Associated Press
Cuban Looks to Shield Peso From Devaluation
Tuesday November 2, 11:11 am ET
By Anita Snow, Associated Press Writer
AP Interview: Cuba's Central Bank President Looks to Shield Convertible Peso From Devaluation

HAVANA (AP) -- Cuban Central Bank President Francisco Soberon said he is committed to ensuring the convertible peso remains on par with the U.S. dollar in the wake of his country's currency replacing dollars as legal tender.

"It would be extremely unwise for us to change the one-to-one exchange rate after the Cuban people have shown such confidence in the Cuban government," Soberon, responding to fears about a possible future devaluation of the Cuban currency, told The Associated Press in an interview late Monday night.

Since President Fidel Castro announced Oct. 25 that the communist nation was dumping the U.S. dollar as its No. 1 form of legal currency, many Cubans have privately expressed worries the convertible peso will later lose value.

"We have to keep the rate one-to-one to the dollar, and we are prepared to do that," Soberon said.

Soberon also said authorities have been surprised at the large amounts of American dollars Cubans have changed over the past week to avoid a 10 percent surcharge taking effect on Nov. 8.

"It's been above our expectations," Soberon said of the quantities changed. "A lot of people are opening accounts in important amounts of money. We didn't know how much people were saving under their mattresses."

Soberon declined to estimate how much had been changed thus far, saying he didn't want to provide ammunition for Cuba's enemies. He did say that in the first week there had been 700,000 transactions to exchange dollars or open dollar accounts across the island of 11.2 million people.

Some independent analysts have estimated that several hundred million American dollars will be exchanged into convertible pesos during the two-week transition period.

"People are very bad about making calculations about Cuba's economy and that makes me very happy," Soberon said with a smile.

Last week, there were numerous reports of smaller money exchange operations in Havana shutting down early after their daily allotment of 50,000 convertible pesos ran out.

Nevertheless, Soberon insisted that Cuba "without doubt" had enough convertible peso currency printed to meet the demands of those dumping dollars.

After Nov. 8, banks and exchange houses will levy a 10 percent surcharge to change dollars into convertible pesos, but dollars can be bought with convertible pesos at no extra charge.

Soberon said the 10 percent charge was not an attempt to increase foreign exchange, but a way to discourage people from bringing or sending in more dollars.

"The greatest sign of success for these measures would be if we don't collect a single cent of the surcharge," he said.

Cuba has said the measure is necessary to protect the country from an increasing U.S. crackdown on foreign banks sending dollars to Cuba.

The U.S. Federal Reserve in May fined Switzerland's largest bank, UBS AG, $100 million for allegedly sending American dollars to Cuba, Libya, Iran and the former Yugoslavia in violation of U.S. sanctions.

By eliminating the U.S. dollar as primary form of legal tender at stores and businesses, Cuba is less vulnerable, said Soberon. "And we are completely sovereign in terms of our monetary policy."

Soberon downplayed the impact the measures could have on family remittances, most of which traditionally have been sent from the United States in American dollars to relatives on the island.

Now, those sending the cash transfers will have to send the funds in a different foreign currency, such as euros or Canadian dollars, or the recipient in Cuba will have to pay a 10 percent surcharge to change the newly received American dollars into local currency for use at stores.

While some estimates place Cuba's remittances as high as $1 billion annually, those family cash transfers are just a fraction of the $9.3 billion in foreign exchange that flows into Cuba each year, Soberon said.

"In the end, people will find a way to keep helping their families," he said.

Soberon also downplayed predictions that the 10 percent surcharge will trigger a black market in money changing.

"The black market exists when you prohibit something," Soberon said, emphasizing that the government has not banned Cubans from holding or changing dollars.

And if problems pop up later, he said, "we can always pass another resolution."

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