Re: Cuba: Dealing with the dollar

[Diane Monaco <diane.monaco@xxxxxxxxx>]

The article forwarded by Ulhas states:

> ?Food, medicines, inputs and fuel can be
> accessed in adequate volumes only with foreign exchange, making the
> effort at restoring the health of a devastated economy and protecting the
> quality of life of its citizens dependent on dollar earnings. Fidel
> Castro's Government is committed to ensuring that the entire population
> has access to basic necessities. But the definition of what goods and
> services and how much of them constitute basic necessities depends in
> turn on the amount of foreign exchange that could be drawn into the
> economy and soaked up by the Government. 
> With no supporter of the Soviet kind in sight, recovery became synonymous
> with the pursuit of the dollar.
> [?]
> The faster rate of growth of the supply of dollars relative to demand is
> reflected in the fact that the regular peso, which is the principal form
> of income for the average Cuban, has improved its position
> vis-a-vis the dollar over time. 
>  From an all-time low of 130 pesos to the dollar in 1994, its value rose
> to 40 pesos to the dollar in November 1995, 30 pesos to the dollar in
> July 1995 and an unusual seven pesos to the dollar, in August 1995. Since
> then the rate has stabilised at 20 pesos to the dollar, where it
> currently stands.?



There have been several recent posts on the HDI and Cuba?s admirable
ranking in so many aspects of this index which obviously points to how
committed the Cuba government is in ensuring that ALL Cubans have
adequate supplies of basic necessities:  food, medicine, etc. 
But adequate supplies require imports, for smaller countries like Cuba,
and imports require foreign currency.  The US embargo on trade with
Cuba explicitly includes food and medicine.  

Dollarization is helping to establish that mechanism in Cuba, but at the
same time and as we well know (Enron and others), accounting practices
and accounts in hard currencies at the corporate level can make the
currency (dollars in the case of Cuba) very difficult to keep track of --
corporate corruption.  Dollars are needed for the imported goods
(food and medicine).  

There are three  -- actually four if you include the euro that is
now accepted at a few tourist locations in Havana  -- currencies
used in Cuba: the Cuban peso, the convertible peso (equivalent to the
dollar), and dollars.  All three of these currencies circulate
freely in Cuba.  The convertible peso was created in 1994, but just
last year the Cuban Central Bank established new rules that require firms
to exchange their dollars for convertible pesos to conduct their business
within Cuba, and then purchase dollars with their convertible pesos for
the their import needs.  The convertible peso is equivalent to the
dollar within Cuba, but it has no value outside of Cuba.

This action by the Cuban Central Bank has lessened the problem of getting
adequate supplies of medicine and basic necessities, but Cubans are still
in dire need.  The US embargo includes all trade -- including trade
in food and medicine -- which also restricts the flow of hard
currencies.  

Currency is needed to import anything?including food and medicine. 

See the 1997 report, DENIAL OF FOOD AND MEDICINE: THE IMPACT OF THE U.S
EMBARGO ON HEALTH AND NUTRITION IN CUBA.  A Report from the American
Association for World Health at
<http://www.ifconews.org/aawh.html>

Diane