Cuba to end circulation of US dollar
By Reuters
October 26 05:36
Cuban President Fidel Castro, seeking to rid his country of the currency of his arch-enemy, said on Monday Cuba was ending circulation of the U.S. dollar as of Nov. 8 in response to tightened American sanctions.
Cubans, foreign residents and tourists will have to use locally printed convertible pesos, equal in value to the dollar, for all cash purchases, a Central Bank decree said.
“As of Nov. 8, the dollar will not be accepted in our shops, which will only take convertible pesos,” it said.
A 10 percent commission will be charged for changing dollars into the local currency, according to the decree read on a special television broadcast attended by Castro.
Appearing on television in a sling only five days after falling and fracturing a knee and an arm, Castro said the issue was so important that he had to be there despite Wednesday’s accident that left his left leg in a plaster cast.
“The empire is determined to create more difficulties for us,” he said, referring to Bush administration steps to restrict travel and cash flows to the island nation.
The dollar was legalized in Cuba in 1993 after the fall of the Soviet Union plunged the island into deep economic crisis and forced it to open up to tourism and foreign investment.
Dollars became the dominant currency and are used to buy most consumer goods in dollar stores that will now only accept the local currency.
The decision will effect cash remittances from the United States, a major support for the cash-strapped Cuban economy that amount to an estimated $1 billion a year, unless they are sent in other currencies.
The government encouraged Cubans living abroad to send remittances to their relatives in Cuba in euros, British pounds, Swiss francs or Canadian dollars, to avoid exchange costs.
NO DOLLAR BAN
Castro, wearing his trademark military uniform, said his communist government was not banning possession of dollars, just their use in the economy.
“We are not restoring the penalization of holding dollars; it will not be a crime,” he said.
The move to eliminate use of the greenback was prompted by U.S. moves to squeeze Cuba financially, the decree said.
A four-decade-old U.S. trade embargo against his communist government prohibits the use of dollars in transactions with Cuba unless they are licensed by the U.S. Treasury.
Foreign banks were put on guard in May when the Federal Reserve fined UBS, Switzerland’s largest bank, $100 million for illegally transferring freshly printed dollar notes to Cuba and three other countries subject to U.S. sanctions, Libya, Iran and Yugoslavia.
Foreign bankers in Havana said this had created serious problems for Cuba to deposit its dollars abroad and renew bills in circulation.
Existing dollar accounts will be “totally guaranteed” and their funds can be withdrawn in the U.S. or local currency at any date with no charge, the decree said. Dollar bank transfers will be also be accepted, but not cash deposits.
Foreign companies operating in Cuba, as well as Cuban state enterprises, will not longer be able to make dollar bank deposits in cash.
Cuba’s tourism is based on the dollar, though euros are accepted as currency in some resorts. Tourists will have to exchange their currency into convertible pesos, though the 10 percent charge will only apply to dollars, the decree said.
The commission will not affect credit cards payments. Cards issued by U.S.-based banks are not valid in Cuba.
Cuba took the first step to curb dollar circulation last year when it banned state corporations from using the U.S. currency in their domestic operations.
U.S. President George W. Bush launched a strategy in May to undermine Castro’s government by tightening restrictions on travel from the United States and the amount of dollars licensed visitors could spend on the island.
Castro, who has outlasted nine U.S. presidents and survived the demise of the Soviet Union, said his socialist system will prevail.
“The destiny of this country was decided long ago and nothing can intimidate us,” he said.
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