By: Abby Belongy
Cuba’s dual currency system has been stratifying people since it was implemented after the fall of the Soviet Union two decades ago. Originally intended to protect Cuba from capitalism, the Cuban convertible peso (CUC) is equivalent to the U.S. dollar. Tourists and the wealthier islanders use CUCs. The majority of Cubans, however, earn the other form of currency, the Cuban peso (CUP). This is worth only about 4 cents – 25 times less than that of the convertible peso.
Cubans have long complained about the dual system. Most Cubans can only earn CUPs but can only buy imported goods with CUCs. This leads to the rich accumulating more and more material goods while the poor struggle to purchase basic necessities. Interestingly, a hotel clerk could also earn a much larger salary from tourists’ tips than a doctor who treats national patients.
On October 29, 2013, President Raul Castro announced an 18-month plan to unify Cuban currency into a single Cuban peso. Castro hopes to improve and open up the Cuban economy with a fairer and less complicated system. Most people currently earning CUPs embrace this decision.
However, Castro has not provided many details on how such a complicated process will work. Although most want a unified system, economists worry about the practical issues. Eliminating the two-tiered system could drive up inflation and cause public turmoil. State-run enterprises will also suffer, as right now government treats the CUP and the CUC as equal in official accounts – a huge financial incentive.
This step could show Cuba warming up to the rest of the world and attempting to come out of isolation, though Castro insists this process is necessary for Cuba’s survival as a socialist state. If executed methodically and carefully, the unified system could make a huge impact on marginalized people in Cuba. The poor majority can improve quality of life and have a chance to “catch up” to the elite. On the other hand, the elimination of one of the pesos could shock the economy and bring even more economic turmoil to already struggling citizens.
Read more on Cuba’s monetary system and plans: http://www.telegraph.co.uk/news/worldnews/centralamericaandthecaribbean/cuba/10397304/Cuba-to-end-dual-currency-as-part-of-Castros-economic-reforms.html