HAVANA – More than a year after the Communist government here replaced the U.S. dollar with a convertible peso, the greenback remains in the hearts and hands of the Cuban people.
Prices for most goods are still listed in dollars. Tens of thousands of families still get handouts from U.S. relatives in dollars, much of it funneled in by visitors to skirt the Cuban state bank’s 10 percent cut for conversion. Taxi drivers, private restaurants and people with rooms to rent still accept payment in the U.S. currency.
“We have more trust in dollars,” said a partner in an Old Havana “paladare,” the private but heavily regulated eateries some Cubans are allowed to operate in their homes. Anyone who can afford to save money does so in U.S. dollars, he added.
The resilience of the dollar here has created a complicated, three-tiered monetary system, as the convertible peso, or CUC, also circulates alongside the official “moneda nacional,” or MN. Most Cuban salaries are paid in moneda nacional, which consumers must exchange for convertible pesos, at a rate of 25 to 1, if they want to shop in what are still referred to as dollar stores – the only source of meat, milk and most consumer goods. Neither the convertible peso nor the moneda nacional has any value abroad.
The attempt to “de-dollarize” Cuba was instituted in November 2004, purportedly because the economy had recovered from the gut punch dealt by the 1991 collapse of the Soviet Union and the billions in aid and subsidies Moscow had provided. The dollar became legal tender in 1994, at the close of an austerity program dubbed the Special Period in Peacetime, during which the gross domestic product fell by one-third and Cubans lost an average of 22 pounds.
Remittances from U.S. relatives now account for as much as $1 billion a year, and individual Cubans legally may hold and save dollars. But the government has reeled in hard currency earning and spending autonomy granted state industries and services during the special period. Last year, Cuba reported 5 percent economic growth, and President Fidel Castro said just before Christmas that this year will see an 11.8 percent expansion.
Foreign analysts say the growth figure is inflated by inclusion of subsidies and intangible benefits such as social services. The U.N.
Economic Commission for Latin America and the Caribbean, which calculated last year’s Cuban expansion at 3 percent, dropped the island nation from its report for 2005, saying the data made available by Havana was insufficient to calculate reliable figures.
The nation does a healthy trade with Venezuela and China, but independent analysts suspect that Cuba has undisclosed debts and a widening trade deficit as exports grow at a much slower pace than imports.
Even the most critical analyses, though, peg growth this year at upward of 5 percent and bolster claims by Economy Minister Jose Luis Rodriguez that Cuba has turned the corner on post-Soviet privations.
“The country has begun to overcome the shortages of the crisis period,” Rodriguez told the National Assembly last month. He said tourism, nickel sales and the export of services accounted for “the highest performance in revolutionary history,” referring to the 47 years since Castro’s anti-capitalist guerrilla force came to power.
With all but about 2,000 legally self-employed service providers earning state salaries averaging $15 a month, the boom times are hard to see on the streets. The government raised salaries for most state workers by 25 percent this year, but inflation of 4 percent, an artificial devaluation of hard currencies when the convertible peso was introduced, and a severe crackdown on pilferage and private enterprise in recent weeks served to counterbalance that increase.
Castro deployed thousands of university students and young Communist Party supporters to oversee gas station operations earlier last month after disclosing in a national address that more than half the gasoline in the country was being stolen. He also dispatched police to raid farmers markets and arrest sidewalk vendors and bicycle taxi drivers who couldn’t show a state license.
“You can’t survive without doing something on the side,” said a 39-year-old elementary school teacher who sells homemade salsa CDs and cassettes to tourists.
“We work to eat. That’s all our salaries cover,” said a cardiovascular nurse who left that job eight years ago to work as a hotel maid. “You need dollars from tips or from family outside for clothing and anything else.” Energy shortages that plagued the island through much of spring and summer have eased, apparently one public dividend of the economic upturn that can be traced to lucrative trade with Venezuela and China.
Pedro Alvarez, head of the Cuban state food import agency Alimport, said that the company was expected to have spent more than $500 million on U.S. commodities by the end of this year. Like other economic figures, though, outside analysts see the food purchase figures as distorted. John Kavulich of the U.S.-Cuba Trade and Economic Council says Alimport includes shipping and finance costs in its total. The New York-based analyst reported U.S. food sales last year of $392 million, compared with Alimport’s figure of $473 million.
Mounting outlays for food and fuel and shrinking sales of traditional products like sugar could signal a looming cash crunch, analysts point out, especially if the tiny private sector is further shackled and unable to deliver tax revenue.
Paolo Spadoni, a University of Florida scholar who specializes in study of the Cuban economy, deems the currency manipulations of the past year “largely symbolic.” But together with the raises for state workers and import of low-cost Chinese appliances, he said, they’ve signaled to Cubans that the government is intent on closing the gap between those with access to dollars and those without.
That quest for social leveling plays to revolutionary ideals but has had the effect of pushing down the haves more than lifting up the have-nots. Street crime has become so rampant in Havana that tourists are encouraged to stick to a single street, Obispo, the bustling main drag of the historic old town. Begging from tourists has become so widespread that the main sightseeing venues are flocked by emaciated old women and the maimed. On weekends young working mothers bring their infants to bolster furtive bids for a “regalito,” a small gift of a dollar or a convertible peso. “The same government that created great equality in the 1960s is now presiding over a system of rising inequality,” said Damian Fernandez, head of the Cuban Research Institute at Florida International University, estimating as much as 25 percent of the country of 11.2 million lives in extreme poverty.
With the governing elite of the Communist Party benefiting most from foreign investment in tourism ventures, Fernandez says, “The revolutionary rhetoric now rings hollow.” AP-NY-01-01-06 1431EST
