Cuba reintroduces the dollar


From The Economist, London
Thursday, November 28, 2019

American saloons from the 1950s and Chinese-brand cars still fill Havana's streets. Lately, though, they have shared the road with brand-new electric scooters. Once rarities -- sourced in Panama, Mexico, or the Dominican Republic and sold at a big markup in the black market -- scooters can now be purchased at home, and far more cheaply than before.

The catch: Cubans must pay in American dollars or another rich-country currency.

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In October Cuba's communist government said citizens could open bank accounts that receive dollars, yen, euros, and other European currencies. They will be able to use the money to buy imported goods from new state-owned shops, called Tiendas Moneda Libremente Convertible (or convertible-currency shops), where prices are given in dollars. More than 70 are planned. This ends a ban on dollar transactions introduced in 2004.

The Tiendas MLC are proving popular. Shoppers queue to buy refrigerators, air-conditioners, car parts, and television sets. Some items, including freezers and scooters, cannot be restocked quickly enough.

By reintroducing the greenback, Cuba has in effect added a third leg to its dual-currency system. The state pays its employees (that is, most workers) in Cuban pesos, the currency for buying necessities like electricity, water, and bus tickets. In 1994, during the "special period" that followed the collapse of the Soviet Union, the government introduced convertible pesos (CUC), which could be exchanged for dollars at a rate of one to one. This was an attempt to hoover up dollars from remittances and curb inflation by offering Cubans an alternative to dollars.

CUC's are now the main way to pay for things like petrol, internet access, hotel stays, appliances, and restaurant meals.

The reintroduction of the dollar is a response to hardship. Sources of foreign currency needed to sustain the import-dependent economy are running dry. ...

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