors, who are employed by the national health system, earn a little less than 800 CUPs per month. That’s about $30.

Thus, in theory, a cabdriver who gets tipped by foreign tourists in CUCs can earn a cardiologist’s monthly income in a single shift. And since it’s against the law for anyone with a professional degree — doctors, lawyers, accountants, etc. — to ply their trade in business for themselves, a domestic brain drain has decimated Cuba’s educated class.

“Basically, the incentive structure that shapes people’s behavior has become completely perverted and dysfunctional,” says economist Arch Ritter, a professor at Ottawa’s Carleton University who has been studying Cuba for almost 50 years.

People with access to CUCs live far more comfortably than those without. Buses that accept CUCs look like the ones you take to pick up your rental car at American airports; buses that accept CUPs are Soviet-era, exhaust-belching beaters. Essentials like cooking oil and toiletries are easily purchased with CUCs, while CUP earners like Mario, a parking attendant I met one afternoon behind the Habana Libre hotel, ask tourists if they have extras. After I gave Mario a Right Guard Sport Stick and two bars of Irish Spring, he noted that we both have a 36-inch waist. So he asked for my belt.

Cuban President Raúl Castro has quite rightly called the dual currency “one of the major obstacles to the progress of the nation.” However, he has also said, "I was not chosen to be president to restore capitalism to Cuba. I was elected to defend, maintain, and continue to perfect socialism." So it’s no surprise that the government has announced plans to split the difference and do away with the CUC while retaining its hold on industry and commerce in the country.

How do you eliminate an entire currency? Castro has released few details about how or even when Cuba intends to begin taking CUCs out of circulation. But Ritter explained it this way: “They’ve got to make people want to hold the CUP, through the forces of supply and demand. You increase the CUP’s demand by letting people use it to buy a wider variety of goods. Then you also limit how many CUPs are available so its value goes up. Likewise, you reduce demand for the CUC by increasing supply, which would, in time, bring its value lower.”

In Cuba, however, economic decisions aren’t made based on supply and demand, and “the market” as Adam Smith knows it does not exist. Instead, reforms are made with the stroke of a pen, so the government could simply, say, change the exchange rate between the CUC and the CUP from 24-to-1 to 12-to-1. This would instantly halve the life savings of countless Cubans who’ve spent two decades socking away CUCs, to say nothing of the Zimbabwe-like inflation that could strike the economy after such a move.

Or the government may just take everyone’s savings outright.

“My guess is that when the government does the reform, it will expropriate some part of the population’s wealth accumulated in CUCs,” says economist Daron Acemoglu, co-author of Why Nations Fail. “This is exactly the sort of expropriation that Argentina did.”

In the years following the collapse of Argentina’s economy in 2001, the government nationalized private pension funds, swiping roughly $24 billion of the citizenry’s money. Argentinians’ dollar-denominated bank accounts were frozen, and withdrawals were severely limited before everyone was forced to convert their savings into comparatively worthless pesos. Protests, a flood of court cases, violent riots, a worsening economic crisis, and a two-week period in which Argentina had five different presidents were the result.

Raúl Castro has declared that the transition will not hurt holders of either CUCs or CUPs. But the concept of protecting individual wealth has no place in Cuba — a fact specifically stated in the Cuban Communist Party's Lineamientos (Guidelines). And as Mauricio Claver-Carone, executive director of the right-leaning Cuba Democracy Advocates points out, the Cuban government could really use the money.

“The Castro regime seems to undertake these currency operations when it's suffering from a hard-currency crisis,” he explains. “The anticipated currency swap is simply another episode in a long series of asset confiscations by the Castro regime.”

Expropriations and nationalizations of private property have occurred repeatedly since the beginning of the Castro era. People leaving the island in the early days of post-Revolutionary Cuba were forced to give up their property and assets in addition to their rights as citizens. Those who stayed were soon relieved of 42 percent of their wealth in a top-down currency revaluation. In recent years, the CUC has been devalued in pursuit of stabilizing government debt, and hard currency accounts have been periodically frozen and restricted when it has suited the regime.

The economy of Cuba’s main benefactor, Venezuela, is thought by many economists to be in the midst of collapse. As was the Soviet Union's 20 years ago.

MUCHO RESOLVER
Carlos, like 4.6 million of the 5 million people in Cuba’s labor force, works for the state. A lighting and set designer who lives in the “upscale” Vedado section of Havana, the 74 year old has accompanied traveling Cuban theater and dance productions all over Latin America and Eastern Europe. The government pays Carlos relatively well for his work; he earns roughly what a doctor earns. Yet even though he is relatively privileged by comparison, Carlos’s monthly salary covers perhaps half a month’s worth of expenses. And so, displaying the optimistic, opportunistic trait known in Cuba as resolver, Carlos makes up for the shortfall by earning CUCs on the side.

Carlos runs a small bed-and-breakfast — known in Cuba as a casa particular — out of his art-deco townhouse. He rents out two rooms — he could rent more, but the government imposes limits on how many rooms can be occupied at once — and charges 30 CUCs a night per room (the authorities also set maximum room rates). On paper, this means Carlos can multiply his monthly salary several times with just a handful of bookings. The reality, however, is another story.

Over the course of the three nights I stay with him, Carlos explains how it works. He pays about 300 CUCs a month to the government for the right to run his casa, whether or not he rents a single room. In other words, Carlos needs to fill one bed for 10 nights a month just to break even with the government, to say nothing of his own expenses. Still, the fact that he’s even still in business means Carlos is ahead of the game. One woman I met selling salsa CDs along Calle 12 in Vedado told me she'd set up her home as a casa particular, but was forced to shut down after just two months because she’d gone broke paying the government fees.

Attracting guests presents a whole other set of challenges. Advertising in Cuba is against the law, and few people are permitted Internet access in their homes, making it all but impossible to attract tourists looking for accommodations. Carlos is among the lucky Cubans who has internet access in the form of an old HP laptop and creaky dial-up connection, allowing him to maintain a web page to market himself to tourists.

First legalized in 1997, casas particulares generate intense competition among Cubans eager for precious CUCs. Mercedes, a rheumatologist who rents me a room in her perfectly preserved colonial mansion in the touristy hamlet of Trinidad, has to contend with dozens of other nearby casas. But in addition to going head to head with each other, small-business owners like Mercedes and Carlos must also compete against Gaviota S.A., a government-run tourism operation overseen by members of Raúl Castro's inner circle.

A division of the Cuban Revolutionary Armed Forces, Gaviota’s tens of thousands of hotel rooms across the island generate the equivalent of almost a billion dollars a year. The money goes directly to the government.

But the big hotels that divert business away from people like Carlos and Mercedes also give other people — housekeepers, bellhops, bartenders — the chance to obtain CUCs for themselves. And state-run entities (particularly ones with bars, restaurants, and plenty of cash on hand) offer opportunities for all manner of graft, theft, and other types of financial chicanery that make up a robust underground economy in Cuba. It’s impossible to put a dollar value on the amount of money that’s stolen or hidden from the state, but economist Arch Ritter estimates that at least 95 percent of Cubans do it.

Isoyen worked at a Soviet-built, Gaviota-run beach hotel on Cuba’s Caribbean coast until he was furloughed earlier this year. When I met him, he told me it wasn’t the loss of his CUP salary that he missed — it was the CUC tips he received from tourists. A college graduate, Isoyen can only use his accounting degree to work for “the people,” making self-employment in his chosen field an impossibility. Living with his parents makes running a casa impossible, so he plans to use his resolver — and the CUCs he socked away — to open an ice cream stand.

For the elderly docents working at Havana’s Museum of the Revolution, resolver means engaging in a bit of basic arbitrage. After showing me Che Guevara’s gun in a glass display case, one of them tries to sell me a 3 CUP note bearing Che’s likeness as a souvenir. She asks 1 CUC for the bill. That’s a tidy 88 percent profit.

THE LONG CON
Resolver can mean a lot of things.

“My friend! My friend!” someone calls out as I walk down Calle E my first morning in Havana. “Where you from, my friend?”

His name is Rafael, and he says he’s a medical student, though he seemingly fails to understand my English only when I ask about the specifics of his education. He’s bald and wiry, and he has a homemade “13” tattoo on the webbing between his right thumb and forefinger. I like him immediately.

Rafael claims to be a licensed tour guide; he even has an official-looking ID card pinned to his shirt. He charges me 20 CUCs — the equivalent of a month’s salary at a typical government job — for a two-hour walking tour in which he listlessly points out a few local sites like the Plaza de la Revolucion and the clinic where soccer legend Diego Maradona supposedly kicked his cocaine addiction in the early 2000s.

We then go to lunch (I pay for it) at a local cafe where Rafael manages to triple his tour fee. For starters, he collects a commission from the restaurant manager for bringing in foreigners with CUCs — and as I find out later, Rafael’s clients are charged 5 CUCs for a mojito instead of the usual 24 CUPs, a 500 percent markup. Rafael also sells me a bundle of cigars that he describes as “special, only for Cubans,” for 35 CUC. He’s telling the truth — they aren’t for export. However, I also come to learn they sell to locals for 25 CUP per bundle. (That’s about 1/35th of what I paid.) For his final trick, Rafael gently talks me out of the Everlast speed bag and hand wraps I brought to donate to a local boxing gym, explaining that he would walk them over for me, as the place is “very hard to find.”

As we part ways, Rafael turns to me with an earnest look on his face. “My friend, please don’t tell anybody else this is your first day in Cuba," he says. "They will take advantage of you.”

TRUSTING RAUL
Cuban citizens hope that Raúl Castro will tackle financial reform as artfully as Cuban citizens tackle financial survival. But the historically awful performance of the Cuban economy under the tutelage of the Castros doesn’t inspire much confidence. Nonetheless, Ernesto Hernández-Catá, former Deputy Director of the International Monetary Fund, has hope.

“This is part of a reform movement orchestrated by a few brave people in the Cuban government,” Hernández-Catá tells me. “It has been accepted by Raúl, who is not a saint, to be sure. But whereas Fidel was a crazy ideologue, Raúl wants to leave behind an image of a guy who is sober, is reasonably intelligent, and wants to improve the lives of his countrymen.”

Whether it turns out to be a failure or a success, the general consensus in the West remains that while monetary reform is a positive development, Cuba needs to overhaul its entire financial system from top to bottom before real change can take place. While Secretary of State John Kerry called Cuba’s latest slate of reforms a good start — on top of the economic liberalizations, Cubans can now travel outside the country without an exit visa — he said Havana must do more.

And not surprisingly, Mauricio Claver-Carone of Cuba Democracy Advocates doesn’t see life improving much for Cubans.

“The Castro regime will always end up capturing income made in Cuba, one way or another,” he says. “That's the nature of totalitarianism.”

El Mariel, las inversiones extranjeras y la unificación monetaria: a vueltas con el laberinto castrista

Cubaeconomía

Elías Amor Bravo, economista

Alguien ha cometido un error de graves consecuencias.
¿Será acaso 1 a 10 el cambio de la unificación monetaria? Ya hay algunas pistas.

En la isla del doctor Castro, Fidel, cualquier cosa es posible con su hermano Castro, Raúl. O sea, más de lo mismo, pero elevado a la enésima potencia. Ya nos temíamos el peor de todos los escenarios posibles para la anunciada unificación monetaria, pero se acaba de confirmar la más grave de las previsiones.

Los medios se han hecho eco hoy de algunas informaciones que indican que los trabajadores de la Zona Especial de Desarrollo Mariel, en principio donde se van a localizar las inversiones extranjeras de las que tanto alardea el régimen en los últimos días con toda la propaganda oficial, van a cobrar solamente el 80% de los salarios pactados entre la agencia empleadora estatal y las empresas extranjeras. El estado comisionista se lleva un 20% de la masa salarial. No ex extraño que hagan falsas moratorias fiscales. Ya se sabe de dónde van a sacar el dinero. Nunca es razonable empezar a construir una casa por el tejado. Tal vez si los proyectos de inversión que se establecen en El Mariel son capital intensivos, les puede salir el tiro por la culata. Pero esa es otra historia.

Sin embargo, existe otra noticia, complementaria a la anterior, que es más relevante. Se informa que los salarios en El Mariel serán pagados en moneda nacional y el Gobierno aplicará una tasa de cambio especial, de 10 pesos cubanos (CUP) por 1 peso convertible (CUC), cuando la tasa de cambio oficial es de 24 CUP por 1 CUC.

Vamos a ver si lo podemos comprender. Un camarero contratado en un hotel de La Habana de la cadena Meliá, a unos 40 kilómetros de El Mariel, por su trabajo percibe un sueldo de 20 CUC, equivalentes a 480 CUP al cambio antes mencionado. Sin embargo, ese mismo camarero si es recolocado en una cafetería de la Zona de El Mariel, va a cobrar igualmente 20 CUC, pero en pesos cubanos, su sueldo quedará en 200 CUP, por obra y gracia de la disposición de las autoridades antes mencionada.

¿Qué consecuencias cabe esperar de todo este lío? Pues muy sencillo, o en la Zona de El Mariel pagan más las empresas en CUC para igualar la retribución en CUP (lo que sería un coste más elevado que actúa negativamente sobre los beneficios de las empresas y una mayor recaudación para el estado por la masa salarial) o van a tener dificultades para encontrar trabajadores, ya que será mucho más interesante quedarse en La Habana o en Varadero y cobrar más, con menos sueldo, al cambio de 1 por 24. Ahora se comprende por qué han tenido que crear la agencia estatal para enviar trabajadores a El Mariel.

Ya nos temíamos el peor de los escenarios cuando la directora de la oficina reguladora de El Mariel, Ana Teresa Igarza, declaraba hace tan solo unos días que a la hora de pactar el salario, se iba a tener en cuenta “el valor de la fuerza de trabajo en la región, y específicamente en Cuba”. Esa frase no deja de ser una bobería si se tiene en cuenta que en Cuba desde 1959 no existe un mercado de trabajo que pueda fijar, siquiera de forma remota, el valor real del trabajo. Esta es una de las consecuencias más nefastas del sistema de planificación central sin derechos de propiedad creado por los Castro, y ahora, 55 años después, no hay forma de darle una solución razonable. Al parecer, esta disposición de rebajar el salario en CUP para los que ocupen los empleos de El Mariel, tiene poco que ver, a no ser que este cambio de 1 a 10 sea el que están barajando las autoridades para poner fin a la dualidad monetaria.

Y aquí es donde conviene detenerse si quiera unos instantes. Con el nivel de secretismo que se está realizando el proceso de unificación monetaria, las noticias como la que estamos comentando, trasladan señales que pueden crear efectos muy negativos en el comportamiento de los agentes económicos. Si finalmente fuera éste el cambio, 1 a 10, en vez de 1 a 24 que rige actualmente, es evidente que los tenedores de CUC van a experimentar una pérdida muy destacable en el valor de sus activos al cambiarlos a CUP, prácticamente la mitad.

De modo que si este tipo de noticias se van difundiendo por la Isla, no me extraña que cunda el pánico y que la gente saque rápidamente sus ahorros en CUC para cambiarlos cuanto antes. Un desplome en la cotización del CUC de estas magnitudes puede acarrear, sobre todo en los mercados negros, cambios incluso inferiores conforme el pánico de la gente vaya en aumento, y trate de cambiar todo el efectivo en CUC al cambio más alto posible que puedan obtener.

La conclusión que cabe extraer es que en un momento especialmente delicado como el actual, en el que la economía castrista tiene que resolver graves problemas internos y externos para afrontar el futuro, no deberían haber dicho este tipo de cosas. Siguen creyendo que en la economía se puede jugar con fuego, y eso solo reporta quemaduras dolorosas.

On Castro's Dual Currency Scheme (Scam)

capitolhillcubans

Justin Rohrlich has a thoughtful article in Vice about his experience with Castro's dual currency system.

Here's an excerpt:

Millions of Cubans May Lose Their Life Savings This Year

"Fucking cops in Cuba are always busting everybody’s balls."

A man mutters this to me in perfect English as I walk down the once-elegant Calle 23 in downtown Havana. He is the very last customer waiting in a Kafkaesque line that wraps around the block and doubles back on itself twice. The afternoon is stiflingly hot. Two police officers are hassling a nearby teenager because he took off his T-shirt.

"But that’s why things here are so safe," the man continues, much louder this time. I’m confused until I realize another cop is standing behind me. He wandered over after spotting a Cuban nacional talking to me—an American gusano. "Very safe, very safe. You know, because the police do such a good job!"

The officer gives him a long, hard stare, then wanders away. I take my place at the end of the line next to my new buddy, who says his name is Yaniel.

Along with several hundred other Cubans, Yaniel and I are waiting to get into Coppelia, the iconic ice cream parlor created in 1966 by order of Fidel Castro and named for his then-secretary’s favorite ballet. Located across the street from the Habana Libre hotel, a one-time Hilton from which Fidel directed the revolution for three months in 1959, Coppelia has been called the "ultimate democratic ice cream emporium." But, as I quickly find out, that isn’t exactly true.

When the Cubans around me spot a foreign tourist standing with them in the endless queue, they’re quick to inform me that the line we're in is for people using Cuban Pesos—which is to say, most Cubans. As a woman in curlers and a tube top explains, people holding Convertible Pesos, the country’s other currency, aren’t forced to endure such Socialist indignities. Foreigners, like me, carry Convertible Pesos.

She then points to a tiny building surrounded by a well-kept patio and leafy trees offering respite from the blistering mid-summer sun. There is no line at this Coppelia stand and, sitting in the shade are several happy, relaxed-looking people, enjoying their ice cream.

This, in a nutshell, is what having two currencies has done to the already dysfunctional Cuban economy for the past 20 years. The good news is that the government is finally attempting to fix it. The bad news is that millions of Cubans could lose their life savings in the process [...]

In Cuba, economic decisions aren’t made based on supply and demand, and "the market" as Adam Smith knows it does not exist. Instead, reforms are made with the stroke of a pen, so the government could simply, say, change the exchange rate between the CUC and the CUP from 24-to-1 to 12-to-1. This would instantly halve the life savings of countless Cubans who’ve spent two decades socking away CUCs, to say nothing of the Zimbabwe-like inflation that could strike the economy after such a move.

Or, the government may just take everyone’s savings outright.

"My guess is that when the government does the reform, it will expropriate some part of the population’s wealth accumulated in CUCs," says economist Daron Acemoglu, co-author of Why Nations Fail.

Raúl Castro has declared that the transition will not hurt holders of either CUCs or CUPs. But the concept of protecting individual wealth has no place in Cuba—a fact specifically stated in the Cuban Communist Party's Lineamientos (Guidelines). And as Mauricio Claver-Carone, executive director of the right-leaning Cuba Democracy Advocates points out, the Cuban government could really use the money.

"The Castro regime seems to undertake these currency operations when it's suffering from a hard-currency crisis," he explains. "The anticipated currency swap is simply another episode in a long series of asset confiscations by the Castro regime."

Expropriations and nationalizations of private property have occurred repeatedly since the beginning of the Castro era. People leaving the island in the early days of post-Revolutionary Cuba were forced to give up their property and assets in addition to their rights as citizens. Those who stayed were soon relieved of 42 percent of their wealth in a top-down currency revaluation. In recent years, the CUC has been devalued in pursuit of stabilizing government debt, and hard currency accounts have been periodically frozen and restricted when it has suited the regime.

The economy of Cuba’s main benefactor, Venezuela, is thought by many economists to be in the midst of collapse. Just as the Soviet Union's was 20 years ago.

Read the whole thing here.

Cuba: DUALIDAD MONETARIA: El cambio que viene

Entrevista de Bohemia a la Dra. Vilma Hidalgo profesora de la Facultad de Economía de la Universidad de la Habana.

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-¿Por qué la unificación monetaria y cambiaria no puede ser una decisión con la cual se resuelva todo de una vez? ¿Qué implica unificar? ¿Por qué empezar por las empresas?

-Implica varias cosas. Primero, unificar el CUP y el CUC, las dos monedas emitidas por el Banco Central de Cuba, y convertirlas en una única moneda nacional con nuevas bases de convertibilidad respecto a la moneda extranjera.

Hoy el CUC ha perdido convertibilidad, particularmente en el sector empresarial, donde solo una parte tiene capacidad de liquidez (CL) para ser intercambiada por dólares. La nueva moneda, es decir, el peso unificado, debe expresar algún grado de convertibilidad, a una tasa de cambio realista, lo cual no significa que se eliminen los controles cambiarios, que no se regule el acceso a la divisa.

La cantidad de dinero debe ser coherente con el equilibrio interno y externo. Es decir, debe respaldar las transacciones de bienes y servicios en la economía, y lograr que ello tenga un reflejo en la estabilidad de precios, además de corresponderse con los flujos de divisa, a la tasa de cambio que se establezca.

Sí, definitivamente, es un proceso complejo y por sus implicaciones en los precios, salarios, finanzas empresariales, presupuesto del Estado entre otros indicadores fundamentales de la economía, debe ser gradual.

La situación no es la misma en el circuito monetario de la población que en el de las empresas. En el sector empresarial la tasa de cambio se ha retrasado en el tiempo, cuando en realidad las condiciones de la economía cubana cambiaron. En el mercado cambiario de la población (Cadeca) existe una tasa de cambio que refleja las condiciones en ese circuito. Pero no hay suficiente información para fijar de un día para otro una única tasa de cambio.

Se impone unificar monedas en el sector empresarial y fijar una tasa de cambio superior a uno. Ambos pasos son complejos. Hay que evaluar el impacto sobre la situación financiera de las empresas y la economía en su conjunto.

Utilizando el mismo ejemplo que refería antes, de subsidios implícitos por tasa de cambio a las importaciones: a las empresas que reflejan hoy en su contabilidad total el componente importado de sus costos a una tasa de uno a uno, ¿qué les ocurriría si mañana la tasa fuera 10? Contablemente, el componente en dólares de sus costos se elevaría diez veces. Si la empresa exporta y hoy es rentable en divisas, no debe preocuparse, también se elevan sus ingresos en divisas expresados en moneda nacional.

Pero, ¿qué pasa con las empresas que no exportan, es decir, las que tienen ingresos en pesos? Que tenían los costos de importación artificialmente bajos y ahora aflora la situación real en la contabilidad.

La corrección de estas distorsiones se trasladará al Presupuesto del Estado, ya que el sistema de transferencia fiscal (impuestos y subsidios) está hoy distorsionado por la tasa de cambio sobrevaluado.

-¿Podría bajar la tasa de cambio de Cadeca en alguna medida, aunque sea mínima?

-Más que responder directamente, voy a referirme a dos cuestiones, para que los lectores puedan “sacar sus propias conclusiones”.

Primero, aclarar que la tasa de cambio en una economía no puede fijarse arbitrariamente. Todos quisiéramos que bajara en Cadeca ahora mismo. Pero, pongamos un ejemplo, ¿qué pasaría si se fijara mañana en dos o tres CUP por CUC? Como estaría muy barato el cambio, empezaríamos a demandar mayor cantidad de CUC en Cadeca, pero esta no tendría los CUC necesarios para satisfacer esa mayor demanda.

Una mala decisión sería que el banco imprimiera más CUC para continuar vendiéndolos, porque esta mayor cantidad no tendría suficiente respaldo en dólares y perdería poder adquisitivo el CUC. ¿Por qué? Porque no se podría suministrar más productos y estos se pondrían más caros o se desabastecerían las tiendas.

En general, el valor de la tasa de cambio depende de la disponibilidad de divisas respecto a esa demanda proveniente de la moneda doméstica. Mientras mayor sea la afluencia de divisas en un país, más posibilidades hay de que se aprecie la tasa de cambio.

Segundo, el poder adquisitivo de la moneda no solo se expresa en una tasa de cambio menor, sino también en salarios y precios. El poder de compra se refiere a la posibilidad real de consumir productos y servicios con una determinada cantidad de dinero. El dinero vale más si los salarios se elevan por encima de los precios.

Una disminución de precios tendría un efecto similar al de la reducción de la tasa de cambio. En ambos casos, el salario valdría más, en términos relativos. Sin embargo, si suben los salarios pero en igual proporción lo hacen los precios o la tasa de cambio, no se eleva el poder adquisitivo, ya que las personas podrán consumir exactamente igual que antes. Las tres variables están relacionadas.

Imaginen un caso extremo en que aumenta la cantidad de CUP en la economía porque suben los salarios, pero ni se produce más, ni hay más divisas para importar. Entonces, los productos escasean tanto en el mercado en CUP como en CUC, pero hay mucha cantidad de CUP. ¿Qué pasará? Pues que los precios del mercado agropecuario subirán y, además la tasa de cambio se elevará, pues habrá más CUP, respecto a CUC disponibles. En cambio, si crece el dinero en CUP, y también la producción y la exportación (entrada de divisas), habría más posibilidades de estabilizar precios y bajar la tasa de cambio.

Así, los incrementos salariales deben corresponderse con incrementos de productividad. Antes dije que tampoco puede ignorarse el poder adquisitivo del salario como incentivo a la productividad, de ahí la importancia de las políticas de remuneración con arreglo al trabajo. De no tomar en cuenta todos estos elementos, la economía queda atrapada en desequilibrios e ineficiencias.

El ajuste de la tasa de cambio empresarial ofrece oportunidades para romper este círculo vicioso. Si al sector exportador se le reconoce una mayor tasa de cambio, los ingresos en CUP se elevan por cada dólar exportado y una parte puede destinarse a incrementar salarios. De manera análoga, al sector que sustituye importaciones, se le deberá permitir formar precios sobre la base de referentes internacionales, de manera que también puedan contar con esta posibilidad en condiciones de mayor competitividad.

Paulatinamente, es de esperar que el efecto reanimador sobre la producción y la balanza de pagos del país impacte los niveles salariales en el resto de los sectores de la economía y así se recupere el poder adquisitivo.

Vale insistir que aun cuando hablamos de potenciales efectos positivos, no se puede atribuir toda la responsabilidad de la recuperación del poder adquisitivo a la unificación. Se trata de colocar a esta en un programa económico integral con ese objetivo.

-¿Cuántas etapas tendría ese proceso y cuánto puede demorar? ¿Qué debe ser primero y qué después? ¿Podría lograrse que los dos tipos de cambio converjan?

-La secuencia de la unificación es relevante. Unido a este proceso es muy importante avanzar en las medidas previstas para reactivar las capacidades productivas y de exportación, como son las dirigidas a profundizar las transformaciones en el sector agropecuario.

También es vital para el equilibrio interno y externo ampliar fuentes de financiamiento al sector exportador; continuar desarrollando nuevas formas de gestión con el doble propósito de elevar la eficiencia y al propio tiempo aliviar las finanzas internas (captando impuestos y reduciendo gastos del presupuesto); perfeccionar los mecanismos regulatorios y el sistema de incentivos en la empresa estatal para estimular la productividad del trabajo; fortalecer la infraestructura productiva y tecnológica del país, elevando gradualmente la inversión, entre otras.

Corregir progresivamente el sistema de precios y salarios es una condición para la reactivación económica. Por eso también el ajuste de la tasa de cambio empresarial debe ser uno de los primeros pasos en el proceso de unificación. Junto a la unificación monetaria y cambiaria en el sector empresarial, habrá que institucionalizar los mecanismos de acceso a la divisa.

Es posible, como decíamos antes, que la actual brecha entre la tasa de cambio de Cadeca y la empresarial justifique transitoriamente un diferencial menor entre ambas. Pero la permanencia de tipos de cambio múltiples en la economía, suele traer problemas como, por ejemplo, la especulación: comprar barata la divisa en un segmento y venderla cara en otro.
Ello puede evitarse a través de la regulación y el control, pero es un riesgo, en particular en las condiciones actuales en que se fortalecen los vínculos entre el sector por cuenta propia y las empresas estatales.

Además, la presencia de tipos de cambio múltiples en una economía distorsiona el sistema de precios. Por eso soy partidaria de procurar la convergencia de ambos tipos de cambio, en la medida en que las condiciones de la economía lo permitan.
El programa hacia la unificación monetaria es sin duda un paso trascendental para consolidar la moneda doméstica, recuperar su poder adquisitivo y reactivar la economía. El país cuenta con capacidad y competencia para lograr el éxito de este proceso. En lo adelante, debemos afianzar la estabilidad de largo plazo del peso cubano, sobre los pivotes más esenciales: la productividad y la disciplina financiera y fiscal.

Entrevista completa en la Revista Bohemia >>

Cuba currency reform will take 3 years: ex-minister

GlobalPost

The unification of Cuba's dual currency system will take at least three years, the architect of the unpopular two-decades old policy of using dollars and convertible pesos has said.

The government announced last month that it would phase out the existing system as part of President Raul Castro's gradual attempt to streamline Cuba's Soviet-style economy.

Under current rules, a minority of Cubans who have dollars can buy convertible pesos (CUC) at a one for one rate, and use them to buy scarce goods in well-stocked special state stores.

Cubans' salaries, however, are paid in non-convertible pesos (CUP), which are valued at 24 to a convertible peso and do not go far in a country where builders, teachers and doctors, for example, are paid $20 a month.

Amid uncertainty about when the change will happen, Jose Luis Rodriguez, the communist state's minister of economy and planning between 1993 and 2009, said it would take time to devalue the exchange rate.

"This process will likely take at least three years," he said, referring to the need to first devalue the exchange rate for business transactions, and then secondly for private individuals.

Rodriguez said currency unification would "create the conditions for better management and measurement of the economy," but it involves a "profound structural change" for those providing goods and services in the country.

The government established the current system to steer hard currency into its coffers which it needs to buy bulk food on international markets for the country's 11 million population.

While Cubans enjoy almost free education and health benefits, housing and a subsidized food basket, most say they still struggle to put food on the table.