October 28, 2004 (AFP/Tim Sloan)
Posted on 10/28/2004 1:03:05 AM PDT by Cincinatus' Wife
The decision by Fidel Castro to dedollarize Cuba's economy is yet another sign of economic distress for an island that has had a rough year, Cuba analysts say.
Havana's move earlier this week to eliminate U.S. dollars from circulation is a tacit admission of the effectiveness of U.S. trade and travel sanctions and is the Cuban president's response to the United States, they say.
And the change comes at a time when Cuba's economy is also starting to suffer from skyrocketing oil prices and a drop in crucial foreign investment.
Cubans may still hold dollars, but to spend their money in any official establishment, they must exchange their dollars for convertible pesos -- known as chavitos or little pennies. After Nov. 8, any exchanges will be subject to a 10 percent government charge.
The decision to withdraw U.S. dollars from the economy for the first time since the American greenback was legalized on the island in 1993 followed a Bush administration directive in June that limited family visits and remittances to Cuba in an effort to dry up the supply of dollars.
Cuba watchers are expecting the number of family visits to tumble by at least 30 percent, and remittances also could drop substantially.
While these measures won't have the same impact as the end of subsidies from the former Soviet Union, which devastated the Cuban economy starting in 1990, they are still hitting home.
''That has hurt the economy,'' said Miami lawyer Antonio Zamora, who just returned from a visit to the island last week. ``No doubt, it has had a big impact.''
Cuba is now suffering from a scarcity of cash brought on after the Bush administration levied a $100 million fine on UBS AG, the largest Swiss bank, because its trading desk was supplying dollar bills to Cuba, Libya, Iran and the former Yugoslavia, in violation of U.S. sanctions.
SHORT SHELF LIFE
Dollar bills, it turns out, have a short shelf life, measured in months and not years. The crackdown left the island with a dwindling supply of deteriorating bills.
''Bankers who deal with Cuba tell you that there is quite a bit of lack of cash in Cuba,'' Zamora said.
On top of that cash crunch is the reality that Cuba does not earn enough foreign exchange from exports, remittances and tourism to pay for its financial needs.
''The bottom line is that they have a permanent foreign exchange crisis,'' said Philip Peters, a Cuba analyst who is vice president of the Lexington Institute, a think tank in Arlington, Va.
The dedollarization will bring money to the government.
''The Cuban Treasury is going to mop up a lot of liquidity with this measure,'' Peters said.
''Remittance flows may decrease even more,'' Peters said. ``But it's not going to stop the use of dollars in Cuba. They didn't turn the clock back 10 years here. It's still a dual currency economy.''
In the dedollarization decree read Monday night by an aide as Castro sat nearby flanked by Economics Minister Carlos Lage and the Central Bank President Francisco Soberon, the government lashed out at the United States, saying Cuba was ``protecting itself from external economic aggression.''
Although tourism and other sectors are expected to boost growth to around 3 percent this year, there are storm warnings on the horizon. Foreign investment in recent years has been zero. Oil imports are costlier, even with subsidies from Venezuela and Cuba's own ability to supply slightly over half its energy needs.
ADDITIONAL PROBLEMS
Mismanagement in the energy sector also has added to the problems. Castro sacked Energy Minister Marcos Portal Leon this month after he failed to warn the government about a crisis at a power plant.
Some business analysts in South Florida say that Cuba turning its back on the dollar is simply one-upmanship with the Bush administration.
''Castro is fanatical about always having the last word on everything,'' said Paul Alcazar, a director of the Cuban Liberty Council, a Miami exile organization that supports the embargo. ``So if the United States is going to restrict remittances, he is going to change the system inside Cuba and penalize the recipients by 10 percent so he can blame Bush for it.''
Next week, American executives will get a chance to view the impact of the recent changes in Cuba first-hand at an international trade fair in Havana, which starts Monday.
U.S. farmers and ranchers have sold some $984 million of food and agricultural products to Cuba since a 2000 change in U.S. rules opened the way for American cash sales.
Commodity broker Chris Aberle, who is from New Smyrna Beach, holds out hopes of signing a slew of new orders, but acknowledges that a productive outcome is far from assured.
''I am still going down with the prospects of writing some more orders,'' said Aberle, sales director of FC Stone, a subsidiary of the commercial grain brokerage Farmer's Commodities Corporation. ``I am sure we will know by the end of next week.''
I see. Now only the tourists can spend US dollars. The Cuban government is now basically banning its own people from partaking in the economy. Its mostly black market now.
A President with a plan.
No doubt however sKerry has a plan too. We just won't be allowed to see it until he's elected.
U.S. companies were required to sign an agreement to sell to Castro, that said, they would work to have the U.S. sanctions removed.
That caused one company, that I know of (can't remember their name), to withdraw from the deal.
The only thing propping up the Castro guv is total control of the military and money from euroscum tourist. Average folks in Cuba are on scant food rations, no meds and hope is fading fast!
My fear and fear of Cubans here is that total chaos will consume Cuba and the bloodshed will be enormous!
Fidel is just mad because Karl Rove pulled some strings and made him plunge headlong off that step and break stuff.
Evil genius, that Karl...
And oil from Hugo Chavez in Venezuela.
Yes, I forgot to mention that.
Bump!
So....Who cares????.....
In case you haven't noticed, China is no longer Communist.
If in doubt, look in your sneaker or on the back of you digital camera. Tyrants, yes. Communists, no.
Hopefully chaos will be short-term
Me too my friend....When the video of Castro falling was on TV, recent Cuban refugees I know went NUTS!!!!! They wanted to watch it over and over!
I made a promise 30 yrs ago that I'd be in Cuba the day they drag castro thru the streets and plan to keep it!
Look for me ..I'll be the gringo armed to the teeth!
"There is no Soviet domination of Eastern Europe" --Gerald Ford, 1976
Thanks...Ill translate this our refugees...same things they have been saying.
Castro is not "eliminating U.S. dollars from circulation".
He is finding a way to cheat his own people out of an extra 10%.
"There is no Soviet domination of Eastern Europe" --Gerald Ford, 1976
I would agree with Read2Know.
China gave up on Marxist orthodoxy and is now more classically Fascist than it is Communist.
The only difference between the two is that the Fascist tyrant realizes that the economy works best with some capitalist incentive but the Communist tyrant does not. Other than that, the Communist tyrant and the Fascist tyrant are two peas in a pod.
As to Castro, he has always, above everything else, been simply a "Fidelista". In his youth, he idolized Mussolini. During the Soviet era, he embraced the ideology of his Communist protector. After the fall of the USSR, he embraced the Euro-weenie capitalist investors.
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