Without Confidence in the Money

La Habana/Any day can be the eve of a celebration or a disaster, as much for those who hurried to exchange their convertible pesos (CUC) to Cuban pesos (CUP – also known as moneda nacional, or “national money”) as for those who are purchasing foreign currencies or who are trusting enough to think that everything is planned and calculated so as not to cause anyone any harm. Although its proximity can almost be smelled, the “final battle” of the end of the dual currency system continues to be a mystery and the present lack of transparency can endanger its presumed strategic objectives.

Those who have a good memory or who have dedicated time to digging through our recent history know that the Law 963, passed on 4 August 1961, established the “obligatory exchange of currency” for bills of a new design. That surprising operation took place on Sunday the 6th and Monday the 7th of August 1961. No one was able to leave or enter the country on those two days. Each family unit was only allowed to exchange up to 200 pesos. Of the 1.187 million Cuban pesos considered circulating in the country, only 724.9 million were exchanged. The rest lost its value, vanished.

Some naïve people who had their savings inside banks trusted that their money would be exchanged in its entirety. However, the government decided to only hand over one thousand pesos annually, in the form of 100 a month, for ten years, even if people’s accounts contained hundreds or thousands or millions of pesos. Many of those affected by such a drastic measure committed suicide. Such a disastrous exchange process annihilated in one single blow not only the part of the creole bourgeoisie that still remained on this Island, but also the entire middle class. It ripped to shreds people’s life work and savings and also that of past generations.

Such a disastrous exchange annihilated in one single blow not only the part of the creole bourgeoisie that still remained on this Island, but also the entire middle class.

They say that that new currency came from Czechoslovakia, camouflaged in large wooden boxes since the use of metal containers wasn’t common in those times. The signs on the boxes and the customs declarations indicated that they contained spare parts for Czech-made Zetor tractors. Two days before the exchange, the boxes were opened in secret and the new Cuban peso was distributed to banks throughout the country.

Fifty-three years have gone by and anyone could argue that this is not the same country as that from 1961. But the fear lies in that it is still governed by the same people from before, who still invoke the same “stern slogans.”

The uncertainty is not only founded on reminiscences from the past; it has solid contemporary motives. No authority has pronounced itself officially on what will be the level of parity of the surviving currency to foreign ones and it isn’t even known whether, in the near future, it will be possible to exchange the CUP for dollars or euros. It is also unknown how much the State will pay for each CUC handed over by citizens once that currency stops circulating.

Until now, the only visible advancement toward the end of monetary duality has been the possibility of paying with CUP in stores that previously only sold products for hard currency (the official name of which, TRDs, stands for “foreign exchange collection stores”).

In the beginning of 2015, a worker with a 480-peso monthly salary (without access to remittances and without any other chance of getting CUCs) would have to work 23 hours to buy two pounds of powdered milk in one of those markets; 18 hours for a three pounds of chicken drumsticks; another 18 hours for a pound of grams of spaghetti and 19 hours for one quart of cooking oil. Thus, in order to pay this small bill at the current 1-to-25 exchange rate, he will have to work a little over ten 8-hour workdays.

A worker with a 480-peso monthly salary will have to work a little over ten 8-hour workdays in order to buy powdered milk, chicken, spaghetti, and cooking oil on the current 1-to-25 exchange rate.

In the event that the illusion becomes a reality and the CUC comes to cost 20 Cuban pesos, the worker from our example could get all that and a little more with just over a week of labor, and if the miracle occurs that it come down to 15, he would get everything with fewer than 5 workdays.

It is not necessary to be an economist to realize that the country is in no condition to turn that dream into a reality. At least unless delirium reaches the point of fantasizing that, from the secret tunnels where today they keep the old soviet armaments, hundreds of containers of goods surface to furnish the stores that would no longer be called TRDs, because they wouldn’t be collecting any foreign currencies at all, and standing before whose cash registers wouldn’t be today’snouveaux riches, but the joyous working class, living decently from their salaries.

Jumping over our chimeras, other distressing questions remain: will there be a limit to the cash that can be exchanged? Will cash be worth the same as the money in savings accounts? No one has clarified this and the lack of a commitment to these guarantees makes insecurity and distrust mount even higher.

In workplaces where perks are received in CUC, beneficiaries are asking themselves if this “stimulus” will keep the 1-to-25 exchange rates in the national currency. In markets where the elevated prices were once justified as a way for the government to “collect” foreign currencies, clients wonder if now goods will cost what rationality suggests should be their price. Will taximeters need regulation? Could ticket purchases on international airlines be made in the new currency

The secrecy that surrounds the end of the monetary duality won’t be able to be delayed for much longer

Parallel to the eventual disappearance of the CUC, there exists the possibility that all the CUP bills circulating today will be “demonetized” and new issues of 1, 3, 5, 10, 29, and 50 pesos be created to match the recently-introduced 200, 300, 500, and 1000 pesos bills, which make counterfeiting more difficult. The latter are already in circulation and nowhere can anything along the lines of, “Guaranteed by international standards of free exchange” or “Can be freely exchanged for foreign currencies at the Central Bank of Cuba” be found, which is currently the case for each CUC and which could also be seen on the bills that premiered in the summer of 1961, signed by the person who, at the time, was the president of the Bank, a man who had the effrontery to sign the currency of the Republic of Cuba with his nickname: Che.

The secrecy that surrounds the end of the dual currency system attempts to justify itself with the same arguments as always: above all, we can’t trust in the enemy. However, it won’t be able to be delayed for much longer because even in Cuba, where it has been demonized for decades, money continues to be something that is essential and part of its value lies in the trust it is accorded.

Translated by Fernando Fornaris