Cuba Begins Conversion of U.S. Money

Thu Oct 28, 6:56 PM ET Business - AP
By ANITA SNOW, Associated Press Writer

HAVANA - Cuba's banks and exchange houses began large-scale conversions of U.S. money into a local currency on Thursday as Fidel Castro's communist nation moved to dump the dollar from general circulation.

Freshly printed Cuban convertible peso notes are counted in Havana, October 28, 2004. Cubans jammed banks and exchange houses to dump their U.S. dollars for local pesos as Cuba's government moved to end circulation of the American currency in response to U.S. sanctions. (Claudia Daut/Reuters)

Cubans lined up several hours before exchange houses opened to convert the American dollars widely used here for 11 years for the local Cuban convertible pesos that will now be the main currency accepted for consumer goods.

"I'm not going anywhere, I don't need dollars," said 68-year-old port worker Ramon Gonzalez, among about 80 people lined up outside the main exchange house in Old Havana.

"For me, it's just the same," Gonzalez said of the convertible pesos, tied at one-to-one to the U.S. dollar. "It just has a different face."

"As long as it keeps the same value, there is no problem," added 57-year-old custodian Alberto Serra.

Responding to stepped-up U.S. sanctions, Castro announced Monday that within two weeks, U.S. currency would be not be accepted at stores and businesses.

After Nov. 8, changing American money will carry a 10 percent commission fee that won't be applied to other foreign currencies.

"It's good news that there is now a currency for obligatory use in the country," said well-known dissident intellectual Manuel Cuesta Morua, adding it was important for every country to have its own currency. "The bad news is that it will hurt remittances received by citizens from abroad because it will reduce their buying power."

Authorities, meanwhile, said they were considering wider use of the euro as Cuba began rebuilding the hard currency base built mostly on dollars for more than a decade. Foreign tourists were advised to leave American money at home and bring other foreign currencies instead.

Since the government decided to replace the dollar with the local Cuban convertible peso beginning Nov. 8, authorities "have been studying coordinating with Cuba's Central Bank to extend the acceptance of the euro in other areas of the country," Tourism Minister Manuel Marrero said Wednesday.

"It is recommended that after that date that visitors to the country don't carry United States dollars," Marrero said at a news conference. He said visitors could exchange euros, Canadian dollars, British pounds or Swiss francs into convertible pesos after arriving here.

The euro is accepted already at several coastal resorts on this Caribbean island.

The currency switch appears aimed at eliminating Cuba's dependence on the money of its No. 1 enemy — the United States — for hard currency reserves, building up new sources of convertible foreign funds, and reasserting centralized control over the economy.

Tourism will be key in that plan.

Bringing in around $2 billion annually, tourism is the No. 1 source of hard currency Cuba needs to pay for petroleum, food and other critical imports.

Cuba's elimination of the U.S. dollar as a primary form of payment will make handling money easier for the Europeans and Canadians who represent about 75 percent of the island's estimated 2 million visitors annually.

Rather than changing national currencies into American dollars before traveling to the island, those visitors can change euros, Canadian dollars and other currencies into convertible Cuban pesos after arrival. And if they travel to a resort where euros are accepted, they don't have to change money at all.

Before large-scale conversions of dollars into convertible pesos began Thursday, Cubans started dumping their American money for another local currency, the Cuban peso, which trades 26 to the dollar and is used for government subsidized services and goods such as utilities and public transportation.

Adopted as a temporary measure in 1993, the widespread use of the American dollar was seen as a necessary evil for economic survival after Cuba lost its Soviet aid and trade with the collapse of eastern socialism.

Bills bearing the faces of American presidents became the main currency used by foreigners and Cubans alike at stores and other businesses the government opened across this island of 11.2 million people to capture hard currency for its international payments.

Communist leaders were always rankled by having to use the currency of their longtime enemy.

An increasing crackdown by the U.S. government this year on international banks shipping dollars to Cuba provided another reason to take it out of circulation.

The move to dump the dollar, however, was clearly planned for some time.

More than a year ago, the government announced that Cuban state companies would no longer conduct business among themselves in U.S. dollars and would have to sell the central bank any hard currency received from exports or sales. They all now use the convertible Cuban peso.

Cubans and others on the island can still hold unlimited amounts of American dollars without penalty.

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