Is it time for a unified currency in Cuba?

The European Union has offered its expertise to support the unification of currencies in Cuba

Is it time for a unified currency in Cuba?

Can you imagine receiving your salary in the currency of the country and having to calculate it in a second official currency of different value purchases? This situation is the everyday reality among Cubans, the most affected by the dual currency that the Caribbean country faces. This duality also affects other areas of economic life of the country.

For Cuba, the price to deal with the "empire" has been high. The country could survive moderately for decades, thanks to the support of the Soviet Union, when the use of currencies other than the peso was prohibited, especially the dollar, punishable by prison. However, after the disintegration of the socialist bloc, the island was isolated politically and economically. During this stage, the ravages of US blockade became more apparent. During the 90’s, the Cuban government understood the need for the country's transformation.

Cuban Peso (CUP) could not stand against the dollar or its use. As a result, the Cuban convertible peso (CUC) was born because of the blockade. Therefore, Cuba cannot make international transactions with the dollar and legally is out of circulation on the island.

In this regard, operations in the country are held in CUP or CUC depending on the context. Parity is 1 CUC (25 CUP) = 1 USD or € 0.87. This situation has become everyday a real headache for residents and even tourists.

Can you imagine receiving your salary in the currency of the country and having to calculate it in a second official currency of different value purchases?

Thus, the unification of the Cuban currency has been identified as a target of the government of Raul Castro, but so far, there is not official action. The European Union, through the Director General for International Development and the European Commission, Stefan Manservisi Cooperation, has offered assistance to achieve unification. The EU has experience with the creation of the euro, currency circulating since 2002, although it was officially proposed since 1992 in the Treaty of Maastricht.

More than a decade was required to shape the eurozone, expanding to 19 current members. To be part of the euro, countries must meet the convergence criteria, monitor the economy of the country, and accept the policies of the European Central Bank. The latter body is often criticized, especially because of the cases of Greece, Spain and Portugal. The cases show that there are not only advantages in the euro. While the currency has facilitated transactions of EU members, also has undergone harsh monetary tightening.

For Cuba, the unification of its currency will facilitate transactions inside and outside the island, as well as consolidating its parity against other currencies. This would give greater confidence to investors, tourists, and any market that negotiate with Cuba, especially if the US embargo ends.

European experience can give the island all the tools to avoid large fluctuations. EU prepared candidates for admission countries, especially those in Central Europe, so those recommendations would be relevant to Cuba. For the average Cuban life would be simpler, charged and paid in the same currency, a long way Europeans could shorten.

 

Latin American Post | Luis Liborio
Translated from “¿Llegó la hora del peso cubano unificado?”

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