Cuba Looks to Further Centralize Economy
Cuba Further Centralizes Economy, Eliminates State Firms' Control Over Foreign Exchange

HAVANA Dec 30, 2004 — Moving to further centralize the communist state's control over the economy, the government's Central Bank announced Thursday that individual state companies would no longer handle foreign exchange.

Beginning Saturday a single government account will be established for foreign currency and for convertible Cuban pesos, an exchangeable currency that trades 1-1 to the U.S. dollar and that is now used as the primary form of legal tender on the island.

Under a series of steps to be introduced in the coming months, state enterprises will relinquish control over foreign exchange and convertible Cuban peso accounts. Any profits from sales or services will have to be deposited into that single government account.

The move will severely limit any remaining autonomy inside the various state enterprises. It will also effectively turn back an earlier government policy calling for state enterprises to move toward self-financing by pouring earned foreign income back into their operations.

Also, a state company that now wishes to buy any goods or services available only in foreign currency will need special approval from a new Foreign Exchange Approval Committee.

The announcement was the latest in a series of moves in recent months aimed at reasserting government control over the economy in general, and over foreign currency income in particular.

In late October, the government moved to eliminate U.S. dollars from general circulation and replaced it with the convertible Cuban peso as the primary form of legal tender for most products and services in the Caribbean country.

Cuba's convertible currency, like that of many other smaller nations, has no value outside the country. But Cuba relies heavily on imported goods that must be purchased with dollars or other convertible foreign currencies. After the collapse of the Soviet Union, with which Cuba conducted barter trade, Havana's need for hard currency grew.

The currency switch in October appeared 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.

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